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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C., 20549-1004
Form 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended March 31, 1997.
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED].
For the transition period from to
Commission file number 0-2413
MACDERMID, INCORPORATED
(Exact name of Registrant as specified in its Charter)
Connecticut 06-0435750
(State of incorporation) (I.R.S. Employer I.D. No.)
245 Freight Street, Waterbury, Connecticut 06702-0671
(Address of principal executive offices)
Registrant's Telephone Number, including Area Code (203) 575-5700
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Title of Class - Common Stock Without Par Value
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. ( )
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the Registrant was required to file such reports), and (2) has been subject
to the filing requirements for the past 90 days. Yes (X) No ( )
The aggregate market value of the voting stock held by nonaffiliates of
the Registrant as of May 31, 1997 (based on the closing price on such date
as reported on Nasdaq Stock Market) was $194,546,000.
The number of shares of Registrant's Common Stock outstanding as of May
31, 1997 was 8,247,254 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Corporation's 1997 Annual Report to Shareholders are
incorporated by reference into Parts I and II hereof and filed as Exhibit
13 to this Report. The Proxy Statement mailed on or about June 23, 1997 to
the Corporation's stockholders in connection with the annual meeting
scheduled for July 23, 1997 are incorporated herein by reference into Part
III hereof.
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PART I
Item 1(a) GENERAL DEVELOPMENT OF BUSINESS
Incorporated in Connecticut in 1922, MacDermid, Incorporated and its
subsidiaries (collectively, "MacDermid" or the "Corporation") develops,
produces and markets a broad line of specialty chemical products which are
used in the metal and plastic finishing, electronics and photopolymer printing
industries. MacDermid offers a line of horizontal processing equipment used
in the production of printed circuit boards and in chemical machining, through
its wholly-owned subsidiary, MacDermid Equipment, Inc. MacDermid also
markets chemical supplies and equipment produced by others.
In December 1995, MacDermid acquired the assets, subject to certain
liabilities of the Electronics and Printing Division of Hercules
Incorporated, forming a new wholly-owned subsidiary, MacDermid Imaging
Technology, Inc., for that purpose. The acquired business consists
principally of the manufacture and sale of proprietary products
including photoresists, used to imprint electrical patterns on circuit
boards, and photopolymer printing, which reproduces quality graphics
on package printing and in-store displays. The acquisition, accounted
for as a purchase transaction, was financed through bank borrowings and
the issuance of preferred stock.
In May 1995, the Corporation acquired certain assets of the Allied-
Kelite Company (a subsidiary of Witco Corporation), a major supplier of
plating surface preparation proprietary chemical products to automotive,
electronics, hardware and other industries. The business, located
primarily in the United States includes licensing of technology to
companies in several other countries. The acquisition, accounted for as
a purchase and financed through borrowings, complements the Corporation's
existing metal finishing and electronics business and provides cost
benefits from consolidation.
On August 1, 1994, MacDermid acquired, for approximately $26 million,
2,555,697 shares of its common stock (approximately 24% of the shares then
outstanding) through a "Dutch Auction" self-tender offer. The self-
tender was financed by bank borrowings.
For a description of the Corporation's business, see Item 1(c) on the
following page.
Item 1(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
MacDermid has one primary industry segment which is the manufacture and
sale of specialty chemicals used in finishing metals and non metallic
surfaces, printing and in the marketing of supplies and equipment related
to the use of these chemicals.
Item 1(c) of this Report provides information concerning MacDermid's
classes of products and Item 1(d) of this report includes financial
information concerning operations by geographic area and on a
consolidated basis. Additional information with respect to the one
primary business is shown in the portions of MacDermid's 1997 Annual
Report to Shareholders, included as Exhibit 13 to this Form 10-K, and
is incorporated by reference.
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Item 1(c) NARRATIVE DESCRIPTION OF BUSINESS
(i) MacDermid produces and markets over 1,000 proprietary chemical
compounds. The proprietary chemical compounds are used for the following
purposes: cleaning, activating and polishing, mechanical plating,
mechanical galvanizing, electro-plating and phosphatizing metal surfaces,
stripping of metal and final coating of metal surfaces, filtering, anti-
tarnishing and rust retarding and etching, imaging, deposition of metal
and other chemical processes. Research in connection with proprietary
products is conducted principally in the United States, with additional
research facilities in Japan.
In North America, MacDermid markets its entire line of products in the
United States through more than 110 sales and service personnel employed
by it and, in certain areas of the United States, through distributors and
manufacturing representatives. The Corporation maintains chemical
inventories at more than 20 distribution points throughout the United States
which typically are leased or rented. In Vermont a wholly owned subsidiary
manufactures and markets equipment in support of the proprietary chemical
business. In Canada the Corporation both manufactures and markets certain
of its products through MacDermid Chemicals, Inc.
In Europe, the Corporation markets its proprietary products through
wholly owned subsidiaries. European sales are made from inventory stock
through approximately 55 sales and service representatives who are
employed by the Corporation's subsidiaries located in France, Germany,
Great Britain, Italy, Holland, Spain and Switzerland. MacDermid owns
and operates subsidiary manufacturing facilities in Spain and Great Britain.
In the Asia/Pacific area, the Corporation markets its proprietary
products through wholly owned subsidiaries in Australia, Hong Kong,
Japan, Korea, New Zealand, Singapore, and Taiwan, and sales are made
through more than 55 sales and service representatives who are employed
by local subsidiaries. In addition, sales are made in China, Thailand,
Malaysia and The Philippines directly or through distributors. MacDermid
owns and operates subsidiary manufacturing facilities in Australia and Taiwan.
In certain other foreign markets, MacDermid manufactures and sells
certain of its proprietary chemicals and conducts research through
wholly or majority owned subsidiaries. In certain countries in South
America, Europe and Asia, MacDermid products are sold through
distributors or manufactured and sold through licensees.
Chemicals, supplies and equipment manufactured by others and resold by
MacDermid consist of basic chemicals, automatic plating conveyors, barrel
plating and pollution control equipment, rectifiers, pumps and filters.
Resale items are marketed primarily in conjunction with and as an aid to
the sale of proprietary chemicals.
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MacDermid's principal products fall into the three following classes:
(A) Chemical compounds produced by MacDermid, most of
which are the result of the Corporation's own research
and development and, therefore, are referred to as
proprietary products;
(B) Resale chemicals and supplies; and
(C) Equipment, of which more than 60% is manufactured
by the Corporation.
The following table sets forth the classes of MacDermid's products and
the respective percentage of total consolidated revenue for each of the
last three fiscal years:
Class of Products 1997 1996 1995
Proprietary Chemicals 88% 88% 90%
Resale Chemicals
and Supplies 6% 6% 7%
Equipment 6% 6% 3%
(ii) MacDermid has not made a public announcement of, nor has
information otherwise become public about, a new product or line of
business requiring investment of a material amount of assets or which
otherwise is material.
(iii) MacDermid uses in excess of 700 chemicals as raw materials in
the manufacture of its proprietary products. With few exceptions,
several domestic sources of supply are available for all such raw
materials and for resale chemicals, supplies and equipment. During
fiscal 1997, there were no significant difficulties in obtaining raw
materials essential to its business.
(iv) During fiscal 1997, approximately 20% of MacDermid's proprietary
sales were derived from products covered by patents owned by the
Corporation or produced under patent license agreements. MacDermid owns
more than 70 unexpired U.S. Patents, for which corresponding patents have
been obtained or are pending in most industrialized nations, and has more
than 20 patent applications pending in the U.S. The patents owned by
Registrant are important to its business and have varying remaining lives.
Although certain of MacDermid's patents are increasingly more important
to its business, it believes that its ability to provide technical and
testing services to its customers and to meet the rapid delivery
requirements of its customers is equally, if not more, important. In
addition, MacDermid has many proprietary products which are not covered
by patents and which make a large contribution to its total sales.
Further, the Corporation owns a number of domestic and foreign trade
names and trademarks which it considers to be of value in identifying
MacDermid and its products. MacDermid neither holds nor has granted any
franchises or concessions.
-5-
(v) No material portion of MacDermid's business is seasonal.
(vi) It is necessary to maintain finished goods inventory at locations
throughout the United States and in the foreign countries in which the
Corporation operates so that it may meet the rapid delivery requirements
of its customers. This impacts working capital requirements by requiring
a considerable investment in inventories to service its customers.
Customer payment terms, which vary by country, are generally in accord
with local industry practice.
(vii) No major portion of MacDermid's business is dependent upon a
single customer or a few customers, the loss of whom would have a
materially adverse effect on its business.
(viii) Since products are taken from inventory stock to ship against
current orders, there is essentially no backlog of orders for MacDermid's
proprietary chemical products. MacDermid does not consider the absence
of a backlog to be significant.
(ix) No material portion of MacDermid's business is subject to
renegotiation of profits or termination of contracts or subcontracts at
the election of the Government.
(x) The Corporation provides a broad line of proprietary chemical
compounds and supporting services. MacDermid has many competitors,
estimated to be in excess of 100 in some proprietary product areas.
Some large competitors operate globally, as does MacDermid, but most
operate locally or regionally. To the best of the Corporation's
knowledge no single competitor competes with all its proprietary
products. MacDermid maintains extensive supporting technical and
testing services for its customers, and is continuously developing new
products. Management believes that the Corporation's combined abilities
to manufacture, sell, service and develop new products and applications
enables it to compete successfully both locally and world-wide.
(xi) MacDermid spent approximately $10,850,000, $10,042,000 and
$9,644,000 during fiscal years 1997, 1996 and 1995, respectively, on
research and development activities. Substantially all research and
development activities were sponsored by the Corporation, the greater
percentage of which related to the development of new products.
(xii) For many years, MacDermid has developed proprietary products
designed to reduce the discharge of pollutant materials into the
environment and eliminate the use of certain targeted raw materials
while enhancing the efficiency of customer chemical processes. For
this reason, efforts to comply with Federal, State and local provisions,
which have been enacted or adopted regulating the discharge of materials
into the environment, may have had a positive effect upon the
Corporation's competitive position. Capital expenditures of approx-
imately $6.9 million were made in fiscal 1997 and an estimated $1
million will be spent for environmental control facilities in fiscal 1998.
Though difficult to predict, future spending for this purpose is likely to
average more than 10% of the capital budget.
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(xiii) MacDermid employed 1,086 and 1,083 full time, regular
employees as of March 31, 1997 and 1996, respectively.
Item 1(d) FOREIGN AND DOMESTIC OPERATIONS
MacDermid's 1997 Annual Report to Shareholders, included as Exhibit 13 to
this Form 10-K and incorporated by reference, provides information with
respect to the Corporation's geographic segments including operating
information and the effect upon shareholder's equity of the translation
of foreign currency financial statements.
Item 2 PROPERTIES
In the United States, MacDermid owns the following properties:
In Waterbury, Connecticut, a 51,700 square foot building, principally
used for executive offices, marketing and corporate support, and a
62,000 square foot research and customer service facility, both of
which are located on a 5.8 acre tract. In addition, a 180,000 square
foot wood brick and concrete building complex is principally used for
manufacturing and warehousing but also includes some offices and
laboratories. The complex is located on a 7.2 acre tract. Directly
across a street from this property, a 31 acre tract of land is held
for possible future development.
In Middletown, Delaware, a concrete and steel building of 85,520 square
feet consisting of factory, laboratory, warehouse and office facilities
located on a 10.97 acre tract.
In Wilmington, Delaware, a concrete and steel building of 26,000 square
feet used principally as a technical and administrative services center
located on a 3.8 acre tract. Also on this site is an 18,000 square foot
concrete and steel building which may be used for manufacturing expansion.
In Ferndale, Michigan, a steel frame and steel sided building of 75,000
square feet consisting principally of factory, warehouse and office
facilities, located on a 6.25 acre tract.
In New Hudson, Michigan, a steel and brick single story building of 15,000
square feet consisting of research laboratories and offices located on a 7
acre tract.
The Corporation also owns property in Vernon, Connecticut,
which is being held for sale or lease but which could be
used for manufacturing should the need arise.
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Outside the United States, the Corporation owns additional properties as
follows:
At Barcelona, Spain, a steel and brick building of 31,000 square feet
of factory, warehouse, laboratory and office space.
At Telford, England, two brick, concrete and steel buildings, connected
by a walkway, containing a total of 43,000 square feet of manufacturing,
warehouse, laboratory and office space.
At Hsin Chu, Taiwan, Republic of China, two buildings of reinforced
concrete totaling 30,000 square feet, located on a 1.8 acre tract, used
for factory, warehouse and offices.
At Hong Kong, 30,000 square feet of office, laboratory and warehouse space
in a concrete block building.
In addition, MacDermid leases office, laboratory, warehouse and
manufacturing facilities as needed. During the year, such additional
facilities were leased in Vermont, Canada, Holland, Germany, Korea,
Australia, Japan, Singapore and several other foreign countries.
All owned and leased facilities are in good condition and are of
adequate size for present business volume.
Item 3 Legal Proceedings
Legal proceedings are contained in MacDermid's 1997 Annual Report to
Shareholders included as Exhibit 13 to this form 10K and incorporated
by reference.
Item 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of the Corporation's security
holders during the fourth quarter of fiscal 1997.
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Item 4A EXECUTIVE OFFICERS OF MACDERMID
The following is a list of the names, offices and ages (as of March 31,
1997) of all the executive officers of MacDermid, each of whom has been
employed in his respective office(s) for more than five years, except as
noted:
Name Age Office with Registrant
Harold Leever 82 Chairman since 1977
Daniel H. Leever 48 President and Chief Executive Officer
since 1990.
Arthur J. LoVetere, Jr. 33 Executive Vice President and Chief
Financial Officer since December 1995.
Previously, was Director of European
Operations since 1993. From February
1992, he was Corporate Controller,
prior to which he was Manager of
Accounting and Management Information
Systems.
Gregory M. Bolingbroke 47 Corporate Controller since April 1995.
Previously, was since 1993 Cost
Accounting Manager. Prior to that and
since 1974 he was a Chartered
Accountant and Auditor.
John L. Cordani 34 Corporate Secretary since April 1995.
Previously was General Counsel since
May 1993. From the beginning of 1992,
he was Manager of Patents and
Trademarks prior to which he was a
Research Chemist.
David A. Erdman 54 Vice President since November 1993.
Previously, and since 1988, was
Director of Quality of the Electronics
Group of E.I. Dupont de Nemours, Inc.
Patricia I. Janssen 46 Vice President/Electronics and Printing
since December 1995. Previously, and
since 1978 she was with Hercules
Incorporated, serving as general
manager of the E&P Division since 1992.
Peter E. Kukanskis 50 Vice President/Technical since 1986
Gary B. Larson 57 Vice President/Research since 1981
Michael A. Pfaff 53 Vice President/Industrial Products
since 1984
Sharon J. Stone 47 Assistant Treasurer since February
1995. Previously, she was for more
than five years, and continues to be,
Manager of General Accounting
-9-
PART II
Item 5 MARKET FOR MACDERMID'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
Information with respect to the market for MacDermid's Common Stock,
dividends paid and other related information is contained in its 1997
Annual Report to Shareholders included as Exhibit 13 to this form 10-K
and incorporated by reference.
Item 6 SELECTED FINANCIAL DATA
The selected financial data (Five-Year Summary) is contained in
MacDermid's 1997 Annual Report to Shareholders included as
Exhibit 13 to this form 10-K and incorporated by reference.
Item 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results
of Operations is contained in MacDermid's 1997 Annual Report to
Shareholders included as Exhibit 13 to this form 10-K and incorporated
by reference.
Item 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements, including the notes thereto, of
the Corporation are contained in MacDermid's 1997 Annual Report to
Shareholders included as Exhibit 13 to this form 10-K and incorporated
by reference. Additional financial information is contained in the
Financial Data Schedule appearing as Exhibit 27 to this report.
Item 9 DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
Item 10 DIRECTORS AND OFFICERS
The discussion of "Election of Directors" and a portion of the discussion
in the section, "Interest of Management and Others in Certain Transactions
and Family Relationships" contained in MacDermid's Proxy Statement dated
June 23, 1997 are incorporated herein by reference thereto. Officers of
the Corporation are listed in Item 4A, above.
Item 11 EXECUTIVE COMPENSATION
The discussion of "Executive Compensation" contained in MacDermid's Proxy
Statement dated June 23, 1997 is incorporated herein by reference thereto.
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Item 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with respect to the security ownership of certain beneficial
owners and management contained in MacDermid's Proxy Statement dated June
23, 1997 is incorporated herein by reference thereto.
Item 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND FAMILY
RELATIONSHIPS
The discussion of "Interest of Management and Others in Certain
Transactions and Family Relationships" contained in MacDermid's Proxy
Statement dated June 23, 1997 is incorporated herein by reference thereto.
PART IV
Item 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) Financial Statements
The consolidated financial statements and report thereon of KPMG Peat
Marwick LLP, dated May 13, 1997, except as to note 8, which is
May 28, 1997 are contained in MacDermid's 1997 Annual
Report to Shareholders included as Exhibit 13 to this form 10-K and
incorporated herein by reference. Additional financial information is
contained in the Financial Data Schedule included as Exhibit 27 to this
report.
(2) Financial Statement Schedules
The following supplementary financial data should be read in conjunction
with the consolidated financial statements and comments thereto referred
to above. Schedules not included with this supplementary financial data
have been omitted because they are not applicable, are immaterial or the
required information is included in the consolidated financial statements
or related notes to consolidated financial statements.
Schedule II - Valuation and Qualifying Accounts and Reserves
Auditors' Report on Supporting Schedule
(3) Exhibits
An index to the exhibits filed or incorporated by reference immediately
precedes such exhibits.
-11-
(c) Reports on Form 8-K
The Corporation filed a report on Form 8-K dated May 14,1997
superceeding a report on Form 8-K dated February 28, 1991, filed
during the fourth quarter of fiscal 1997. These reports relate
to environmental investigation involving MacDermid and are
incorporated by reference.
(d) Schedules
The schedules listed above are filed as part of this
Annual Report on Form 10-K.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Annual Report
on Form 10-K to be signed on its behalf by the undersigned, thereunto
duly authorized.
MACDERMID, INCORPORATED
(Registrant)
Dated: June 30, 1997
By /s/ Harold Leever By /s/ Daniel H. Leever
Harold Leever Daniel H. Leever
Director, Chairman Director, President and
Chief Executive Officer
By /s/ Arthur J. LoVetere, Jr. By /s/ Gregory M. Bolingbroke.
Arthur J. LoVetere, Jr. Gregory M. Bolingbroke
Executive Vice President Controller and Principal
and Chief Financial Officer Accounting Officer
Harold Leever, pursuant to powers of attorney which are being filed
with this Annual Report on Form 10-K, has signed below on June 30, 1997
as attorney-in-fact for the following directors of the Registrant:
Donald G. Ogilvie Thomas W. Smith James C. Smith
/s/ Harold Leever
Harold Leever
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SCHEDULE II
MACDERMID, INCORPORATED AND SUBSIDIARIES
Valuation and Qualifying Accounts and Reserves
Years ended March 31, 1997, 1996 and 1995
Balance at Additions Balance
beginning charged to Deductions at end
Description of period earnings of period
----------- ---------- ---------- ---------- ---------
1997
----
Allowance for
doubtful
receivables $4,829,000 $ 547,000 $ 1,997,000 $3,379,000
========== ========== ============ ==========
1996
----
Allowance for
doubtful
receivables $2,859,000 $1,793,000 $ (177,000) $4,829,000
========== ========== =========== ==========
1995
----
Allowance for
doubtful
receivables $2,317,000 $ 664,000 $ 122,000 $2,859,000
========== ========== ========= ==========
Bad debts charged off less recoveries and translation adjustments.
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REPORT OF INDEPENDENT AUDITORS
KPMG Peat Marwick LLP (Logo)
Certified Public Accountants
CityPlace II
Hartford, CT 06103-4103
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
MacDermid, Incorporated:
Under date of May 13, 1997, except as to note 8, which is May 28, 1997,
we reported on the consolidated balance sheets of MacDermid,
Incorporated and subsidiaries as of March 31, 1997 and 1996, and
the related consolidated statements of earnings, cash flows, and
changes in shareholders' equity for each of the years in the
three-year period ended March 31, 1997, as contained in the 1997
annual report to shareholders. Our report refers to a change
in the Company's method of accounting for postemployment benefits.
These consolidated financial statements and our report thereon are
incorporated by reference in the annual report on Form 10-K for the
year 1997. In connection with our audits of the aforementioned
consolidated financial statements, we also audited the related
financial statement schedule as listed in the accompanying index
under Item 14(a)(2). This financial statement schedule is the
responsibility of the Company's management. Our responsibility is
to express an opinion on this financial statement schedule based on
our audits.
In our opinion, such schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
KPMG Peat Marwick LLP
May 13, 1997
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EXHIBIT INDEX
1997 FORM 10-K ANNUAL REPORT
Exhibit
No.
3.1 Restated Certificate of Incorporation, MacDermid, By reference
Incorporated, dated November 19, 1984. Exhibit 19
to September 30, 1991 Form 10-Q Quarterly Report
is incorporated by reference herein.
3.2 By-Laws, amended as of November, 1984. Exhibit 3b By reference
to 1985 Form 10-K Annual Report is incorporated
by reference herein.
4.1 Credit Agreement, amended and restated, dated as of By reference
August 23, 1996, among MacDermid, Incorporated, the
Banks signatory thereto and Chase Manhattan Bank, N.A.,
as Agent, is incorporated by reference herein.
10.1 MacDermid, Incorporated Special Stock Purchase By reference
Plan, amended as of November 1, 1992. Exhibit 10
to 1993 Form 10-K Annual Report is incorporated
by reference herein.
10.2 MacDermid, Incorporated 1995 Equity Incentive Plan By reference
Exhibit 10.2 to 1995 Form 10-K Annual Report is
Incorporated by reference herein.
13 Portions of MacDermid's 1997 Annual Report to Attached
Stockholders as required by Item 8
21 Subsidiaries of MacDermid, Incorporated Attached
23 Independent Auditors' Consent Attached
24 Power of Attorney Attached
27 Financial Data Schedule Attached