EXHIBIT 13
PORTIONS of MACDERMID'S 2001 ANNUAL REPORT TO STOCKHOLDERS
MACDERMID CORPORATE PHILOSOPHY
OUR BUSINESS
MacDermid, Incorporated is in the international business of researching,
developing, acquiring, manufacturing, marketing, and servicing, for optimum
profit to us and our customers, specialty chemicals and systems for the metal
and plastic finishing, electronics, graphic arts and offshore oil industries.
OUR CUSTOMERS
We will create an industry image that automatically causes people in the
industries we serve to think first of MacDermid.
We will justify their action by first thinking of the customers' needs ---
what's right for them makes it right for MacDermid --- by supplying a total
system including processes, know-how and services that assist in meeting all
their needs.
OUR PEOPLE
We continue to believe in the supreme worth of the individual and the
dignity of his or her work for the benefit of all. We will provide the
opportunity for our people to fulfill satisfactorily their own personal
objectives and ambitions and reward them in proportion to their contribution
toward achieving the corporate objectives.
We will continue to be a place of opportunity where people "have the guts
to fail." We will encourage the entrepreneurs and innovators. We will
continually challenge the goals, objectives, organization and all the operating
and procedural aspects of our business and modify them when needed.
Our progress and your progress, our Company's long-term advantage and your
long-term advantage, lie in our human resources. Other advantages that come
about from technological improvements, the opening of new markets, lower costs,
etc., all prove to be relatively short run. So, basically, it is the initiative,
the will and the motivation that people bring to their work on which we rely for
our survival and growth.
We will continue to try to attract new people who have creative and probing
minds; people who will at times be disturbing -- questioning policy and
procedures. If we are wise, we will welcome it, resolve it, put it to work, or
forget it.
We will continue to expand with the best possible talent available and
continue to train them, and ourselves, so that we each increase our ability to
contribute to the Company's progress.
We will each strive to exemplify the MacDermid Spirit of teamwork and
cooperation throughout the organization, which has been instrumental to our past
and present growth as a corporation.
WHAT WE CAN EXPECT FROM YOU
First and foremost, we expect of you a fundamental honesty --- honesty with
yourself, with your Company and with all those with whom you interact, whether
they be associates within our organization, our customers or society in general.
Character and strength have always been born of honesty and a willingness to
face up to the truth of each situation as it arises.
Second, we expect and insist on hard work. An easy life, marked by the
absence of difficulty, builds neither character nor happiness. We believe that
self-realization of the individual is founded on accomplishment, which implies a
willingness to make the sacrifices necessary to get the job done the way it
should be done.
Third, we expect you to accept responsibility. Every assignment you will
have carries with it a responsibility for accomplishment. Commit yourself to
achievement that you consider beyond the scope of your talents and then program
your effort to translate it into a reality.
Fourth, we expect of you a loyalty --- loyalty to yourself, your family,
your associates, your organization and our customers. We have always worked
together as an organization and your own personal achievements will be measured
in terms of the contribution you make to our joint effort.
Fifth, we expect you to demonstrate good judgment. Judgment is essentially
an ability to appraise facts. Factual knowledge must come before good judgment.
This means you must continually educate yourself on our Company, our products
and our industry. In this way, you will have the material on which a sound
appraisal of good judgment is based.
This is what we expect of you, and being in an extremely competitive
environment, we have a real urgency in this expectancy.
WHAT YOU CAN EXPECT FROM US
One, you can expect from us the fairest treatment of which we are capable
- --- fair in respect to matters of compensation, fair in respect to working
conditions and fair in respect to personnel policies.
Two, you can expect from us, as a Company, complete honesty in whatever we
do. Your assignments will never compromise the principles of honesty and common
decency, which we also expect you, as an individual, to uphold.
Three, you can expect that we will provide assignments which will represent
challenges to you --- assignments which will enable you to grow toward your
professional and personal objectives.
Four, you can expect that we will offer opportunities for advancement. Our
desire is to grow from within.
Five, you can expect that we will be a demanding organization --- demanding
of your time, your talents and the best which you as an individual have to
offer. In this way our company will grow and you will grow with it.
Perhaps all this can best be summarized in these words from an unknown
author:
"Create mental pictures of your goals, then work to make those pictures become
realities.
Exercise your God-given power to choose your own direction and influence your
own destiny and try to decide wisely and well.
Have the daring to open doors to new experiences and to step boldly forth to
explore strange horizons.
Be unafraid of new ideas, new theories and new philosophies.
Have the curiosity to experimentto test and try new ways of living and
thinking.
Recognize that the only ceiling life has is the one you give it and come to
realize that you are surrounded by infinite possibilities for growth and
achievement.
Keep your heart young and your expectations high and never allow your dreams to
die".
MACDERMID SHAREHOLDER PRINCIPLES
1.OUR VISION IS TO BUILD ONE OF THE WORLD 'S GREATEST INDUSTRIAL COMPANIES
We believe that the excitement inherent in the culture of ultra high performance
will differentiate us from our competitors, who, while fine companies in their
own right, simply will find it impossible to keep up with the fighting Clan
MacDermid.
2.OUR FORM IS CORPORATE, OUR ATTITUDE IS PARTNERSHIP
Unlike many public companies, our employees and Directors own close to 33% of
the shares, so, we obviously think as owners. We hope that you consider your
investment in MacDermid as being a part owner of a business, much as you would
if you owned a small business in partnership with your close friend or family.
You would not be concerned about the evaluation of that small business weekly or
monthly. Many employees, including your CEO, have the vast majority of our net
worth in MacDermid stock. We intend to be very long-term holders, thinking in
generational terms. We desire to partner with like-minded individuals and
institutions. We will not respond to short term pressures from the market.
3.WE FOCUS TO BUILD INTRINSIC VALUE, PER SHARE
We define intrinsic value as the present value of free cash flow, measured per
share. Cash flow will be invested in growth opportunities. We will build in
significant margin for error in investment assumptions. We have no interest in
top line growth for growth's sake. Per share cash flow is what counts. Our goal
is to increase per share intrinsic value by 25% per year. We believe in setting
stretch targets even though sometimes we may fall short of our goals.
4.PERSONAL AND CORPORATE RESPONSIBILITY
MacDermid will demonstrate the highest standards of personal and corporate
ethics and responsibility, with special emphasis on our environment. We take
seriously our leadership commitment to the communities in which we do business.
5.CARE OF OUR PEOPLE IS A TOP PRIORITY
We know to build one of the world's greatest industrial companies requires an
unusual partnership with the people charged with making the vision a reality. We
are guided by the MacDermid philosophy, including our clear statement of
commitment to our people, and our expectations of their commitment to MacDermid.
We maintain policies that encourage long, productive service. We avoid short
term policies like layoffs and restructuring simply to make the current quarter
or year numbers. That's not to say that we will not have reductions in staffing
based on performance, or if we feel the long term health of the business
requires us to do so. But even then we will do so with great reluctance. Our
people are our most important asset. We treat them as such by investing heavily
in training and education and management development.
6.LONG TERM INVESTMENT HORIZON
We will aggressively fund sound internal growth opportunities mostly in research
and market development regardless of short-term impact. We will fund these
opportunities when the time is right, not necessarily when it is convenient. Our
internal investment opportunities normally offer an exceptional return, but
often require multi-year horizons. We will avoid the stop-start method of
investing, which is typical of a short-term mentality.
7.LOW COST OPERATING STRUCTURE
We know that our ability to invest aggressively requires us to have a cost
structure lower than our competitors. Investing AND lowering our current costs
constantly is a core principle of our company.
8.HIGH OPERATING MARGINS
Growth opportunities will be passed through a margin filter prior to investment.
9.LOW CAPITAL EXPENDITURES
We invest shareholder funds in high return assets after a healthy margin for
error. Bricks and mortar have no attraction if they will not produce a high
return.
10.CAPITAL STRUCTURE
Cost of capital is an important consideration. Our ability to generate
relatively high amounts of cash allows us to carry significant debt while still
maintaining a healthy margin for error. We will issue common stock only when we
receive at least as much in intrinsic value as we give.
11.DIVIDENDS
Our current dividend is a result of history. Increasing our dividend is not a
high priority. We believe we can better serve shareholders by using internally
generated funds to grow the business or purchase shares.
12.ACCOUNTING
We will be candid in our reporting to you. We will tell you the business facts
that we would want to know if the positions were reversed, while safeguarding
information which would aid our competitors.
13.REPORTING
We will be communicating with you in several ways. Through our annual report, we
will try to give all shareholders as much value - defining information as
possible. At our annual meeting we will spend as much time as necessary to
provide information and answer questions. The forum section of our web site,
macdermid.com, provides shareholders the opportunity to submit questions
directly to the CEO. We will answer questions honestly and as promptly as
practicable. In all of our communications, we try to make sure that no
shareholder gets an edge. Our goal is to have all of our shareholders updated at
the same time.
14.FAIR VALUE
To the extent possible, we would like each MacDermid shareholder to record a
gain or loss in market value that is proportional to the gain or loss in
per-share intrinsic value. Obviously we cannot control MacDermid's share price
but by our policies and communications, over time we believe, are likely to
attract long term investors who seek to profit strictly from the progress of the
Company.
MESSAGE TO SHAREHOLDERS
Dear Shareholders,
The external environment in fiscal year 2001 was the most difficult in recent
memory. For the first time since the early 90's we experienced "head winds" in
each of our major businesses that became more pronounced as the year progressed.
Revenues for 2001 were $794 million, up 4% from $758 million in the prior year.
Earnings were sharply lower. Earnings per share were $1.07 vs. $1.40 after one
- - time costs, and $1.33 vs. $1.70 before. Included in revenues in 2001 was $82
million resulting from acquisitions. On a comparable basis revenues were down
2%. Rest assured no one at MacDermid considers this satisfactory performance.
This year represents a stumble, the second in a row. Our share price finished
the year at $18.08, down 38%%. Not a lot to feel proud of or, is there more to
the story?
THE STORY: As the year progressed our markets weakened. Printed circuits
suffered from unprecedented declines in demand as inventories of electronic
devices began piling up in the supply chain. An important measure of demand,
the book - to - bill ratio for printed circuits ended the year at .63, the
lowest since the measure was introduced. A ratio of 1.0 would mean bookings and
shipments were balanced. The slowing of the U.S. economy was evidenced in
automotive production, which ended 15% lower, driving down the demand for our
industrial products. Advertising and printing activity in graphic arts trended
down as the year progressed. Yes, the external environment presented a
difficult challenge.
REOCCURRING REVENUES: This year's difficult external environment provided the
background for us to demonstrate the relative lack of volatility of earnings and
especially cash flow in down cycles. A very important characteristic of your
company is the percentage of reoccurring revenues. Reoccurring revenues are
sales revenue of the company that don't require a new sales cycle. We refer to
this as consumable revenues. Most of our products are consumed, or used in our
customers' manufacturing processes. This means purchases of our products cannot
be postponed or otherwise reduced in a cost savings initiative. Yes, the amount
of our product used may be reduced if our customers produce less. For example,
in the graphic arts business, our customers use a photopolymer printing plate
for every page of a newspaper. A page cannot be printed without one. When fewer
pages are printed, our volume is reduced as we experienced this year.
Reoccurring revenues were 89% of total revenues this year. For many of our
product lines there is a minimum usage of our products to operate a production
line, regardless of whether the line is fully utilized or not. This is why we
often experience smaller reductions in revenues than our end markets would
indicate.
VARIABLE COST STRUCTURE. 64% of our total costs are manufacturing costs
incurred to produce our chemical business products.75% of manufacturing cost is
raw materials. We purchase more than 1,000 raw materials. Historically, the
economic cycles of different raw materials run counter to one another,
offsetting an increase in one with a reduction in another. Raw materials are
strictly variable in usage, i.e. the more products we sell the more we produce
and visa versa. As a result, the portion of cost represented by raw materials
remains a constant percent as volume moves up and down. There is a significant
portion of our "SG&A" that is variable as well. This results from a highly
leveraged compensation system. When earnings are down, bonuses, which represent
as much as 20% of total compensation, are also down, offsetting a good amount of
the impact.
BETTER CASH FLOWS IN DIFFICULT TIMES. Fiscal 2001 cash from operations were
$59 million, about equal to the prior year. Owner earnings of $43.4 million
were 15% higher than the previous year. We will increasingly refer to owner
earnings. This is a measure of the cash available for investment generated by
the business in the period. We define owner earnings as net income, plus
non-cash items, plus or minus the change in working capital, less capital
expenditures. Another way to look at owner earnings is the amount of cash that
could be taken out of the business, or reinvested in it. MacDermid has always
been cash flow oriented. This year with the difficult external environment, we
made a greater effort than normal. Capital expenditures are much more
discretionary at MacDermid than one might suspect. This year net capital
expenditures were $8 million lower than the prior year. We estimate our
maintenance capital expenditure at about $8 million. Any spending over that
should produce a growth opportunity. Capital expenditures are subject to delays
or cancellations if the economic situation warrants doing so. We did a much
better job of utilizing cash globally, minimizing non-productive uses and
balances. Our new heightened focus on cash will continue to benefit us in
fiscal 2002.
BACK TO THE FUTURE. As we said in last year's report, the strategic
transformation of MacDermid is complete. Your company today is much more
balanced in terms of business risk. The platform for growth is also more
robust. There is no longer a strategic imperative to grow by acquisition.
We find ourselves in a very similar position to the early 90's. Our businesses
enjoy outstanding fundamentals. They generate significant cash and require only
modest reinvestment. They are relatively recession resistant, and enjoy
defendable competitive advantage. We have a lot to work with.
In the early 90's we took a business with good dynamics and by exhibiting an
intense focus on the basics, turned average performance into extraordinary
results. Our starting point today is very similar. There are some 2,500 new
Clan members who came from different cultures, good companies, albeit
traditional. There is little traditional about MacDermid. A high performance
expectation is fundamental to our culture. We act like owners. We take risks
as entrepreneurs. We can afford to take risks because we spend your money like
it was our own. Our performance standards are similar to what one would expect
from a small business owner. To us it ALL matters. We know that people can
change to embrace our philosophies. All of MacDermid changed in the early 90's.
We also know it isn't easy. It takes inspired leadership, and a focus that can
be scary in its intensity. Simply telling people about it doesn't change
behavior. As we have begun this transformation we have had to change
leadership. There can be no room for uninspired leaders if we are to be
successful in this transformation. Make no mistake, this is a change that must
occur. As your Chairman and CEO, I know I am the one who you must hold
accountable. This is a transformation that must not fail. I take great comfort
knowing that I am not alone. We have promoted progressive "young at heart"
people who clearly "get it" and we will be supporting them closely. Recognizing
the need for additional management capacity, especially at corporate, we are
recruiting for a few key positions. There is large group of Clan members all
around the world who need no special encouragement to embrace the MacDermid
Philosophy. We will be building from that base. We also know there are key
people from within the newly acquired organizations who are excited about this
entrepreneurial opportunity.
BACK TO THE FUTURE IS ALREADY STARTED! Significant movement to focus on the
basics has already started. Last year when we acquired PTI we thought we could
operate Graphic Arts as a separate unit. We soon realized that graphic arts
would not be able to meet our expectations without completely adopting the
MacDermid operating philosophy. As a result, we announced the closure of their
former headquarters, and a management reorganization as part of an overall $12
million cost reduction initiative that was complete by year-end. We saw an
improvement in the fourth quarter and now fully expect Graphic Arts to meet our
expectations. Our refocus on the basics of frugal entrepreneurship is in the
early stages. We are seeing reductions in all discretionary areas, travel and
entertainment, small purchases, facilities and much more. In Graphic Arts we
have only recently begun sharing raw material costs between locations and we see
a major opportunity to reduce these costs. During the year we sold a European
fuel oil additive business and a small adhesive and sealant business. After the
year-end we announced the write-off of our Via Tek investment in Chicago. This
recognizes the end of one frustrating chapter in our investment in electronics
manufacturing. We were unable to obtain the production levels and yields in
Chicago that we were reaching in Spain. This will, however, eliminate more than
$8 million in losses incurred in 2001.
MAKING THEM OWNERS. Employee ownership has been high at MacDermid since the
employees bought the company from Archie MacDermid 42 years ago. We believe
employee ownership is key to the success of the MacDermid philosophy. In an
effort to jump-start this entrepreneurial transformation, we will be asking for
your approval for two new stock option plans. First a worldwide, all employee
plan intended to award options to all employees. The second is a new executive
option plan. It is an indexed, performance plan, designed to ensure that our
executives gain only if we meet performance targets and outperform the index.
This plan is rare because it does not reward for average performance and it
requires us to treat the cost as an expense in the income statement.
HAROLD LEEVER THE FOUNDER OF THE MODERN CLAN MACDERMID HAS PASSED ON. Harold
implored us not to stand at his grave and weep, but to take inspiration from his
life. Harold embodied the MacDermid philosophy like no one else. He was the
tough taskmaster who knew that greatness never resulted from taking the easy
road. He believed to the tips of his toes in innate human potential. His
motives were pure. He just wanted people to be more successful than they
themselves thought possible. And most of all Harold had fun. He reveled in the
challenges we faced. He laughed in the face of adversity. He celebrated
victory, did he ever celebrate victory! His life was MacDermid. We owe him a
great debt as he created the special place called the Clan MacDermid. Now he
has left it up to us. What do we do with this legacy? We can take the easy
road and seek to fit in with the crowd. Or, we can continue the road less
traveled, and take this as but the beginning. As you can see by reading the
above, I have already decided. I know I can count on the Clan to respond, and
appreciate the support of our shareholder partners. We will not fail.
/s/ Daniel H. Leever
Daniel H. Leever
Chairman of the Board and Chief Executive Officer
(Three vertical bar graphs are provided here, net sales, earnings per share, and
return on equity. Each graph depicts one facet of results of operations for the
fiscal years 1997 through 2001.)
GRAPH VALUES
Net Sales (in $U.S. millions), Earnings Per Share (diluted, in $U.S.), Return On
Equity (percentage)
'97 '98 '99 '00 '01
NET SALES $440.3 $528.6 $612.8 $ 758.1 $ 794.8
EARNINGS PER SHARE $ 0.83 $ 0.92 $ 1.72 $ 1.70(1) $ 1.33(1)
RETURN ON EQUITY 31.4% 30.6% 41.3% 29.2%(1) 19.3%(1)
<FN>
(1) Excluding one-time, merger related charges in 2001 and 2000 and
restructuring/impairment charges in 2001.
MACDERMID, INCORPORATED: PROFILE OF AN INDUSTRIAL LEADER
Founded in 1922 and headquartered in Waterbury, Connecticut, MacDermid,
Incorporated (NYSE:MRD) is a leading worldwide manufacturer of specialty
chemical processes for the metal and plastic finishing, electronics and graphic
arts industries with operating facilities in over 20 countries. The Corporation
employs over 4,300 worldwide, many of whom are shareholders. Our vision is to
build one of the world's greatest industrial companies.
FIVE YEAR SELECTED FINANCIAL DATA
(In thousands, except share and per share amounts)
OPERATING RESULTS 2001 2000 1999 1998 1997
- ------------------------------------------------------- ------------ ------------ ------------ ------------ ------------
Net Sales $ 794,776 $ 758,080 $ 612,801 $ 528,567 $ 440,297
Gross Profit $ 354,550 $ 358,936 $ 295,133 $ 257,961 $ 212,947
Income Before Extraordinary Charge $ 34,804 $ 49,120 $ 55,626 $ 31,389 $ 28,598
Net Earnings Available for Common Shareholders $ 34,804 $ 45,358 $ 55,626 $ 29,758 $ 26,762
Diluted Earnings Per Common Share (1) $ 1.07 $ 1.40 $ 1.72 $ 0.92 $ 0.83
FINANCIAL POSITION AT YEAR END
- -------------------------------------------------------
Working Capital $ 125,689 $ 133,318 $ 117,643 $ 99,637 $ 73,005
Current Ratio 1.5 1.7 1.6 1.8 1.7
Capital Expenditures $ 22,437 $ 24,039 $ 20,036 $ 14,158 $ 11,669
Total Assets $ 884,825 $ 790,492 $ 737,289 $ 498,195 $ 400,123
Long-term Debt (Includes Short-term Portion) $ 461,136 $ 406,697 $ 406,381 $ 263,567 $ 185,376
Percent of Total Capitalization
(Excluding Preferred Stock) 66.7 65.6 71.3 71.3 67.8
Redeemable Preferred Stock -- -- -- -- $ 32,436
OTHER DATA
- -------------------------------------------------------
Return On Sales (%) 4.4 6.0 9.1 5.6 6.1
Return On Average Common Equity (%) 15.7 24.1 41.3 30.6 31.4
Cash Provided by Operations $ 59,070 $ 59,834 $ 80,456 $ 55,610 $ 49,087
Cash Provided By (Used In) Investing Activities $ (94,318) $ (36,937) $ (195,697) $ (94,281) $ (10,161)
Cash Provided By (Used In) Financing Activities $ 30,273 $ (22,793) $ 129,968 $ 39,255 $ (41,362)
EBITDA (2) $ 131,015 $ 144,553 $ 135,958 $ 104,436 $ 84,691
Owners' Earnings (3) $ 43,417 $ 36,436 $ 60,461 $ 42,117 $ 38,289
Pro Forma Cost of Stock Options (4) $ 3,128 $ 3,185 $ 2,019 $ 78 $ 70
Diluted Earnings Per Share had Pro Forma Cost of Stock
Options been Expensed (4) $ 1.01 $ 1.34 $ 1.68 $ 0.92 $ 0.83
SHARE DATA
- -------------------------------------------------------
Common Shareholders' Equity $ 230,669 $ 213,254 $ 163,350 $ 106,315 $ 88,136
Cash Dividends Per Common Share (1) $ 0.08 $ 0.08 $ 0.08 $ 0.07 $ 0.0667
Common Shares Outstanding (1)
Diluted Average During Year 32,400,385 32,429,450 32,421,296 32,183,821 32,368,481
Outstanding At Year-end 31,152,054 31,155,921 31,155,374 31,094,531 30,560,084
Stock Price (1)
High $ 29.12 $ 46.75 $ 42.38 $ 37.00 $ 13.00
Low $ 15.70 $ 22.19 $ 23.38 $ 11.59 $ 7.16
Year-end $ 18.08 $ 26.50 $ 33.94 $ 28.75 $ 11.59
<FN>
(1) Share and per share data have been restated to reflect the effects of 3-for-1 stock splits effective February 6,
1998 and November 15, 1996.
(2) Represents earnings from operations before interest, taxes on earnings, depreciation and amortizations. EBITDA
is not intended to represent cash flow from operations as defined by generally accepted accounting principles. It
should not be used as an alternative to net income as an indicator of operating performance or to cash flows as a
measure of liquidity.
(3) Represents cash flow from operations, less net capital spending. Owners' Earnings is not intended to represent cash
flow from operations as defined by generally accepted accounting principles. It should not be used as an alternative
to net income as an indicator of operating performance or to cash flows as a measure of liquidity.
(4) Pro forma cost stock options as presented above is different from those in the financial statements, arising from
those granted to the Chairman of the Board and Chief Executive Officer. The options were a three-year grant and
therefore, the pro forma cost, as viewed by management, is spread over the three years covered by this grant.
MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION
& RESULTS OF OPERATIONS
(In thousands, except share and per share amounts)
CONSOLIDATED OVERVIEW
IN FISCAL 2001 MACDERMID, INCORPORATED ("THE CORPORATION") FURTHER RESHAPED
ITS BUSINESS PORTFOLIO WITH THE ADDITION OF ELECTRONICS MANUFACTURING TO ITS
BUSINESS SEGMENTS. PRIOR TO FISCAL 2000, THE CORPORATION OPERATED WITHIN A
SINGLE BUSINESS SEGMENT WITH THE MOST SIGNIFICANT CONCENTRATION OF BUSINESS TO
PRINTED CIRCUIT BOARD MANUFACTURERS. THE ACQUISITION OF W. CANNING, PLC
("CANNING") IN THE LATER PART OF FISCAL 1999, COUPLED WITH THE MERGER WITH PTI
INC. ("POLYFIBRON") IN FISCAL 2000, BEGAN THE CORPORATION'S BUSINESS SEGMENT
EXPANSION. THESE TRANSACTIONS HAVE POSITIONED THE CORPORATION IN THREE PRINCIPAL
BUSINESS SEGMENTS AS A WORLDWIDE MARKET LEADER IN GRAPHIC ARTS AND ADVANCED
SURFACE FINISHES, AS WELL AS HAVING A PRESENCE IN ELECTRONICS MANUFACTURING.
THE GRAPHIC ARTS INDUSTRIES NOW REPRESENT THE LARGEST CONCENTRATION OF BUSINESS
FOR THE CORPORATION.
FISCAL 2001 NET SALES OF $794,776 WERE 5% HIGHER THAN THE PREVIOUS YEAR,
$758,080 AND THIS REPRESENTS THE SEVENTH CONSECUTIVE RECORD YEAR FOR NET SALES.
SEVERAL ACQUISITIONS (AND DIVESTITURES OF NON-CORE BUSINESS, NET) CONTRIBUTED
SIGNIFICANTLY TO THE INCREASE IN SALES. WORLDWIDE ECONOMIES WEAKENED THROUGHOUT
THE YEAR AND THE CORPORATION WITNESSED A SLOWING BUSINESS TREND DURING THE
SECOND HALF OF THE FISCAL YEAR PARTICULARLY IN ASIA AND THE UNITED STATES.
DURING THE YEAR, THE DOLLAR STRENGTHENED AGAINST MOST FOREIGN CURRENCIES
RESULTING IN A NEGATIVE EFFECT OF APPROXIMATELY 4% ON TRANSLATED NET SALES.
GROWTH FROM NEW BUSINESS ACTIVITY THROUGHOUT THE YEAR IN THE ASIAN AND
EUROPEAN REGIONS MORE THAN OFFSET THE NEGATIVE ECONOMIC FACTORS WHICH DEVELOPED
DURING THIS PAST YEAR AND PRODUCED SATISFACTORY GROWTH IN OPERATING PROFITS, IN
THESE REGIONS, FOR 2001. IN NORTH AMERICA, OPERATING PROFITS WERE SUBSTANTIALLY
LESS THAN COMPARED TO THE PREVIOUS YEAR. THE WEAK PERFORMANCE WAS PRINCIPALLY
DUE TO SLUGGISH PURCHASING BY MOST ELECTRONICS CUSTOMERS IN A SOFT INFORMATION
TECHNOLOGIES MARKET. THE DEMAND FOR ADVERTISING PRINTING AND CORRUGATED
PACKAGING AT MANY CUSTOMERS WAS SLOW, AS WELL. CUSTOMER CAPITAL RESOURCES WERE
TIGHT AND THERE WERE COMPETITIVE PRICING PRESSURES. AFTER GIVING EFFECT TO
ONE-TIME MERGER COSTS AS WELL AS RESTRUCTURING AND IMPAIRMENT CHARGES THE
DILUTED EARNINGS PER SHARE WERE $1.07 IN 2001 AS COMPARED TO DILUTED EARNINGS
PER SHARE OF $1.40 AFTER MERGER-RELATED COSTS (INCLUDING AN EXTRAORDINARY CHARGE
FOR DEBT RESTRUCTURING) IN 2000. FOREIGN CURRENCY TRANSLATION RESULTED IN
LOWER REPORTED EARNINGS OF $0.05 PER SHARE FOR 2001.
ACQUISITIONS
The Corporation acquired a 60% interest in Eurocir S.A., a printed circuit
board manufacturer based in Spain, effective January 1, 2001. Fiscal 2001
consolidated operating results include the results of Eurocir S.A. since that
date. The acquisition was financed through bank borrowings under the revolving
credit facility. The total purchase price of approximately $31,000 was
accounted for as a purchase transaction and included inventory, fixed assets and
goodwill of approximately $24,000 which is being amortized over 15 years. There
is a minority interest reflected in the financial statements for March 31, 2001.
The purchase and sale agreement includes a put and call arrangement for the
remaining 40% interest which expires after the fifth anniversary of the closing
date. The purchase price for the remaining 40% is based on a multiple of
earnings from operations before interest, taxes on earnings, depreciation and
amortization ("EBITDA") during that period.
On June 13, 2000, the Corporation acquired the assets, subject to certain
liabilities, of the digital graphics business unit of VirtualFund.com, Inc.
("Colorspan") and the results of Colorspan are included in the consolidated
operating results since that date. The acquisition was financed through bank
borrowings under the revolving credit facility. The total purchase price of
approximately $47,000 was accounted for as a purchase transaction and included
inventory, fixed assets, goodwill and other intangible assets. The goodwill and
intangibles of approximately $25,000 and $17,000, respectively, are being
amortized over 15 years.
During fiscal 2000 the Corporation completed a merger with Polyfibron. On
December 29, 1999, the Corporation issued 6,999,968 shares and share equivalents
of its common stock in exchange for all of the outstanding shares of Polyfibron.
This business positions the Corporation as a worldwide Graphic Arts leader. The
primary products offered to the printing industry include offset blankets,
printing plates, textile blankets and rubber based covers for industrial
rollers. The business combination has been accounted for as a pooling of
interests and accordingly, the consolidated financial statements for the periods
prior to the combination have been restated to include the accounts and results
of operations of Polyfibron.
On May 3, 1999 a subsidiary of the Corporation acquired controlling
interest in Galvanevet S.P.A., an industrial products, specialty chemical
manufacturer in Italy. Consolidated operating results for fiscal 2000 include
the results of Galvanevet S.P.A. since that date. The total purchase price of
approximately $22,500 was accounted for as a purchase transaction and included
inventory, fixed assets and goodwill of approximately $12,800 which is being
amortized over 15 years. The acquisition was financed through bank borrowings
under the revolving credit facility.
During fiscal 1999 the Corporation acquired the outstanding shares of
Canning. This business significantly enhances the Corporation's industrial
products presence worldwide and includes new product offerings for offshore
fluids, sealants and adhesives and fuel and water additives businesses
primarily in North America and Europe. The total purchase price of
approximately $160,000, including closing costs, was accounted for as a purchase
transaction and included inventory, fixed assets, goodwill and other
intangibles. The goodwill (approximately $87,000) is being amortized over
40 years while the other identifiable intangibles (approximately $36,000) are
being amortized over periods ranging between 6 and 40 years. The acquisition
was financed through bank borrowings. Consolidated operating results for fiscal
1999 include the results of the Canning business from December 2, 1998.
RESTRUCTURING
The Corporation embarked on a restructuring program during the second
quarter of fiscal 2001 with an effort to strategically reposition its operations
in both Graphic Arts and Advanced Surface Finishes. In connection with these
actions, restructuring charges of $6,663 ($0.13 per share, diluted) were
recorded during fiscal 2001 summarized as follows:
Severance $6,133
Lease cancellation/Asset write-offs 530
------
Total $6,663
======
The Corporation had grown significantly through acquisitions over the previous
two fiscal years and a comprehensive review of its cost structure was undertaken
in order to achieve cost savings, primarily severance for management and office
support redundancies that had developed. Approximately 140 employees have
severed in accordance with the program resulting in cash payments of $3,980. An
office facility for the previous headquarters of Polyfibron was closed resulting
in other charges of $363. The program is substantially complete and at March
31, 2001, the remaining balance of $2,320 represents employee severance costs
for 25 individuals and lease cancellation costs. These cost saving measures
are expected to result in total selling, technical and administrative ("ST&A")
annual savings of approximately $15,000 beginning in fiscal 2002.
FISCAL 2001 VS. FISCAL 2000
SALES, COSTS AND EXPENSES:
Graphic Arts:
Fiscal 2001 Graphic Arts net proprietary sales of $311,767 increased 6%
over fiscal 2000 net proprietary sales of $293,459. The Graphic Arts segment is
an entirely proprietary business. Acquisitions (net) added approximately
$37,200 and a stronger U.S. dollar had the effect to reduce sales approximately
$9,800. Net proprietary sales would have decreased 3% from the previous year,
without the incremental sales related to acquisition and excluding the negative
effect from foreign currency exchange.
Costs as a percentage of sales increased slightly over the previous year.
Certain excessive manufacturing costs were incurred during the year and overhead
recoveries declined. In addition, the acquired business added costs at a
noticeably higher percentage of sales from traditional business. These
principal factors resulted in an overall gross profit percentage of 42.4% in
2001 as compared to 45.7% in 2000.
ST&A expenses, excluding restructuring costs in 2001 ($4,351) and one-time
merger costs in 2001 and 2000 ($1,473 and $5,727, respectively), were $83,600
for 2001, a 15% increase as compared to $72,504 for 2000. ST&A, excluding
acquisition and foreign currency exchange differences decreased 6%. ST&A, as a
percentage of sales was 31.1% as compared to 24.7% in the previous year, but
would have been relatively similar absent the effects from acquired business.
Total research and development costs were $13,469 in 2001, an increase
(including effect of acquired business) of 29% over 2000. Total amortization
charged to earnings was $8,788 for 2001 up from $7,030 in 2000. The principal
effect on this increase is the amortization of goodwill and other intangibles
from the Colorspan acquisition. As a result, operating profit of $39,257 (after
amortization) decreased 24% from the previous year.
Advanced Surface Finishes:
Net sales of $447,875 decreased 4% in fiscal 2001 for Advanced Surface
Finishes. Proprietary products represent approximately 87% of the Advanced
Surface Finishes segment. Fiscal 2001, proprietary sales of $388,840 increased
2% over fiscal 2000, proprietary sales of $383,000. Acquisitions added
approximately $10,000 and a stronger U.S. dollar had the effect to reduce sales
approximately $17,500. Net proprietary sales would have increased 4% from the
previous year, were the incremental sales related to acquisition and negative
effect from foreign currency exchange to be excluded. This Advanced Surface
Finishes increase came from the Asian region, primarily during the first half of
the year.
Costs as a percentage of sales decreased slightly from the previous year.
Sales mix continued to shift to newer, more efficient and environmentally
Friendly electronics technologies that carry more favorable gross margins.
Softening pricing for certain products, including dry film photoresist has
stabilized this year, as well. These principal factors resulted in an
overall gross profit percentage of 50.0% in 2001 as compared to 48.4%
in 2000.
ST&A expenses, excluding restructuring costs in 2001 ($2,312) and one-time
merger costs in 2000 ($1,890), were $142,244 for 2001 a 7% decrease as compared
to $152,222 for 2000. ST&A, excluding acquisition and foreign currency exchange
differences decreased 4%. ST&A, excluding restructuring costs, as a percentage
of sales was 31.8%, a decrease of approximately 1% from 32.8% in the previous
year. Total research and development costs were $10,997 in 2001, a decrease of
9% from 2000. Total amortization charged to earnings was $11,484 for 2001 up
from $10,533 in 2000. The increase is from goodwill amortization of various
recent acquisitions throughout Europe. As a result, operating profit of $70,142
(after amortization) increased 8% over the previous year.
Electronics Manufacturing:
The Electronics Manufacturing segment is newly formed this year by the
acquisitions of the remaining interest in the joint venture Dynacircuits, in
July 2000, and a 60% majority interest in Eurocir S.A., in January 2001. Net
sales were $35,134 for fiscal 2001. These sales are classified as
non-proprietary and the board business does not carry the same level of gross
margin as the chemical business. Costs were in excess of sales due to start-up
difficulties at Dynacircuits and an asset impairment charge (see Consolidated
Financial Statement Note 1(e)), thus margins were adversely affected. The
underlying gross profit percentage of 8.1% for the Eurocir group in 2001 is not
necessarily indicative of the expectation for future fiscal years. ST&A
expenses were $4,213 for 2001, which is 12.0% of sales. Total amortization
charged to earnings was $369 for 2001, representing three months activity for
the Eurocir acquisition. As a result, operating losses (after amortization and
including asset impairment charges) totaled $10,347 for the partial year 2001.
INCOME TAXES: The overall effective income tax rate increased to 36.8% in 2001
from 36.3% in 2000. The rate increase was due to a combination of the change in
earnings mix from lower to higher tax jurisdictions, the non-deductible goodwill
charges associated with the Canning acquisition and a write-off of deferred tax
assets that will not be realized. These charges were somewhat offset by the
continuing impact of worldwide tax minimization strategies.
NET EARNINGS: The Corporation increased long-term borrowings throughout the
year, primarily to effect its acquisition strategy. In addition, the cost of
borrowing increased approximately one percentage point and, therefore, net
interest expense increased 7% over 2000. This, coupled with lower operating
profit due to modest sales increases and relatively higher costs and expenses
for 2001, pushed net earnings below 2000. Diluted earnings per share decreased
in 2001 to $1.07 per share as compared to $1.40 per share in 2000.
FISCAL 2000 VS. FISCAL 1999
The discussion for 2000 vs 1999 is after giving effect to the merger with
Polyfibron.
SALES, COSTS AND EXPENSES:
Graphic Arts:
Fiscal 2000 Graphic Arts net proprietary sales of $293,459 increased 10%
over fiscal 1999. This increase was due to acquisitions offsetting a weakness
in printing plates for the advertising industry. Foreign currency translation
did not have any measurable affect on sales. Costs as a percentage of sales
increased somewhat in 2000 over 1999, due to increased factory expenses and a
higher cost structure on acquired business. Gross profit percentage was 45.7%
in 2000 as compared to 47.7% in 1999. ST&A expenses (excluding merger costs)
were $72,504 for 2000 as compared to $65,360 for 1999. This 11% increase was
entirely a result of new costs from purchase acquisitions. ST&A, as a
percentage of sales (24.7%) were similar to the previous year. Research and
development expenses of $10,475 increased 3% over the previous year. Total
amortization charged to earnings was $7,030 for 2000 up from $6,445 in 1999. As
a result, operating profit of $51,383 (after amortization) decreased 4% from the
previous year.
Advanced Surface Finishes:
Fiscal 2000 Advanced Surface Finishes net sales of $464,621 increased 34%
over fiscal 1999. This increase was significantly due to the Canning
acquisition, late in 1999. Foreign currency translation of a stronger U.S.
dollar had the effect to reduce sales approximately $8,000. Proprietary sales
represent 82% of total sales for 2000. Net proprietary sales would have
increased approximately 6% over the previous year, were the incremental sales
related to acquisition and negative effect from foreign currency exchange to be
excluded. Costs as a percentage of sales were virtually the same for 2000 as in
1999. Softening pricing for certain products, especially dry film photoresist
was largely offset by an improved product mix towards newer products, which are
more efficient and environmentally friendly. Gross profit percentage was 48.4%
in 2000 as compared to 48.5% in 1999. ST&A expenses (excluding merger costs)
were $152,222 for 2000 as compared to $111,031 for 1999. This 37% increase was
greatly a result of new costs from purchase acquisitions and a delay in
developing cost synergies. ST&A, as a percentage of sales (32.8%) were similar
to the previous year. Research and development expenses, $12,073 increased 7%
over the previous year. Total amortization charged to earnings was $10,533 for
2000 up from $5,885 in 1999, principally from the Canning acquisition. As a
result, operating profit of $65,534 (after amortization) increased 24% from the
previous year.
INCOME TAXES: The overall effective income tax rate increased to 36.3% in 2000
from 33.4% in 1999. The rate increase was brought about by the Corporation
incurring costs related to the merger with Polyfibron, which are not deductible
for tax purposes, along with an increase in non-deductible goodwill, resulting
primarily from the Canning acquisition. These charges were somewhat offset by
increased foreign tax credits and the continuing impact of worldwide tax
minimization strategies.
NET EARNINGS: Although debt balances at year-end are similar, the level of
borrowings during the year were much higher in 2000 as a result of borrowings
late in 1999 to effect the Canning acquisition. Net interest expense increased
21% over 1999 due to the higher level of borrowings and from an approximate one
percentage point interest rate increase for most of the fiscal year.
Acquisitions resulted in increased sales and expenses and after the cost of the
associated borrowings, were accretive to earnings in 2000. This coupled with
otherwise flat operating profit due to modest sales increases and ViaTek
start-up costs left net earnings below 1999. Diluted earnings per share
(including an extraordinary charge for early retirement of debt, $3,762 after
tax, in fiscal 2000) were $1.40 per share in 2000 as compared to $1.72 per share
for 1999.
NEW ACCOUNTING STANDARDS
Effective for the fourth quarter of fiscal 2001, the Corporation adopted
Emerging Issues Task Force Issue No. 00-10 "Accounting for Shipping and Handling
Fees and Costs". As a result, freight charged to customers is included as sales
and all remaining freight costs are charged to ST&A expenses. Prior amounts
have been restated to conform to the current presentation.
The FASB issued in 1998, Statement of Financial Accounting Standards No.
133, Accounting for Derivative Instruments and Hedging Activities ("SFAS133")
which replaces existing pronouncements and practices with a single, integrated,
accounting framework for derivatives and hedging activities. The Corporation
adopted SFAS133 on April 1, 2001 and will achieve hedge accounting treatment for
substantially all of the Corporation's business transactions whose risks are
covered using derivative instruments. The hedge accounting treatment provides
for the deferral of gains or losses on derivative instruments until such time as
the related transactions occur. The Corporation estimates that if it had
accounted for its derivatives in accordance with the new standard as of March
31, 2001, liabilities totaling $927 would have been recorded on the balance
sheet with an offsetting entry to Accumulated Other Comprehensive Income.
LIQUIDITY & CAPITAL RESOURCES
Cash flows from operations are used to fund dividend payments ($0.08 per
common share for fiscal 2001) to shareholders, working capital requirements of
the Corporation and capital projects. The Corporation has paid cash dividends
continuously since 1948. During fiscal 2001 cash flows provided by operations,
$59,070, were similar to the prior year. From time to time the Corporation
utilizes additional outside sources to fund overall needs, including major
capital projects for new and upgraded research and technical, manufacturing and
administrative facilities and for business acquisitions. In certain years, the
Corporation has embarked on programs that have required significant amounts of
funds in excess of those available from cash flows from operations.
New opportunities for business acquisitions, which become available from
time to time, are evaluated individually as they arise based upon MacDermid's
criteria for technological improvement and innovation, potential for earnings
growth and compatibility with the existing distribution channels. Management
intends to pursue those opportunities that have a strong potential to enhance
shareholder value. One such opportunity this past year was Eurocir S.A. The
Corporation acquired a 60% interest in this electronics printed circuit board
manufacturer for approximately $31,000 as part of its plan to further the
application of its ViaTek process. Another opportunity was the acquisition of
Galvanevet S.P.A. purchased for approximately $23,500, which improved the
Corporation's position in the European Advance Surface Finishes industrial
markets, since 1999. During the third quarter of fiscal 1999, the Corporation
purchased W. Canning, plc for approximately $160,000 (including closing costs).
These purchases are presently financed through bank borrowing under six-year
term loans and a revolving credit agreement with Bank of America.
New capital spending during fiscal 2001 of approximately $22,437 as
compared with $24,039 in fiscal 2000 and $20,036 in fiscal 1999, included new,
as well as upgraded, manufacturing facilities worldwide and replacement of
technical equipment. For fiscal 2002, planned new capital projects total
approximately $14,000.
The Board of Directors has, from time to time, authorized the purchase of
issued and outstanding shares of the Corporation's common stock for its
treasury. On July 22, 1998 the Board of Directors authorized the purchase of up
to an additional 1,000,000 shares of the Corporation's common stock, then, on
November 16, 1999 the Board of Directors reduced this authorization to 200,000.
Pursuant to this, and previous authorizations, MacDermid acquired 9,794 shares
during fiscal 2001 and 98,234 shares during fiscal 1999 in privately negotiated
purchases. Treasury shares may be used for transfer or sale to employee benefit
plans, business acquisitions or for other corporate purposes. The outstanding
authorization to purchase up to 174,326 shares, if exercised at the NYSE closing
price on March 31, 2001, would cost approximately $3,152.
The Corporation's financial position remains strong and, other than the
satisfaction of debt obligations, there are no long-range commitments, which
would have a significant impact upon results of operations, financial condition
or liquidity. The Corporation had domestic and foreign; short-term uncommitted
credit lines with banks approximating $75,000 ($11,748 outstanding at March 31,
2001) in addition to $215,000 ($144,340 outstanding at March 31, 2001) committed
revolving credit facility. Management believes that additional borrowing could
be obtained if needed.
The principal sources and uses of cash in fiscal years 2001, 2000 and 1999 were
as follows:
2001 2000 1999
--------- ------- ---------
Cash provided by:
Operations $ 59,070 $59,834 $ 80,456
Proceeds from disposition of
fixed assets, certain business and
available-for-sale securities 16,749 13,453 101
Option exercises --- --- 162
Net increase in borrowings 32,962 --- 135,325
--------- ------- ---------
$108,781 $73,287 $216,044
Cash used for:
Capital expenditures $ 22,437 $24,039 $ 20,036
Business acquisitions 88,630 26,351 175,501
Purchase of treasury shares 196 --- 3,508
Dividend payments 2,493 2,133 2,011
Net decrease in borrowings --- 20,660 ---
--------- ------- ---------
$113,756 $73,183 $201,056
Other - net ($2,595) $ 2,384 ($345)
--------- ------- ---------
Net increase (decrease) in cash ========= ======= =========
balances ($7,570) $ 2,488 $ 14,643
========= ======= =========
EURO CURRENCY CONVERSION
On January 1, 1999, certain member countries of the European Union
established fixed conversion rates between their existing currencies and the
European Union's common currency ("Euro"). The transition period for the
introduction of the Euro ends June 30, 2002. Issues that face the Corporation as
a result of the introduction of the Euro include converting information
technology systems which were largely upgraded under the year 2000 compliance
review, reassessing currency risk, negotiating and amending contracts, as well
as processing accounting and tax records. The Corporation is continually
addressing these issues and does not expect the Euro to have a material effect
on its financial condition or results of operations.
ENVIRONMENTAL MATTERS
As manufacturers and distributors of specialty chemicals and systems, 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's nature of operations and products (including raw
materials) exposes it to the risk of liabilities or claims with respect to
environmental cleanup or other matters, including those in connection with the
disposal of hazardous materials. The Corporation has been named as a
potentially responsible party ("PRP") at three Superfund sites. There are many
other PRPs involved at each of these sites. The Corporation has recorded its
best estimate of liabilities in connection with site clean-up based upon the
extent of its involvement, the number of PRPs and estimates of the total costs
of the site clean-up that reflect the results of environmental investigations
and remediation estimates produced by remediation contractors. While the
ultimate costs of such liabilities are difficult to predict, the Corporation
does not expect that its costs associated with these sites will be material.
In addition, some of the Corporation's facilities have an extended history
of chemical processes or other industrial activities. Contaminants have been
detected at some of these sites, with respect to which the Corporations ise
conducting environmental investigations and/or cleanup activities. These sites
include some of the Canning sites acquired in December 1998, such as the Kearny,
New Jersey and Waukegan, Illinois sites. The Corporation has established an
environmental remediation reserve of $2 million, predominantly attributable to
those Canning sites that it believes will require environmental remediation.
With respect to those sites, it also believes that its Canning subsidiary is
entitled under the acquisition agreement to withhold a deferred purchase price
payment of approximately $2 million. To the extent the Corporation's
liabilities exceed $2 million, it may be entitled to additional indemnification
payments. Such recovery may be uncertain, however, and would likely involve
significant litigation expense.
The Corporation does not anticipate that it will be materially affected by
environmental remediation costs, or any related claims, at any contaminated
sites, including the Canning sites. It is difficult, however, to predict the
final costs and timing of costs of site remediation. Ultimate costs may vary
from current estimates and reserves, and the discovery of additional
contaminants at these or other sites or the imposition of additional cleanup
obligations, or third-party claims relating thereto, could result in significant
additional costs.
Legal Proceedings
On January 30, 1997, the Corporation was served with a subpoena from a
federal grand jury in Connecticut requesting certain documents relating to an
accidental spill from its Huntingdon Avenue, Waterbury, Connecticut facility
that occurred in November of 1994, together with other information relating to
operations and compliance at the Huntingdon Avenue facility. The Corporation
was subsequently informed that it is a subject of the grand jury's investigation
in connection with alleged criminal violations of the federal Clean Water Act
pertaining to its wastewater handling practices. The Corporation has retained
outside law firms to assist in complying with the subpoena and the underlying
investigation. It has cooperated from the outset with the investigation and is
currently involved in informal negotiations with the Government with a view
towards settling any and all charges in this matter without resort to trial. At
this time of these negotiations it is too speculative to quantify the precise
financial implications to the Corporation.
In addition, two of the Corporation's former employees, who worked at the
Huntington Avenue facility, pled guilty in early 2001 to misdemeanor violations
under the Clean Water Act in connection with the above matter. These
individuals were recently sentenced to fines of $25,000 and $10,000 and 2 years
probation, as well as community service.
In a separate matter, on July 26, 1999, the Corporation was named in a
civil lawsuit commenced in the Superior Court of the State of Connecticut
brought by the Connecticut Department of Environmental Protection alleging
various compliance violations at its Huntingdon Avenue and Freight Street
locations between the years 1992 through 1998 relating to wastewater discharges
and the management of waste materials. The complaint alleges violations of its
permits issued under the Federal Clean Water Act and the Resource Conservation
and Recovery Act, as well as procedural, notification and other requirements of
Connecticut's environmental regulations over the foregoing period of time. The
Corporation is vigorously defending this complaint. It currently believes that
the outcome of this proceeding will not materially affect its business or
financial position, however, the proceeding is in the early stages. Therefore,
at this time it is too speculative to quantify the financial implications to the
Corporation.
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 below under the heading "Risk Factors" and 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.
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except share and per share amounts)
YEAR ENDED MARCH 31
---------------------
2001 2000 1999
------------ --------------------- ------------
Net sales $ 794,776 $ 758,080 $ 612,801
Costs and expenses:
Cost of sales 440,226 399,144 317,668
Selling, technical and administrative 230,057 224,726 176,385
Amortization of intangibles,
primarily goodwill 20,641 17,563 12,330
Merger related costs 1,473 7,617 ---
Restructuring costs 6,663 --- ---
Impairment charge 4,800 --- ---
------------ --------------------- ------------
703,860 649,050 506,383
------------ --------------------- ------------
Operating profit 90,916 109,030 106,418
Other income (expense):
Interest income 2,007 2,007 2,221
Interest expense (35,251) (33,050) (27,860)
Miscellaneous, net (2,735) (935) 2,688
------------ --------------------- ------------
(35,979) (31,978) (22,951)
------------ --------------------- ------------
Earnings before income taxes,
and extraordinary charge 54,937 77,052 83,467
Income taxes (note 6) (20,133) (27,932) (27,841)
------------ --------------------- ------------
Earnings before extraordinary charge 34,804 49,120 55,626
Extraordinary charge due to early
retirement of debt, net of tax benefit
of $2,305 --- (3,762) ---
------------ --------------------- ------------
Net earnings $ 34,804 45,358 55,626
============ ===================== ============
Earnings per share (note 1)
Basic
Earnings before extraordinary charge $ 1.12 $ 1.58 $ 1.79
Extraordinary charge due to early
retirement of debt, net of tax
benefit $ --- $ (0.12) $ ---
------------ --------------------- ------------
Net earnings $ 1.12 $ 1.46 $ 1.79
============ ===================== ============
Diluted
Earnings before extraordinary charge $ 1.07 $ 1.52 $ 1.72
Extraordinary charge due to early
retirement of debt, net of tax
benefit $ --- $ (0.12) $ ---
------------ --------------------- ------------
Net earnings $ 1.07 $ 1.40 $ 1.72
============ ===================== ============
Weighted average number of common
shares outstanding (note 1):
Basic 31,153,006 31,155,756 31,140,774
============ ===================== ============
Diluted 32,400,385 32,429,450 32,421,296
============ ===================== ============
<FN>
See accompanying notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
YEAR ENDED MARCH 31
---------------------
2001 2000 1999
-------- --------------------- --------
Net earnings available for common
shareholders $34,804 $ 45,358 $55,626
Other comprehensive income:
Foreign currency translation (7,597) (449) 3,230
Additional minimum pension liability (9,670) --- ---
Available-for-sale securities
unrealized gain/(loss)-net of taxes --- 174 (174)
-------- --------------------- --------
Comprehensive income $17,537 $ 45,083 $58,682
======== ===================== ========
<FN>
See accompanying notes to consolidated financial statements.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
ASSETS
MARCH 31
---------
2001 2000
--------- --------
Current assets:
Cash and equivalents $ 12,546 $ 20,116
Accounts receivable, less allowance for doubtful
receivables of $11,758 and $10,541 194,764 180,628
Inventories (note 2) 141,513 115,602
Prepaid expenses 6,365 6,977
Deferred income taxes (note 6) 10,346 9,115
--------- --------
Total current asset 365,534 332,438
--------- --------
Net property, plant and equipment (note 3) 183,578 154,149
Goodwill, net of accumulated amortization of
$36,062 and $25,332 236,098 206,848
Patents, trademarks and other intangibles, net of
accumulated amortization of $36,077 and
$28,109 67,135 54,891
Deferred income taxes (note 6) 5,559 7,505
Other assets, net 26,921 34,661
--------- --------
$ 884,825 $790,492
========= ========
<FN>
See accompanying notes to consolidated financial statements.
LIABILITIES & SHAREHOLDERS ' EQUITY
MARCH 31
----------
2001 2000
---------- ---------
Current liabilities:
Notes payable (note 4) $ 11,748 $ 4,561
Current installments of long-term obligations
(note 8) 68,517 46,349
Accounts payable 81,204 62,922
Dividends payable 623 623
Accrued compensation 18,121 18,937
Accrued expenses, other 48,997 51,761
Income taxes (note 6) 10,635 13,967
---------- ---------
Total current liabilities 239,845 199,120
---------- ---------
Long-term obligations (note 8) 392,619 360,348
Accrued post-retirement benefits, less current
portion (note 5) 17,355 7,239
Deferred income taxes (note 6) 4,337 10,531
---------- ---------
Total liabilities 654,156 577,238
---------- ---------
Shareholders' equity (note 10):
Common stock. Authorized 75,000,000 shares;
issued 45,408,464 shares in 2001 and
45,412,325 shares in 2000 at stated value of
$1.00 per share 45,408 45,412
Additional paid-in capital 16,437 13,866
Retained earnings 249,460 217,149
Accumulated other comprehensive income
Equity adjustment from foreign currency
translation (12,659) (5,062)
Equity adjustment from additional minimum
pension liability (9,670) ---
Less cost of common shares in treasury;
14,277,610 in 2001 and 14,267,816 in 2000 (58,307) (58,111)
---------- ---------
Total shareholders' equity 230,669 213,254
---------- ---------
Contingencies and commitments (notes 1, 11 and
12)
$ 884,825 $790,492
========== =========
<FN>
See accompanying notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
YEAR ENDED MARCH 31
-------------------
2001 2000 1999
--------- --------------------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 34,804 $ 45,358 $ 55,626
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation 22,193 18,895 14,522
Amortization of goodwill and other
intangible assets 20,641 17,563 12,330
Provision for bad debts 3,859 2,473 1,507
Deferred income taxes (5,479) (3,994) (1,388)
Impairment charge 4,800 --- ---
Changes in assets and liabilities net of
effects from acquisitions and dispositions:
Decrease (increase) in receivables (8,742) (8,582) (6,508)
Decrease (increase) in inventories (16,131) (6,441) (1,235)
Decrease (increase) in prepaid expenses 435 5,211 (5,353)
Increase (decrease) in accounts payable 108 (11,778) 13,831
Increase (decrease) in accrued Expense (5,092) 2,395 (9,916)
Increase (decrease) in income tax
Liabilities 5,818 1,585 4,497
Other 1,856 (2,851) 2,543
--------- --------------------- ----------
Net cash flows provided by
operating activities 59,070 59,834 80,456
--------- --------------------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (22,437) (24,039) (20,036)
Proceeds from disposition of fixed assets 6,784 641 101
Sale/(purchase) of available-for-sale
Securities --- 1,147 (261)
Acquisitions of businesses (88,630) (26,351) (175,501)
Dispositions of businesses 9,965 11,665 ---
--------- --------------------- ----------
Net cash flows used in investing
Activities (94,318) (36,937) (195,697)
--------- --------------------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term (repayments) borrowings - net . (14,749) (1,070) 90,281
Long-term borrowings 105,344 17,350 317,355
Long-term repayments (57,633) (36,940) (272,311)
Exercise of stock options --- --- 162
Acquisition of treasury stock (note 10) (196) --- (3,508)
Dividends paid (2,493) (2,133) (2,011)
--------- --------------------- ----------
Net cash flows provided by (used in)
financing activities 30,273 (22,793) 129,968
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND EQUIVALENTS (2,595) 2,384 (84)
--------- --------------------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (7,570) 2,488 14,643
CASH AND CASH EQUIVALENTS AT BEGINNING OF
YEAR (NOTE 1(A)) $ 20,116 $ 17,628 $ 4,793
--------- --------------------- ----------
--------- --------------------- ----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 12,546 $ 20,116 $ 19,436
========= ===================== ==========
========= ===================== ==========
CASH PAID FOR INTEREST $ 33,593 $ 32,004 $ 24,705
========= ===================== ==========
========= ===================== ==========
========= ===================== ==========
CASH PAID FOR INCOME TAXES $ 20,592 $ 27,634 $ 19,872
========= ===================== ==========
<FN>
See accompanying notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
SHAREHOLDERS ' EQUITY
(Note 1(h) and 10)
(In thousands)
COMMON ADDITIONAL RETAINED ACCUMULATED TREASURY TOTAL
STOCK PAID IN EARNINGS OTHER STOCK SHAREHOLDERS'
------- --------- ---------
CAPITAL COMPREHENSIVE EQUITY
----------- --------------
INCOME
--------------
Balance at March 31, 1998 45,264 3,833 119,664 (7,843) (54,603) 106,315
Exercise of stock options 90 341 --- --- --- 431
Stock awards 58 1,343 --- --- --- 1,401
Net earnings --- --- 55,626 --- --- 55,626
Cash dividends --- --- (2,011) --- --- (2,011)
Non-cash dividends --- --- (1,539) --- --- (1,539)
Tax benefit (note 6) --- 3,579 --- --- --- 3,579
Currency translation --- --- --- 3,230 --- 3,230
Securities holding loss --- --- --- (174) --- (174)
Shares acquired --- --- --- --- (3,508) (3,508)
------- ----------- --------- -------------- --------- --------------
Balance at March 31, 1999 45,412 9,096 171,740 (4,787) (58,111) 163,350
------- ----------- --------- -------------- --------- --------------
Exercise of stock options --- 22 --- --- --- 22
Stock awards. --- 831 --- --- --- 831
Net earnings --- --- 45,358 --- --- 45,358
Cash dividends --- --- (2,133) --- --- (2,133)
Change in subsidiary fiscal
year end --- --- 2,184 --- --- 2,184
Tax benefit (note 6) --- 3,917 --- --- --- 3,917
Currency translation --- --- --- (449) --- (449)
Securities holding gain --- --- --- 174 --- 174
------- ----------- --------- -------------- --------- --------------
Balance at March 31, 2000 45,412 13,866 217,149 (5,062) (58,111) 213,254
------- ----------- --------- -------------- --------- --------------
Exercise of stock options --- 45 --- --- --- 45
Stock awards (cancelled) (4) (13) --- --- --- (17)
Net earnings --- --- 34,804 --- --- 34,804
Cash dividends --- --- (2,493) --- --- (2,493)
Tax benefit (note 6) --- 2,539 --- --- --- 2,539
Currency translation --- --- --- (7,597) --- (7,597)
Additional minimum pension
Liability --- --- --- (9,670) --- (9,670)
Shares acquired --- --- --- --- (196) (196)
------- ----------- --------- -------------- --------- --------------
Balance at March 31, 2001 45,408 16,437 249,460 (22,329) (58,307) 230,669
======= =========== ========= ============== ========= ==============
<FN>
See accompanying notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) PRINCIPLES OF CONSOLIDATION. On December 29, 1999, the Corporation issued
6,999,968 shares and share equivalents of its common stock in exchange for all
of the outstanding shares of Polyfibron. The Corporation's consolidated
financial statements have been prepared to give retroactive effect to the merger
between Polyfibron and the Corporation which has been accounted for as a pooling
of interests. Accordingly, the consolidated financial statements for the periods
prior to the combination have been restated to include the accounts and results
of operations of Polyfibron. The combined results of operations for the year
ending March 31, 1999 include Polyfibron for the year ending December 31, 1998.
The Polyfibron subsidiaries, in previous years, reported on a calendar year
basis. Their fiscal year was changed beginning with fiscal year 2000, to
coincide with the parent corporation. The results of the quarter ended March 31,
1999, earnings of $3,184, less non-cash dividends of $1,000 on revenues of
$57,086, were credited directly to retained earnings to effect this changeover.
The consolidated statements of cash flows are presented for the year ended March
31, 2000, exclusive of the results of operations for the three months ended
March 31, 1999. During this period, net cash and cash equivalents of $4,800 and
$13,172 was used for operations and investing activities, respectively, and net
cash and cash equivalents of $16,164 was provided by financing activities. The
resulting $1,808 decrease in cash and cash equivalents during the period is
reflected in the cash and cash equivalents at the beginning of the year for
purposes of the consolidated statements of cash flows for the year ended March
31, 2000.
The accompanying consolidated financial statements include the accounts of
the parent corporation and all of its domestic and foreign subsidiaries. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
(B) USE OF ESTIMATES. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(C) CASH AND CASH EQUIVALENTS. For the purpose of the consolidated statements of
cash flows, the Corporation considers all highly liquid debt instruments
purchased with an initial maturity of three months or less to be cash
equivalents.
(D) INVENTORIES. Inventories are stated at the lower of cost (average moving
cost) or replacement market.
(E) PROPERTY, PLANT AND EQUIPMENT. Property, plant and equipment are stated at
cost. Depreciation and amortization of property, plant and equipment are
provided over the estimated useful lives of the respective assets, principally
on the straight-line basis. Expenditures for maintenance and repairs are charged
directly to expense; renewals and betterments, which significantly extend the
useful lives are capitalized. Costs and accumulated depreciation and
amortization on assets retired or disposed of are removed from the accounts and
the gains or losses resulting therefrom, if any, are credited or charged to
earnings.
Statement of Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
(SFAS121) requires the Corporation to assess the carrying value of property,
plant and equipment at each balance sheet date. At March 31, 2001 certain
assets were considered impaired, because it was determined that, due to
continuing losses at a start-up facility, the Corporation would be unable
to recover their remaining net book value. Accordingly, a $4,800 charge to
earnings was recorded in fiscal 2001 for those assets. These assets, which
are primarily used in the production of printed circuit boards, are expected
to be taken out of service within the next three to six months.
(F) INTANGIBLE ASSETS. Various intangible assets are amortized on a
straight-line basis over their estimated useful lives as determined by an
appropriate valuation. The present periods of amortization range between 15 and
40 years for patents and trademarks and between 5 and 30 years for other
separately identified intangible assets. Specifically, goodwill is amortized on
a straight-line basis over its estimated period of benefit; for smaller
businesses generally no longer than 15 years, for divisions of larger
corporations generally 25 years and for long established companies generally 40
years. The present goodwill amortization periods range between 5 and 40 years.
Accumulated amortization of goodwill was $36,062 and $25,332 at March 31, 2001
and 2000, respectively.
As required by Statement of Financial Accounting Standards No. 121,
Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to Be
Disposed Of (SFAS121) the Corporation evaluates the carrying value of intangible
assets at each balance sheet date to determine if impairment exists based upon
estimated undiscounted future cash flows. The impairment, if any, is measured by
the difference between carrying value and estimated fair value and charged to
expense in the period identified. The remaining amortization periods are
periodically evaluated and are revised if considered necessary. The application
of this statement had no impact on the Corporation's goodwill or other
intangible assets as of March 31, 2001 or 2000.
(G) EMPLOYEE BENEFITS. The Corporation sponsors a variety of employee benefit
programs, of which most are non-contributory.
RETIREMENT. Pension, profit sharing and other retirement plans generally are
non-contributory and cover substantially all employees. Domestically, the
Corporation funds a defined benefit pension plan and, overseas, maintains a
defined contribution plan. The projected unit credit actuarial method is used
for financial reporting purposes. In addition, the Corporation contributes to
profit sharing and employee stock ownership plans, which provide retirement
benefits based upon amounts credited to employee accounts within the plans. The
Corporation's funding policy for qualified plans is consistent with federal or
other regulations and customarily equals the amount deducted for income tax
purposes. Foreign subsidiaries contribute to plans, which may be administered
privately or by government agencies in accordance with local regulations.
POST-RETIREMENT. The Corporation currently accrues for post-retirement health
care benefits for most U.S. employees. The post-retirement health care plan is
unfunded.
POST-EMPLOYMENT. The Corporation currently accrues for post-employment
disability benefits to employees meeting specified service requirements. The
post-employment benefits plan is unfunded.
(H) COMPREHENSIVE INCOME. Statement of Financial Accounting Standards No. 130,
Reporting Comprehensive Income (SFAS130) establishes standards for reporting and
display of comprehensive income in the financial statements. The accumulated
currency translation adjustment for foreign operations and adjustment for
additional minimum pension liability are shown separately on the Consolidated
Balance Sheet.
(I) FAIR VALUE OF FINANCIAL INSTRUMENTS. Statement of Financial Accounting
Standards No. 107, Disclosures about Fair Value of Financial Instruments
(SFAS107) requires that reporting entities provide, to the extent practicable,
the fair value of financial instruments, both assets and liabilities. The
carrying amounts for the Corporation's financial instruments approximate fair
value because of the short maturity or variable rates of those instruments.
Interest rate swap agreements are employed by the Corporation to optimize
borrowing costs by reducing exposure of possible future changes in interest
rates. Net receipts or payments on the swap are accrued and recognized as
adjustments to interest expense. The Corporation had foreign currency forward
contracts outstanding to reduce its exposure to possible future changes in the
Deutsche Mark for which there is a short-term equipment purchase commitment.
The estimated fair value of these financial instruments at March 31, 2001 is a
liability of $927 based on the quoted market price from the banks holding the
instruments.
(J) FOREIGN OPERATIONS. The assets and liabilities of foreign subsidiaries are
translated into U.S. dollars at year-end rates of exchange while revenue and
expense accounts are translated at weighted-average rates in effect during the
periods. Translation of the financial statements resulted in a decrease in
equity of $7,597 and $449 in 2001 and 2000, respectively, and an increase in
equity of $3,230 in 1999. Foreign currency transactions included in the
consolidated statements of earnings resulted in a loss of $475 in 2001 and gains
of $352 and $385 in 2000 and 1999, respectively.
(K) REVENUE RECOGNITION. Sales, including freight charged to customers, are
recorded when products are shipped to the customer. Commissions and royalties
are recorded when earned.
(L) RESEARCH AND DEVELOPMENT. Research and development costs, charged to
expenses as incurred, were $24,466, $22,548 and $21,500 in 2001, 2000 and 1999,
respectively.
(M) INCOME TAXES. The provision for income taxes includes Federal, Foreign,
State and Local income taxes currently payable and those deferred because of
temporary differences between the financial statement and tax basis of assets
and liabilities and net operating loss (NOL) carry-forwards. No provision for
deferred income taxes is made with respect to equity adjustments from foreign
currency translation or to undistributed earnings of subsidiaries which, in
management's opinion, will be permanently reinvested or repatriated at a minimal
tax cost to the Corporation. Foreign tax credits are recorded as a reduction of
the provision for Federal income taxes in the year realized.
(N) STOCK-BASED PLANS. Effective April 1, 1996, the Corporation adopted the
disclosure requirements of Statement of Financial Accounting Standards No. 123,
Accounting for Stock Based Compensation (SFAS123). As permitted under SFAS123,
the Corporation continues to apply the recognition provisions of APB25,
Accounting for Stock Issued to Employees. Accordingly, compensation expense is
measured as the difference between the fair value of the shares and the exercise
price on the measurement date. Pro forma net income and per share amounts are
presented in the Employee Stock Incentive Plans note as if the alternative fair
value method of accounting provided for under SFAS123 had been applied to
options granted after March 31, 1995.
(O) COMMON SHARE DATA. Statement of Financial Accounting Standards No. 128,
Earnings Per Share (SFAS128) requires the presentation of basic and diluted
earnings per share (EPS). EPS is calculated based upon net earnings available
for common shareholders after deduction for preferred dividends. The computation
of basic EPS is based upon the weighted-average number of common shares
outstanding during the period. Diluted EPS is computed based upon the
weighted-average number of common shares outstanding plus the effect of all
dilutive contingently issuable common shares from stock options, stock awards
and warrants that were outstanding during the period.
The following table reconciles basic weighted-average common shares
outstanding to diluted weighted-average common shares outstanding:
2001 2000 1999
---------- ---------- ----------
Basic 31,153,006 31,155,756 31,140,774
Dilutive effect of stock options 246,027 272,342 279,170
Dilutive effect of warrants 1,001,352 1,001,352 1,001,352
---------- ---------- ----------
Diluted 32,400,385 32,429,450 32,421,296
========== ========== ==========
(P) RECENT ACCOUNTING STANDARDS. In 1998, the FASB issued Statement of Financial
Accounting Standard No. 133, Accounting for Derivative Instruments and Hedging
Activities (SFAS133). The Corporation adopted SFAS133 on April 1, 2001 and will
achieve hedge accounting treatment for substantially all of the Corporation's
business transactions whose risks are covered using derivative instruments. The
hedge accounting treatment provides for the deferral of gains or losses on
derivative instruments until such time as the related transactions affect
earnings. The Corporation estimates that if it had accounted for its derivatives
in accordance with the new standard as of March 31, 2001, liabilities totaling
$927 would have been recorded on the balance sheet with an offsetting entry to
Accumulated Other Comprehensive Income.
Effective March 31, 2001, the Corporation adopted Emerging Issues Task
Force Issue No. 00-10, Accounting for Shipping and Handling Fees and Costs. As
a result, freight charged to customers is included in sales and freight expense
is included in ST&A. Prior amounts have been restated to conform to the current
presentation by reclassifying freight expense of $2,840, $2,034 and $2,197 for
2001, 2000 and 1999, respectively. Freight expense recorded in ST&A expenses
was $7,179, $7,008 and $6,284 for 2001, 2000 and 1999, respectively.
(Q) ACQUISITIONS. Late in fiscal 2001, the Corporation acquired a 60% interest
in Eurocir S.A., a printed circuit board manufacturer based in Spain. The total
purchase price of approximately $31,000 was accounted for as a purchase
transaction and included inventory, fixed assets and goodwill of approximately
$24,000 which is being amortized over 15 years. The consolidated operating
results have included the results of Eurocir S.A. since January 1, 2001 and the
associated minority interest is reflected in the financial statements at March
31, 2001. The purchase and sale agreement includes a put and call arrangement
for the remaining 40% interest which expires after the fifth anniversary of the
closing date. The purchase price for the remaining 40% is based on a multiple
of earnings from operations before interest, taxes on earnings, depreciation and
amortization ("EBITDA") during that period. The acquisition was financed through
bank borrowings under the revolving credit facility.
On June 13, 2000, the Corporation acquired the assets, subject to certain
liabilities, of the digital graphics business unit of VirtualFund.com, Inc. and
those results are included in the consolidated operating results since that
date. The acquisition was financed through bank borrowings under the revolving
credit facility. The total purchase price of approximately $47,000 was
accounted for as a purchase transaction and included inventory, fixed assets,
goodwill and other intangible assets. The goodwill and intangibles of
approximately $25,000 and $17,000, respectively, are being amortized over 15
years.
The following unaudited pro forma summary of consolidated results is presented
as if these acquisitions had occurred on April 1, 1999 after giving effect to
certain pro forma adjustments, including recognition of additional interest
expense on debt to acquire the business, amortization of goodwill and other
intangibles, the effects of purchase price allocations and related tax effects.
(In thousands except per share amounts)
- ---------------------------------------
(unaudited) 2001 2000
-------- --------
Net sales $857,769 $893,975
Net earnings $ 34,337 $ 43,422
Diluted, earnings per share $ 1.06 $ 1.34
The pro forma financial information is presented for informational purposes only
and is not necessarily indicative of the results which would have occurred if
the acquisitions had commenced at that date, nor are they indicative of future
results.
On December 29, 1999, the Corporation issued 6,999,968 shares and share
equivalents of its common stock in exchange for all outstanding shares of
Polyfibron, a specialty chemical manufacturer for the graphic arts industries.
This business combination has been accounted for as a pooling-of-interests
combination and, accordingly, the consolidated financial statements for the
periods prior to the combination have been restated to include the accounts and
results of operations of Polyfibron.
In December 1998 the Corporation closed its cash tender offer whereby it
acquired approximately 95% of the outstanding shares of W. Canning, plc. The
Corporation acquired the remaining shares through a statutory compulsory
procedure completed February 5, 1999, thereby acquiring the international
specialty chemical company. Based in Birmingham, England, the business consists
principally of the manufacture, sale and technical servicing of proprietary
products including surface finishing, offshore fluids, sealants and adhesives
and fuel and water additives. The total purchase price of approximately
$160,000, including closing costs, included inventory, fixed assets, goodwill
(approximately $87,000) and other intangibles (approximately $36,000) and was
accounted for as a purchase transaction. The goodwill is being amortized over 40
years while the other separately identifiable intangibles are being amortized
over periods ranging between 6 and 40 years. The goodwill reflects adjustments
necessary to allocate the purchase price to the fair value of the assets
acquired, liabilities assumed and additional purchase liabilities recorded. The
additional liabilities recorded include approximately $9,000 for reorganization
costs associated with planned elimination of duplicate staffing and facilities
in the United Kingdom, France, Germany and the United States, and $2,000 for
environmental costs (explained more fully in note #12, Contingencies). At March
31, 2001, liabilities of $2,092 for reorganization and $1,880 for environmental
remained on the Consolidated Balance Sheet.
The following table shows the acquisition reserves balance included in
other accrued liabilities on the
consolidated balance sheets at March 31, 2001. The activity is shown cumulative
since inception and fiscal 2001
activity included amounts paid of $621:
(In thousands)
Description Inception Paid Adjustments 2001
- --------------------- ---------- ------ ------------- ------
U.S. facilities $ 3,550 $2,954 $ 1,035 $1,631
Overseas facilities 650 73 (150) 427
U.S. redundancies 700 1,166 500 34
Overseas redundancies 1,350 3,950 2,600 0
U.S. environmental 2,000 120 0 1,880
---------- ------ ------------- ------
Total $ 8,250 $8,263 $ 3,985 $3,972
========== ====== ============= ======
(R) RESTRUCTURING CHARGES. The Corporation embarked on a restructuring program
during the second quarter of fiscal 2001 in effort to strategically reposition
its operations for both Graphic Arts and Advanced Surface Finishes.
Acquisitions over the past two years had significantly increased the operations
and the Corporation took action to reduce its cost structure. In connection
with these actions, restructuring charges of $6,663 were recorded during the
second through the fourth quarters of fiscal 2001. The restructuring activities
primarily related to severance for management and office support redundancies.
The charge included cash payments of $3,980 for severance and other charges
of $363 for asset write-off and lease costs. Remaining balances recorded at
March 31, 2001 totaled $2,320, which will be relieved throughout fiscal 2002 as
the payments become contractually due. The following table shows the detail of
the restructuring reserves balance included in other accrued liabilities on the
consolidated balance sheet at March 31, 2001:
Description Charge Payments Balance
- ----------- ------- --------- --------
Severance $ 6,133 $ 3,980 $ 2,153
Lease cancellation/Asset write-offs 530 363 167
------- --------- --------
Total $ 6,663 $ 4,343 $ 2,320
======= ========= ========
2.INVENTORIES
The major components of inventory at March 31 were as follows:
(In thousands)
2001 2000
-------- --------
Finished goods $ 75,788 $ 65,338
Raw materials and supplies 47,578 38,399
Equipment 18,147 11,865
-------- --------
$141,513 $115,602
======== ========
3.PROPERTY, PLANT AND EQUIPMENT
The major components of property, plant and equipment (at cost) at March 31 were
as follows:
(In thousands)
2001 2000
-------- --------
Land and improvements $ 14,886 $ 14,204
Buildings and improvements 82,196 86,087
Machinery, equipment and fixtures 198,774 153,030
-------- --------
295,856 253,321
Less accumulated depreciation and amortization 112,278 99,172
-------- --------
Net property, plant and equipment $183,578 $154,149
======== ========
4.NOTES PAYABLE
Notes payable at March 31, 2001 consisted of $11,748 of outstanding borrowings
under available lines of credit aggregating approximately $75,000. The terms of
the lines of credit generally provide for interest rates at or below the prime
rate on the date of borrowing domestically and, for foreign company borrowings,
rates that vary with base rates in each currency. The lines of credit can be
withdrawn at any time at the option of the banks. The weighted average interest
rates on short-term borrowings outstanding were 5.2% and 5.0% at the end of 2001
and 2000, respectively.
5.EMPLOYEE BENEFIT & STOCK OPTION PLANS
PENSION, POST-RETIREMENT & POST-EMPLOYMENT BENEFITS
The Corporation has defined benefit pension, defined contribution profit sharing
and employee stock ownership plans for substantially all its domestic employees.
Aggregate amounts charged to earnings for these plans were $2,347, $3,175 and
$3,010 in 2001, 2000 and 1999, respectively.
PENSION. The domestic pension plan provides retirement benefits based upon years
of service and compensation levels. Plan assets at fair value consist primarily
of listed stocks, bonds and guaranteed investment contracts, and included
393,255 shares of the Corporation's common stock having a market value of $7,110
and $10,421 at March 31, 2001 and 2000, respectively. The Corporation also has a
retirement and death benefit plan, covering employees located in Great Britain.
As of April 6, 1997, this plan converted from a defined benefit to a defined
contribution basis for pensionable service after that date. The obligation has
been recognized for past service benefits, which continue on the defined benefit
basis. The Corporation's other foreign subsidiaries maintain benefit plans that
are consistent with statutory practices and are not significant.
POST-RETIREMENT BENEFITS. The Corporation sponsors a defined benefit
post-retirement medical and dental plan (unfunded) that covers all of its
domestic full-time employees, hired prior to April 1, 1997, who retire after age
55 with at least 10 to 20 years of service (depending upon the date of hire).
Employees retiring after March 31, 1998 are required to contribute the full cost
of the plan until they reach age 65. At age 65 the Corporation will contribute a
portion of the cost. The Corporation's subsidy level is subject to a cap which
increases 3% each year. Retirees will be required to contribute the plan cost in
excess of the cap in addition to other required contributions. In fiscal
2001, the recorded actuarial loss results primarily from a reduction in employee
contribution requirements.
The projected benefit obligation for the post-retirement plan at March 31,
2001 comprised 26% retirees, 4% fully eligible active participants and 70% other
active participants. The annual increase in cost is 3% for post-retirement
medical benefits (no assumed rate increase for dental benefits since it is a
scheduled plan) since the Corporation's contributions are at the defined cap.
The medical cost trend rate assumption has no effect on the amounts reported due
to the cap on contributions paid by the Corporation.
POST-EMPLOYMENT BENEFITS. The Corporation sponsors a defined benefit,
post-employment compensation continuation plan that covers all of its full time
domestic employees. Employees who have completed at least six months of service,
become permanently disabled and are unable to return to work are eligible to
receive a benefit under the plan. The benefit may range from one week to a
maximum of six months of compensation. The estimated ongoing additional
after-tax annual cost is not material.
The following table sets forth the components of the pension and post-retirement benefit plans with respect to the
Consolidated Balance Sheets for the years ended March 31:
(in thousands)
PENSION BENEFITS
------------------
2001 2000
------------------ ----------
DOMESTIC FOREIGN Domestic Foreign
------------------ --------- ---------- ---------
Reconciliation of Projected
Benefit Obligation:
Projected benefit obligation at
beginning of year $ 33,117 $ 43,894 $ 35,226 $ 43,764
Service cost (benefits earned
during the period) 3,056 735 1,812 761
Interest cost on the projected
benefit obligation 2,482 2,357 2,341 2,596
Plan participants contribution 0 289 0 161
Liability increase due to transfers 0 3,965 0 0
Actuarial (gain)/loss excluding
assumption change (490) 388 (9) 0
Actuarial (gain)/loss due to
assumption change 2,605 0 (5,106) 0
Benefits paid (1,341) (922) (1,147) (2,058)
Curtailment gain (365) 0 0 0
Translation difference 0 (3,669) 0 (1,330)
------------------ --------- ---------- ---------
Projected benefit obligation at
End of year 39,064 47,037 33,117 43,894
------------------ --------- ---------- ---------
Reconciliation of Fair Value of
Plan Assets:
Fair value of plan assets at
beginning of year 40,061 44,186 41,743 46,695
Actual return on plan assets (net
of expenses) (3,913) (3,146) (535) (48)
Transfers 0 3,965 0 0
Employer contribution 0 490 0 288
Plan participants contribution 0 289 0 161
Benefits paid (1,342) (922) (1,147) (2,058)
Translation difference 0 (3,817) 0 (852)
Fair value of plan assets at end of
year 34,806 41,045 40,061 44,186
------------------ --------- ---------- ---------
Funded Status:
Funded status (4,258) (5,992) 6,944 292
Unrecognized net actuarial
(gain)/loss 4,058 9,670 (5,690) 3,039
Unamortized prior service cost 127 0 211 0
Unrecognized transition
obligation (asset)/obligation 0 0 (229) 0
Net amount recognized (73) 3,678 1,236 3,331
Amounts recognized in the Consolidated Balance Sheet consists of:
Accrued benefit liability (73) (5,992) 1,236 3,331
Accumulated other
comprehensive income 0 9,670 0 0
------------------ --------- ---------- ---------
Net amount recognized $ (73) $ 3,678 $ 1,236 $ 3,331
================== ========= ========== =========
Weighted Average Assumptions:
Discount rate 7.25% 6.0% 7.75% 6.0%
Rate of compensation increase 5.0% 4.5% 5.0% 4.5%
Long-term rate of return on
assets 9.0% 8.0% 9.0% 8.0%
Annual increase in cost of
medical benefits N/A N/A N/A N/A
Post Retirement Benefits
--------------------------
2001 2000
-------------------------- ----------
DOMESTIC Domestic
-------------------------- ----------
Reconciliation of Projected
Benefit Obligation:
Projected benefit obligation at
beginning of year $ 3,966 $ 4,448
Service cost (benefits earned
during the period) 109 84
Interest cost on the projected
benefit obligation 387 286
Plan participants contribution 0 0
Liability increase due to transfers 0 0
Actuarial (gain)/loss excluding
assumption change 1,294 96
Actuarial (gain)/loss due to
assumption change 275 (433)
Benefits paid (499) (515)
Curtailment gain 0 0
Translation difference 0 0
-------------------------- ----------
Projected benefit obligation at
End of year 5,532 3,966
-------------------------- ----------
Reconciliation of Fair Value of
Plan Assets:
Fair value of plan assets at
beginning of year 0 0
Actual return on plan assets (net
of expenses) 0 0
Transfers 0 0
Employer contribution 499 515
Plan participants contribution 0 0
Benefits paid (499) (515)
Translation difference 0 0
Fair value of plan assets at end of
year 0 0
-------------------------- ----------
Funded Status:
Funded status (5,532) (3,966)
Unrecognized net actuarial
(gain)/loss 1,720 231
Unamortized prior service cost 0 0
Unrecognized transition
obligation (asset)/obligation 0 0
Net amount recognized (3,812) (3,735)
Amounts recognized in the Consolidated Balance Sheet consists of:
Accrued benefit liability (3,812) (3,735)
Accumulated other
comprehensive income 0 0
-------------------------- ----------
Net amount recognized $ (3,812) $ (3,735)
========================== ==========
Weighted Average Assumptions:
Discount rate 7.25% 7.75%
Rate of compensation increase N/A N/A
Long-term rate of return on
assets N/A N/A
Annual increase in cost of
medical benefits 3.0% 3.0%
The following table sets forth the components of the pension and post-retirement benefit plans with respect
to the Consolidated Statements of Earnings for the years ended March 31:
(in thousands)
PENSION BENEFITS
------------------
2001 2000 1999
------------------ ---------- ----------
DOMESTIC FOREIGN Domestic Foreign Domestic Foreign
------------------ --------- ---------- --------- -------
Net Periodic Benefit Expense:
Service cost (benefits earned
during the period) $ 3,056 $ 735 $ 1,812 $ 761 $ 1,477 $ 211
Interest cost on the projected
benefit obligation 2,482 2,357 2,341 2,596 2,155 836
Expected return on plan
assets (3,540) (3,165) (3,700) (3,735) (3,256) (1,080)
Amortization of prior service
cost 58 0 58 0 58 0
Amortization of transition
obligation (229) 0 (229) 0 (229) (168)
Recognized actuarial
(gain)/loss (179) (117) (47) (324) (87) 15
Curtailment gain (339) 0 0 0 0 0
Net periodic benefit cost $ 1,309 $ (190) $ 235 $ (702) $ 118 $ (186)
================== ========= ========== ========= ========== =========
POST RETIREMENT BENEFITS
-------------------------
2001 2000 1999
------------------------- --------- ---------
DOMESTIC Domestic Domestic
------------------------- --------- ---------
Net Periodic Benefit Expense:
Service cost (benefits earned
during the period) $ 109 $ 84 $ 83
Interest cost on the projected
benefit obligation 387 286 296
Expected return on plan
assets 0 0 0
Amortization of prior service
cost 80 10 0
Amortization of transition
obligation 0 0 0
Recognized actuarial
(gain)/loss 0 0 0
Curtailment gain 0 0 0
Net periodic benefit cost $ 576 $ 380 $ 379
========================= ========= =========
EMPLOYEE STOCK INCENTIVE PLANS
1992 PLAN: In 1993, the Corporation adopted a non-qualified stock option plan,
approved by shareholders in July 1992 (the 1992 plan), for the issuance of up to
2,700,000 shares under which certain employees have been granted options
totaling 2,545,565. Options granted under the 1992 plan generally are
exercisable, at a price equal to two-thirds of the market price at the grant
date, during a four-year period beginning with the grant date. The options are
exercisable into restricted shares of common stock, which cannot be sold or
transferred, except back to the Corporation at cost, during the four-year period
commencing with the exercise date.
Compensation expense, which is equal to the difference between the fair
market value on the date of an option grant and the exercise price of shares,
which may be purchased thereunder, is amortized over a six-year period. During
2001, 2000 and 1999, compensation expense relating to this plan was $45, $22,
and $317, respectively.
1995 PLAN: In 1996, the Corporation adopted a non-qualified equity incentive
plan, approved by the shareholders in July 1995 (the 1995 plan), for the
issuance of up to 900,000 shares under which certain employees have been granted
a total of 472,947 restricted shares, having market prices of between $4-3/4 and
$38-5/16 on the dates of grant. All shares of restricted stock issued under the
1995 plan must be held and cannot be sold or transferred, except to the
Corporation for a period of four years from the date of the award. No
compensation expense was charged during 2001. During 2000 and 1999,
compensation expense relating to this plan was $831 and $1,311, respectively.
1998 PLAN: In 1999, the Corporation adopted a non-qualified stock option plan,
approved by shareholders in July 1999 (the 1998 plan), for the issuance of up to
1,500,000 shares under which certain employees have been granted options
totaling 1,006,650. Options granted under the 1998 plan generally are
exercisable, at a price equal to a one-third premium over market price at the
date of grant, during a ten-year period beginning with the grant date. The
options are exercisable into unrestricted shares of common stock, except as
otherwise provided, under the terms of the plan, at the time of grant.
Options issued under the Corporation's stock incentive plans and
outstanding at March 31, 2001 have exercise prices ranging from $1.79 to $55.50,
expiring periodically through fiscal 2010, summarized in the following table as
of March 31:
NUMBER WEIGHTED-AVERAGE
OF OPTIONS EXERCISE PRICE
----------- -----------------
Outstanding March 31, 1998 540,000 $ 1.89
1999 activity:
Granted 12,065 $ 21.81
Exercised (90,000) $ 1.79
Forfeited 0 -
Outstanding at March 31, 1999 462,065 $ 2.42
Exercisable at March 31, 1999 462,065 $ 2.42
2000 activity:
Granted 741,650 $ 47.44
Exercised 0 -
Forfeited 0 -
Outstanding at March 31, 2000 1,203,715 $ 30.16
Exercisable at March 31, 2000 1,203,715 $ 30.16
2001 ACTIVITY:
GRANTED 265,000 $ 30.33
EXERCISED 0 -
FORFEITED 0 -
OUTSTANDING AT MARCH 31, 2001 1,468,715 $ 30.30
EXERCISABLE AT MARCH 31, 2001 1,468,715 $ 30.30
The following table summarizes information about fixed stock options outstanding
and exercisable at March 31, 2001:
EXERCISE NUMBER WEIGHTED-AVERAGE WEIGHTED-AVERAGE
PRICES OUTSTANDING REMAINING LIFE EXERCISE PRICE
- ------------- ----------- ---------------- -----------------
1.79-$2.00 450,000 2.6 years $ 1.90
30.33-$32.75 277,065 8.7 years $ 30.44
45.00-$55.50 741,650 8.1 years $ 47.44
----------- ---------------- -----------------
1,468,715 6.4 years $ 30.30
Had the Corporation used the fair value-based method of accounting for its stock
option plans (beginning in 1996) and charged compensation cost against income,
over a period consistent with the terms of the grant, based on the fair value at
the date of grant, net earnings and net earnings per common share for 2001, 2000
and 1999 would have been reduced to the following pro forma amounts:
(In thousands, except per share amounts)
2001 2000 1999
------- ------- -------
Net earnings available for common
shareholders
As reported $34,804 $45,358 $55,626
Pro forma $33,614 $40,377 $55,600
Net earnings per common share
Basic
As reported $ 1.12 $ 1.46 $ 1.79
Pro forma $ 1.08 $ 1.30 $ 1.79
Diluted
As reported $ 1.07 $ 1.40 $ 1.72
Pro forma $ 1.04 $ 1.25 $ 1.71
The pro forma information above includes stock options granted since April 1,
1995. Effects of applying FAS 123, using the fair value-based method of
accounting, is not representative of the pro forma effect on earnings in future
years because it does not take into consideration pro forma compensation expense
related to stock options granted prior to 1996.
The weighted-average grant-date fair value of options for those granted in
2001 was $6.96 and for those granted in 2000 was $14.51 as determined by
utilizing the Black-Scholes option-pricing model and the following key
assumptions:
2001 2000 1999
-------- --------- --------
Risk-free interest rate 6.50% 6.21% 5.15%
Expected option life 6 YEARS 10 years 6 years
Expected volatility 30.0% 33.3% 46.3%
Dividend yield 0.4% 0.3% 0.2%
6.INCOME TAXES
Income tax expense attributable to income from operations for the years ended
March 31 consisted of:
(In thousands)
CURRENT DEFERRED TOTAL
-------- ---------- -------
2001
----------
U.S. Federal $ 4,981 $ (1,758) $ 3,223
State and local 939 (363) 576
Foreign 19,692 (3,358) 16,334
-------- ---------- -------
Totals $ 25,612 $ (5,479) $20,133
======== ========== =======
2000
----------
U.S. Federal $ 14,969 $ (4,100) $10,869
State and local 2,078 (883) 1,195
Foreign 14,879 989 15,868
-------- ---------- -------
Totals $ 31,926 $ (3,994) $27,932
======== ========== =======
1999
----------
U.S. Federal $ 15,294 $ (1,958) $13,336
State and local 2,974 (262) 2,712
Foreign 10,961 832 11,793
-------- ---------- -------
Totals $ 29,229 $ (1,388) $27,841
======== ========== =======
Income tax expense differed from the amounts computed by applying the U.S.
Federal statutory tax rates to pretax income from operations for the years ended
March 31 as a result of the following:
(In thousands)
2001 2000 1999
-------- -------- --------
U.S. Federal statutory tax rate 35% 35% 35%
======== ======== ========
Taxes computed at U.S.
statutory rate $19,148 $26,970 $29,115
State income taxes, net of
Federal benefit 375 777 1,762
Foreign tax rate differential (2,401) (1,368) 106
Non-deductible goodwill 2,250 1,922 25
Acquisition costs -- 1,043 --
Reduction of valuation reserve -- -- (1,107)
Other, net 761 (1,412) (2,060)
-------- -------- --------
Actual income taxes $20,133 $27,932 $27,841
======== ======== ========
Effective tax rate 36.8% 36.3% 33.4%
======== ======== ========
Earnings before income taxes included foreign earnings of $50,584, $56,283
and $31,907 for 2001, 2000 and 1999, respectively.
The Corporation has not recognized a deferred tax liability for the
undistributed earnings of foreign subsidiaries that arose in 2001 and prior
years because the Corporation does not expect to repatriate those earnings in
the foreseeable future. A deferred tax liability will be recognized when the
Corporation expects that it will recover those earnings in a taxable
transaction, such as through receipt of dividends, net of foreign tax credits,
or sale of the investment. At March 31, 2001, the undistributed earnings of
those subsidiaries were approximately $133,656. A determination of the deferred
tax liability relating to the undistributed earnings of foreign subsidiaries is
not practical.
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at March 31 are:
(In thousands)
2001 2000
-------- --------
Deferred tax assets:
Accounts receivable, primarily due to
allowance for doubtful accounts $ 2,670 $ 1,675
Inventories 4,554 3,747
Accrued liabilities 5,698 2,859
Acquisition accrued liabilities 7,101 6,446
Employee benefits 6,214 4,567
Foreign tax credits 1,505 1,896
Foreign losses 5,820 6,219
Other 7,834 8,347
-------- --------
Total gross assets 41,396 35,756
Valuation reserve (5,820) (6,218)
Total gross deferred tax assets 35,576 29,538
Deferred tax liabilities:
Plant and equipment, primarily due to
depreciation. 4,195 2,172
Purchase accounting 12,537 13,622
Other 7,276 7,655
-------- --------
Total gross deferred tax liabilities 24,008 23,449
-------- --------
Net deferred asset/(liability) $11,568 $ 6,089
======== ========
During fiscal 2001, 2000 and 1999 the lapse of restrictions upon stock
exercised under the stock option and award plans resulted in a tax benefit of
$2,539, $3,917 and $3,579, respectively, which were recorded as increases to
additional paid-in capital. The release of the valuation reserve for taxes in
the amount of $398 was recorded as a decrease to goodwill. The Corporation has
state NOL's of $17,064 and foreign NOL's of $12,406 available for utilization in
the future. The carry-forward lives of these range from 5 years to unlimited.
7.VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
The major components of the allowance for doubtful receivables at March 31 were
as follows:
(In thousands)
BALANCE ADDI- ADDI- DEDUC- BALANCE
AT TIONS TIONS TIONS* AT
BEGINNING CHARGED DUE TO END
OF PERIOD TO ACQUISI- OF
EARNINGS TIONS PERIOD
--------- --------- --------
2001 $ 10,541 $ 3,859 $ 894 $ 3,536 $ 11,758
========== ========= ========= ======= ========
2000 $ 10,217 $ 2,473 -- $ 2,149 $ 10,541
========== ========= ========= ======= ========
1999 $ 6,756 $ 1,507 $ 2,820 $ 866 $ 10,217
========== ========= ========= ======= ========
<FN>
* Bad debts charged off less recoveries and translation adjustments.
8.LONG-TERM OBLIGATIONS
Long-term obligations at March 31 consisted of the following:
(In thousands)
2001 2000
-------- --------
Term loan, unsecured, variable
interest (7.94% at March 31, 2001) due in
quarterly installments to 2005 $143,299 $166,970
Acquisition facility, unsecured, variable
interest (7.39% at March 31, 2001) due
in quarterly installments to 2005 47,973 62,379
Debenture, 3.5% interest due in quarterly
installments to 2004 85 143
Term loan, unsecured, variable interest
(7.94% at March 31, 2001) due in
quarterly installments to 2005 98,273 111,864
Revolving loan, unsecured, variable
interest, due in 2005
6.14% at March 31, 2001 39,738 51,596
6.14% at March 31, 2001 12,106 7,604
6.14% at March 31, 2001 28,496 --
7.01% at March 31, 2001 64,000 --
Term loan, collaterized, variable interest
(8.94% at March 31, 2001) due in
quarterly installments to 2006 9,812 --
Term loan, collaterized, variable interest
(6.14% at March 31, 2001) due in
quarterly installments to 2006 1,499 --
Term loan, unsecured, variable interest
(5.64% at March 31, 2001) due in
quarterly installments to 2008 8,493 --
Capitalized lease obligations 3,728 1,974
Other, due in varying amounts to 2008 3,634 4,167
-------- --------
Total long-term obligations 461,136 406,697
Less current portion 68,517 46,349
-------- --------
Long-term portion $392,619 $360,348
======== ========
Minimum future principal payments on long-term obligations subsequent to March
31, 2001 are as follows:
(In thousands)
$ 68,517
2002
2003 88,814
2004 236,778
2005 63,671
2006 2,145
Thereafter 1,211
--------
Total $461,136
========
The term loans, acquisition facility and revolving credit facility bear
interest at a variable rate, which is based on a ratio of the Corporation's debt
to earnings before certain expenses. The rates were set on March 31, 2001, at
1.50% above the London interbank market rate ("LIBOR"). U.S. LIBOR which was
6.44% for the U.S. dollar term loans, U.K. LIBOR which was 5.89% for the pound
sterling acquisition facility and EUROBOR which was 4.64% for the Italian Lira,
French Franc, Spanish Pesetas and Euro borrowings. The European borrowings are
payable in Euros under the revolving credit facility. At March 31, 2001 the
effective interest rate was 7.94% for the U.S. dollar term loan, 7.39% for the
pound sterling acquisition facility and 6.14% for the Euro revolving loan
facility. Under these loans, the most restrictive covenants provide that
earnings before interest and taxes as a ratio to interest expense must be
greater than 2.5 to 1; consolidated net worth must be at least $172,188 and the
total debt must not exceed 350% of net worth.
The $215,000 committed revolving credit facility expires in 2005. The
Corporation can borrow in foreign currencies and U. S. dollars on this facility.
Commitment fees under the revolving credit lines are variable, ranging from 37.5
to 150 basis points on the unused balance.
The Corporation has entered into interest rate swap agreements for the
purpose of reducing its exposure to possible future changes in interest rates
applicable to the term and revolving loans. The fixed rates are compared to the
applicable three-month LIBOR rates as a basis for payment, or receipt of the
rate differential as applied to the notional amount of each swap transaction.
Pursuant to the terms of certain of the agreements the Corporation has notional
coverage for the following:
Notional US dollar coverage $18,214 expires June 29, 2001 compares fixed
5.6300% rate to US LIBOR
Notional US dollar coverage $25,000 expires December 31, 2002 compares
fixed 5.5375% rate to US LIBOR
Notional US dollar coverage $25,000 expires December 31, 2005 compares
fixed 5.5950% rate to US LIBOR
Notional (GB pound 32,143) US dollar coverage $45,511 expires December 31, 2001
compares fixed
5.4180% rate to UK LIBOR
Notional (Euro 7,747) US dollar coverage $6,801 expires June 30, 2004 compares
fixed 4.9000% rate to
EUROBOR
Notional (Euro 7,747) US dollar coverage $6,801 expires September 30, 2005
compares fixed 5.1240% rate
to EUROBOR
Notional (Euro 6,817) US dollar coverage $5,986 expires June 30, 2005 compares
fixed 4.8825% rate to
EUROBOR
9.SEGMENT REPORTING
The Corporation provides development, manufacture and technical service for a
large variety of specialty chemical processes and related equipment in two
reportable operating segments: Advanced Surface Finishes and Graphic Arts. In
addition, the Corporation operates a third reportable segment for the design and
manufacture of printed circuit boards. These three segments under which the
Corporation operates on a worldwide basis are managed separately as each segment
has differences in technology and marketing strategies. The chemicals supplied
by Advanced Surface Finishes are used for a broad range of purposes including
finishing metals and non metallic surfaces, electro-plating metal surfaces,
etching, imaging, metalization, offshore fluids and cleaning. The chemicals
supplied by Graphic Arts are used for diverse purposes including offset
blankets, printing plates, textile blankets and rubber-based covers for
industrial rollers used in the printing industry. The Electronics Manufacturing
segment produces a wide variety of single-sided and double-sided printed circuit
boards.
The business segments reported below are the segments of the Corporation
for which separate financial information is available and for which operating
results are reviewed by executive management to assess performance of the
Corporation. The accounting policies of the business segments are the same as
those described in the summary of significant accounting policies, Note 1.
Net sales for all of the Corporation's products fall into one of the three
business segments. The business segment results of operations include certain
operating costs, which are allocated based on the relative burden each segment
bears on those costs. Operating income amounts are evaluated 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, equity method investments and certain other long term assets not
directly associated with the support of the individual operations.
Worldwide operations are summarized by business segment in the following tables:
2001 2000 1999
--------- --------- ---------
NET SALES TO UNAFFILIATED CUSTOMERS:
Graphic Arts $311,767 $293,459 $266,774
Advanced Surface Finishes 447,875 464,621 346,027
Electronics Manufacturing 35,134 0 0
--------- --------- ---------
Consolidated Net Sales $794,776 $758,080 $612,801
========= ========= =========
OPERATING PROFIT:
Graphic Arts $ 48,045 $ 58,413 $ 59,818
Advanced Surface Finishes 81,626 76,067 58,930
Electronics Manufacturing (9,978) 0 0
--------- --------- ---------
119,693 134,210 118,748
Amortization of Intangibles (20,641) (17,563) (12,330)
Merger Costs (1,473) (7,617) 0
Restructuring Costs (6,663) 0 0
--------- --------- ---------
Consolidated Operating Profit $ 90,916 $109,030 $106,418
========= ========= =========
AMORTIZATION:
Graphic Arts $ 8,788 $ 7,030 $ 6,445
Advanced Surface Finishes 11,484 10,533 5,885
Electronics Manufacturing 369 0 0
--------- --------- ---------
Consolidated Amortization $ 20,641 $ 17,563 $ 12,330
========= ========= =========
DEPRECIATION:
Graphic Arts $ 9,481 $ 9,815 $ 8,375
Advanced Surface Finishes 9,219 9,026 6,059
Electronics Manufacturing 3,282 0 0
Corporate-wide 211 54 88
--------- --------- ---------
Consolidated Depreciation $ 22,193 $ 18,895 $ 14,522
========= ========= =========
CAPITAL EXPENDITURES:
Graphic Arts $ 4,832 $ 11,826 $ 15,286
Advanced Surface Finishes 11,534 10,108 4,750
Electronics Manufacturing 2,781 0 0
Corporate-wide 3,290 2,105 0
--------- --------- ---------
Consolidated Capital Spending. $ 22,437 $ 24,039 $ 20,036
========= ========= =========
IDENTIFIABLE ASSETS:
Graphic Arts $345,849 $314,215 $321,553
Advanced Surface Finishes 426,869 453,714 392,065
Electronics Manufacturing 91,665 0 0
Corporate-wide 20,442 22,563 23,671
--------- --------- ---------
Consolidated Assets $884,825 $790,492 $737,289
========= ========= =========
Worldwide operations are summarized by geographic region (determined by customer location) in the following
table:
(In thousands)
UNITED STATES OTHER AMERICAS EUROPE ASIA PACIFIC CONSOLIDATED
-------------- --------------- -------- ------------- -------------
2001
- -----
Net sales to unaffiliated customers $ 370,199 $ 28,019 $261,141 $ 135,417 $ 794,776
Operating profit 28,496 6,966 31,421 24,033 90,916
Identifiable assets 364,182 16,224 416,717 87,702 884,825
2000
- -----
Net sales to unaffiliated customers $ 361,780 $ 28,687 $246,300 $ 121,313 $ 758,080
Operating profit 53,780 7,804 27,736 19,710 109,030
Identifiable assets 337,332 13,592 365,363 74,205 790,492
1999
- -----
Net sales to unaffiliated customers $ 344,918 $ 22,946 $156,383 $ 88,554 $ 612,801
Operating profit 71,319 6,207 17,396 11,496 106,418
Identifiable assets 377,830 5,830 292,255 61,374 737,289
10.COMMON AND TREASURY STOCK
The Corporation's Restated Certificate of Incorporation provides for 75 million
authorized common shares.
Common shares issued are summarized in the following table at March 31:
SHARES
----------
2001 2000 1999
----------- ---------- ----------
COMMON STOCK:
Balance - beginning of year 45,412,325 45,411,775 45,264,104
Shares issued - stock options -- -- 90,000
Shares issued - stock awards -- 550 57,671
Shares cancelled - stock awards (3,861) -- --
----------- ---------- ----------
Balance - end of year 45,408,464 45,412,325 45,411,775
=========== ========== ==========
As of March 31, 2001, there are 1,001,352 shares of the Corporation's
common stock, which are issuable upon exercise of warrants held by Citicorp
Mezzanine Partners, L.P. ("Citicorp"). Under the terms of the warrants Citicorp
may purchase the common shares at an exercise price of approximately $.001 per
share, at any time between December 29,1999 and December 29, 2004, inclusive. On
May 1, 2001, the Corporation issued 311,520 common shares upon the exercise of
the same number of warrants by Citicorp and cancellation of 18 warrants to
cover the exercise price, leaving 689,814 warrants outstanding. The Board of
Directors, on July 22, 1998, authorized the purchase of up to 1,000,000
shares of the Corporation's common stock. On November 16, 1999, the Board of
Directors reduced this authorization to 200,000, to be acquired through open
market purchases or privately negotiated transactions from time to time. Any
future repurchases under this authorization will depend on various factors,
including the market price of the shares, the Corporation's business and
financial position and general economic and market conditions. Additional shares
acquired pursuant to such authorization will be held in the Corporation's
treasury and will be available for the Corporation to issue without further
shareholder action (except as required by applicable law or the rules of any
securities exchange on which the shares are then listed). Such shares may be
used for various Corporate purposes, including contributions under existing or
future employee benefit plans, the acquisition of other businesses and the
distribution of stock dividends. At March 31, 2001, there was a balance of such
outstanding authorizations totaling 174,326 shares.
SHARES
----------
2001 2000 1999
---------- ---------- ----------
TREASURY STOCK:
Balance - beginning of year 14,267,816 14,267,816 14,169,582
Shares acquired 9,794 -- 98,234
---------- ---------- ----------
Balance - end of year 14,277,610 14,267,816 14,267,816
========== ========== ==========
11.LEASE COMMITMENTS
The Corporation leases certain warehouse space, transportation, computer and
other equipment, which expire at various dates through 2007. In addition, the
Corporation has leased equipment at customers, which are generally subject to
sublease agreements. Contingent rentals are paid for warehouse space on the
basis of the monthly quantities of materials stored and for transportation and
other equipment on the basis of mileage or usage. Total rental expense amounted
to $8,662, $9,044, and $7,993 in 2001, 2000 and 1999, respectively, of which
$1,594, $1,372, and $1,296, respectively, were contingent rentals.
Minimum lease commitments under operating leases for the fiscal years
subsequent to March 31, 2001 are as follows:
(In thousands)
COMMITMENTS SUBLEASE NET COMMITMENTS
2002 $ 6,414 $ 1,412 $ 5,002
2003 3,368 368 3,000
2004 1,042 167 875
2005 375 -- 375
2006 118 -- 118
Thereafter 84 -- 84
------------ --------- ----------------
Total $ 11,401 $ 1,947 $ 9,454
============ ========= ================
12.CONTINGENCIES
As manufacturers and distributors of specialty chemicals and systems, 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's nature of operations and products (including raw
materials) exposes it to the risk of liabilities or claims with respect to
environmental cleanup or other matters, including those in connection with the
disposal of hazardous materials. The Corporation has been named as a
potentially responsible party ("PRP") at three Superfund sites. There are many
other PRPs involved at each of these sites. The Corporation has recorded its
best estimate of liabilities in connection with site clean-up based upon the
extent of its involvement, the number of PRPs and estimates of the total costs
of the site clean-up that reflect the results of environmental investigations
and remediation estimates produced by remediation contractors. While the
ultimate costs of such liabilities are difficult to predict, the Corporation
does not expect that its costs associated with these sites will be material.
In addition, some of the Corporation's facilities have an extended history
of chemical processes or other industrial activities. Contaminants have been
detected at some of these sites, with respect to which the Corporations ise
conducting environmental investigations and/or cleanup activities. These sites
include some of the Canning sites acquired in December 1998, such as the Kearny,
New Jersey and Waukegan, Illinois sites. The Corporation has established an
environmental remediation reserve of $2 million, predominantly attributable to
those Canning sites that it believes will require environmental remediation.
With respect to those sites, it also believes that its Canning subsidiary is
entitled under the acquisition agreement to withhold a deferred purchase price
payment of approximately $2 million. To the extent the Corporation's
liabilities exceed $2 million, it may be entitled to additional indemnification
payments. Such recovery may be uncertain, however, and would likely involve
significant litigation expense.
The Corporation does not anticipate that it will be materially affected by
environmental remediation costs, or any related claims, at any contaminated
sites, including the Canning sites. It is difficult, however, to predict the
final costs and timing of costs of site remediation. Ultimate costs may vary
from current estimates and reserves, and the discovery of additional
contaminants at these or other sites or the imposition of additional cleanup
obligations, or third-party claims relating thereto, could result in significant
additional costs.
Legal Proceedings
On January 30, 1997, the Corporation was served with a subpoena from a
federal grand jury in Connecticut requesting certain documents relating to an
accidental spill from its Huntingdon Avenue, Waterbury, Connecticut facility
that occurred in November of 1994, together with other information relating to
operations and compliance at the Huntingdon Avenue facility. The Corporation
was subsequently informed that it is a subject of the grand jury's investigation
in connection with alleged criminal violations of the federal Clean Water Act
pertaining to its wastewater handling practices. The Corporation has retained
outside law firms to assist in complying with the subpoena and the underlying
investigation. It has cooperated from the outset with the investigation and is
currently involved in informal negotiations with the Government with a view
towards settling any and all charges in this matter without resort to trial. At
this time of these negotiations it is too speculative to quantify the precise
financial implications to the Corporation.
In addition, two of the Corporation's former employees, who worked at the
Huntington Avenue facility, pled guilty in early 2001 to misdemeanor violations
under the Clean Water Act in connection with the above matter. These
individuals were recently sentenced to fines of $25,000 and $10,000 and 2 years
probation, as well as community service.
In a separate matter, on July 26, 1999, the Corporation was named in a
civil lawsuit commenced in the Superior Court of the State of Connecticut
brought by the Connecticut Department of Environmental Protection alleging
various compliance violations at its Huntingdon Avenue and Freight Street
locations between the years 1992 through 1998 relating to wastewater discharges
and the management of waste materials. The complaint alleges violations of its
permits issued under the Federal Clean Water Act and the Resource Conservation
and Recovery Act, as well as procedural, notification and other requirements of
Connecticut's environmental regulations over the foregoing period of time. The
Corporation is vigorously defending this complaint. It currently believes that
the outcome of this proceeding will not materially affect its business or
financial position, however, the proceeding is in the early stages. Therefore,
at this time it is too speculative to quantify the financial implications to the
Corporation.
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 38% of the business is concentrated
in the printing industry used for a wide variety of applications, including
offset blankets, printing plates, textile blankets and rubber based covers for
industrial rollers, while 28% of the business is concentrated with manufacturers
of printed circuit boards which are used in a wide variety of end-use
applications, including computers, communications and control equipment,
appliances, automobiles and entertainment products. As is usual for this
business, the Corporation generally does not require collateral or other
security as a condition of sale, choosing, rather, to control credit risk of
trade account financial instruments by credit approval, balance limitation and
monitoring procedures. Management believes that reserves for losses, which are
established based upon review of account balances and historical experience, are
adequate.
MANAGEMENT'S STATEMENT OF FINANCIAL RESPONSIBILITY
MacDermid, Incorporated (Logo)
245 Freight Street
Waterbury, CT 06702
To The Shareholders
MacDermid, Incorporated
The financial information in this report, including the audited
consolidated financial statements, has been prepared by management. Preparation
of consolidated financial statements and related data involves the use of
judgment. Accounting principles used in preparing consolidated financial
statements are those that are generally accepted in the United States.
To safeguard Corporate assets, it is important to have a sound but dynamic
system of internal controls and procedures that balances benefits and costs.
The Corporation employs professional financial managers whose responsibilities
include implementing and overseeing the financial control system, reporting on
management's stewardship of assets entrusted to it by share owners and
performing accurate and proper maintenance of the accounts.
Management has long recognized its responsibility for conducting the
affairs of the Corporation and its affiliates in an ethical and socially
responsible manner. MacDermid, Incorporated is dedicated to the highest
standards of integrity. Integrity is not an occasional requirement, but a
continuing commitment.
KPMG LLP conducts an objective, independent review of management's
fulfillment of its obligations relating to the fairness of reported operating
results and financial condition. Their report for 2001 appears below this
statement.
The Audit Committee of the Board of Directors, consisting solely of
Directors independent of MacDermid, Incorporated, maintains an ongoing appraisal
on behalf of the share owners of the effectiveness of the independent auditors
and the Corporation's staff of financial and operating management with respect
to the financial and internal controls.
/s/Daniel H. Leever
Chairman of the Board and Chief Executive Officer
INDEPENDENT AUDITORS' REPORT
KPMG LLP (Logo)
Certified Public Accountants One Financial Plaza
Hartford, CT 06103-4103
The Board of Directors and Shareholders
MacDermid, Incorporated
We have audited the accompanying consolidated balance sheets of MacDermid,
Incorporated and subsidiaries as of March 31, 2001 and 2000, and the related
consolidated statements of earnings, comprehensive income, cash flows and
changes in shareholders' equity for each of the years in the three-year period
then ended. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
The consolidated financial statements of MacDermid, Incorporated for the
year ended March 31, 1999 have been restated to reflect the pooling-of-interests
transaction with PTI, Inc. as described in Notes 1a and 1q to the consolidated
financial statements. We did not audit the financial statements of PTI, Inc. as
of and for the year ended December 31, 1998 which statements reflect total
revenues constituting 37% of the related consolidated fiscal year March 31, 1999
totals. Those statements were audited by other auditors whose report has been
furnished to us and our opinion insofar as it relates to the amounts included
for PTI, Inc. as of and for the year ended December 31, 1998 is based solely on
the report of the other auditors.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits and the report of
the other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditors,
the consolidated financial statements referred to in the first paragraph present
fairly, in all material respects, the financial position of MacDermid,
Incorporated and subsidiaries as of March 31, 2001 and 2000, and the results of
their operations and their cash flows for each of the years in the three-year
period ended March 31, 2001 in conformity with accounting principles generally
accepted in the United States of America.
/s/KPMG LLP
May 18, 2001
SELECTED QUARTERLY FINANCIAL DATA
(UNAUDITED)
(In thousands, except share and per share amounts)
SELECTED QUARTERLY RESULTS
2001 BY QUARTERS
-----------------
JUNE SEPTEMBER DECEMBER MARCH TOTAL
-------- ---------- ----------------- -------- --------
Net Sales $187,063 $198,720 $197,200 $211,793 $794,776
Gross Profit $91,657 $89,742 $86,250 $86,901 $354,550
Net Earnings $13,784 $9,376 $7,032 $4,612 $34,804
Diluted earnings per common share $0.43 $0.29 $0.21 $0.14 $1.07
2000 by Quarters
-----------------
June September December March Total
-------- ---------- ----------------- -------- --------
Net Sales $182,646 $183,056 $202,117 $190,261 $758,080
Gross Profit $88,286 $87,027 $95,527 $88,096 $358,936
Net Earnings $14,258 $11,939 $6,427 $12,734 $45,358
Diluted earnings per common share $0.44 $0.37 $0.20 $0.39 $1.40
MARKET RANGE TRADING RECORD
FISCAL 2001 Fiscal 2000
------------- -------------
QUARTER HIGH LOW High Low
----- ----- ----- -----
June $27.50 $18.75 $46.50 $32.00
September $29.12 $19.25 $46.75 $28.88
December $22.38 $16.25 $41.44 $30.56
March $21.56 $15.70 $41.81 $22.19
Closing price March 31 $18.08 $26.50
DIVIDEND RECORD
FISCAL 2001 Fiscal 2000
------------- -------------
RECORD PAYABLE AMOUNT Record Payable Amount
DATE DATE DECLARED Date Date Declared
-------- ----------- --------- -------- ----------- ---------
QUARTER
June 6/15/00 7/3/00 $ 0.02 6/15/99 7/1/99 $ 0.02
September 9/15/00 10/2/00 $ 0.02 9/15/99 10/1/99 $ 0.02
December 12/15/00 1/10/01 $ 0.02 12/15/99 1/10/00 $ 0.02
March 3/15/01 4/2/01 $ 0.02 3/15/00 4/3/00 $ 0.02
CORPORATE INFORMATION
DIRECTORS:
DANIEL H. LEEVER, Chairman of the Board and Chief Executive Officer
DONALD G. OGILVIE, Executive Vice President,American Bankers Association
JOSEPH M. SILVESTRI, Vice President of Citicorp Venture Capital Ltd.
JAMES C. SMITH, Chairman of the Board and Chief Executive
Officer, Webster Financial Corporation
T. QUINN SPITZER, JR., Partner of McHugh Consulting
CORPORATE HEADQUARTERS:
245 Freight Street
Waterbury, Connecticut 06702
(203) 575-5700
AUDITORS:
KPMG LLP
SEC FORM 10-K:
The Annual Report and the SEC Form 10-K report are available at the
Corporation's website (www.macdermid.com) and also without charge by written
request to:
Corporate Secretary
MacDermid, Incorporated
245 Freight Street
Waterbury, CT 06702
REGISTRAR OF STOCK AND TRANSFER AGENT:
The Bank of New York, Website - stock.bankofny.com
Send Email to: Shareowner - svcs@bankofny.com
SHAREHOLDERS' QUESTIONS:
Shareholders with questions concerning non-receipt of dividend checks, obtaining
a duplicate 1099 statement, or of a general nature can call 1-877-268-5209 or
should write to:
The Bank of New York
Shareholder Relations Department - 11E
P.O. Box 11258 - Church Street Station
New York, NY 10286
Send certificates for transfer and address changes to:
The Bank of New York
Receive and Deliver Department
P.O. Box 11002 - Church Street Station
New York, NY 10286
A systematic investment service is available to all MacDermid shareholders. The
service permits investment of MacDermid, Incorporated dividends and voluntary
cash payments in additional shares of MacDermid stock.
MARKET & DIVIDEND INFORMATION:
The common shares of MacDermid, Incorporated are traded on the New York Stock
Exchange (Symbol: MRD). Price and shares traded are listed in principal daily
newspapers and are supplied by NYSE. Approximate number of Registered Holders as
of May 31, 2001 - 800. CUSIP-554273 102.
ANNUAL MEETING:
The Annual Meeting of Shareholders will be held on Wednesday, July 25, 2001 at
3:00 p.m., at Naugatuck Valley Community-Technical College, Fine Arts Center,
750 West Main Street, Waterbury, CT.