UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 - 1004
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) June 5, 2001
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MacDermid, Incorporated
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(Exact name of registrant as specified in its charter)
Connecticut 0-2413 06-0435750
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(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) identification No.)
incorporation or
organization)
245 Freight Street, Waterbury, Connecticut 06702
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (203) 575-5700
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None
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(Former name or former address if changed since last report.)
Item 9. Regulation FD Disclosure.
As used herein, the terms "we" and "MacDermid" refer to MacDermid,
Incorporated and its subsidiaries on a consolidated basis, unless the context
requires otherwise. When we refer to any of our historical fiscal years
(including "fiscal 2001") herein, we refer to the twelve month period ended
March 31 of such year.
We issued the press release attached hereto as Exhibit 99 on June 1,
2001. In connection with the proposed private placement of securities
discussed in the attached press release, the following information will be
utilized:
Competitive Strengths
Market Leadership. We have significant market share and a top three
position worldwide in many of our product lines in Advanced Surface
Finishes and Graphic Arts. Our leadership is due in large part to our
global presence, with facilities in 23 countries, and our ability to
support our customers by providing them with a high level of service and
local access. In both printed circuit board chemistries and metal and
plastic finishing chemistries, we are among the top three providers
worldwide, with a major presence in North America, Europe and Southeast
Asia. We are a leading supplier of flexographic and offset printing
consumables and systems worldwide and we are the leader in high resolution,
high speed, wide format photo-realistic digital printing.
High Value-Added Specialty Products. We currently hold more than 190
non-expired U.S. patents and 448 non-expired foreign patents for our
product formulations. We work closely with our customers to develop
specialized, high value-added products that are tailored to suit their
needs, and we continually invest in research and development to refine and
improve the performance of our products in our customers' operations. Our
product formulations generally represent a small portion of the total cost
of our customers' finished products but are critical to enhancing the
performance of these products, improving the efficiency of our customers'
manufacturing processes and reducing their total costs. Our emphasis on
customized solutions has helped us establish and maintain customer loyalty.
These factors enable us to achieve consistent, attractive profit margins
while adding value for our customers.
Low Fixed Cost Structure and Stable Cash Flows. We have consistently
generated positive cashflow due to our high margin and differentiated
product portfolio, our diverse and global customer base, our focus on
minimizing fixed costs and our low capital spending requirements. We
generate revenues from thousands of customers in North America, Europe and
Asia, not one of which accounted for more than 5% of our net sales in
fiscal 2001. We continually evaluate opportunities to eliminate overhead
and minimize fixed costs, and we formulate our proprietary products using a
wide variety of chemicals which provides us with stable material costs. No
single raw material accounted for more than 5% of our raw materials costs
for fiscal 2001. Our emphasis on providing customers with tailored
solutions has helped us establish and maintain strong customer loyalty. Our
ability to blend proprietary formulations with raw materials from third
parties enables us to make relatively low capital expenditures in
comparison to our cashflows from operations.
Established and Proven Infrastructure. The combination of our global
presence, strong commitment to research and development, dedication to
customer service and broad range of specialty products provides us with an
established and proven infrastructure that we believe uniquely positions us
to be a worldwide leader in our major businesses. In printed circuit board
chemistries, we are one of the few producers with the worldwide
infrastructure necessary to deliver the products and the level of technical
service necessary to meet the needs of our transnational customers. In
metal and plastic finishing chemistries, we have the established technical
sales and service force necessary to compete successfully. In the graphic
arts business, our significant investments in research and development have
produced market leading products.
Experienced Management Team with Significant Equity Ownership. Our
senior management team is led by Dan Leever, our Chairman and Chief
Executive Officer, who has over 18 years of experience at MacDermid. Mr.
Leever has been the driving force behind our streamlining efforts over the
past several years, and his management team has successfully integrated
more than 14 acquisitions over the past 10 years. Our senior management
team has on average 15 years of experience in the specialty chemical market
or other similar industrial fields. Furthermore, our directors, management
and employees own 16.9% of our stock on a fully diluted basis, thereby
aligning their interests with those of our shareholders.
Business Strategy
Our strategy is to maximize cash flow by building our core businesses,
actively managing our business portfolio and vigorously pursuing
operational efficiencies.
Build Our Core Businesses. We believe that we can capitalize on our
technical capabilities, strong customer relationships, in-depth end-use
application know-how and industry knowledge to generate incremental revenue
by pursuing the following opportunities:
o Extend Product Breadth: We expect to extend many of our product
offerings through the development or acquisition of related
formulations. In our Advanced Surface Finishes group, we recently
launched a variety of newly developed products including Sterling(R),
a new process for enhancing the ability to effectively solder
components to printed circuit boards.
o Develop New End-Use Applications: We intend to expand our product
offerings by modifying existing formulations to meet new end-use
applications. For example, we recently launched our Chemidize(R)
product line, which is used to treat aluminum aircraft bodies prior to
painting in order to improve paint adhesion.
o Continue to Grow Internationally with Our Customers: We expect to
continue to grow internationally with our existing multinational
customers as they continue to penetrate emerging regions. In early
2000, we completed construction of a new manufacturing facility in
China to service customers there and in other areas of Asia. We also
expect to enter into strategic alliances in areas where we can utilize
our relationships to serve both current and new customers.
Actively Manage Business Portfolio. We have organized our businesses
by the end-use applications we serve and we continually evaluate
opportunities to optimize our business portfolio. The diversity of end-use
applications for our products provides growth opportunity from product-line
extensions and insulation from industry-specific disruptions. This also
allows us to efficiently allocate resources to those businesses that
address industries with the most attractive prospects.
Pursue Operational Efficiencies. We continuously focus on
opportunities to reduce operating expenses through consolidation,
rationalization and acquisition integration. For example, we completed a
comprehensive cost savings and restructuring program in fiscal 2001 that we
expect to result in annual savings of approximately $15 million beginning
over the next twelve months. Our ability to reduce costs provides us with
funds for growth and investment and enhances our competitiveness.
Selected Consolidated Historical Financial Data
The following table sets forth selected consolidated historical
financial data for the periods set forth below. You should read this data
in conjunction with the information set forth in our consolidated financial
statements, the related notes and the other financial information included
in our annual report for fiscal 2001 filed on Form 10-K.
FISCAL YEAR ENDED MARCH 31,
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1997 1998 1999 2000 2001
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(IN THOUSANDS, EXCEPT RATIOS)
STATEMENT OF EARNINGS DATA:
Net sales............................... $440,297 $528,567 $612,801 $758,080 $794,776
Costs and expenses......................
Cost of sales........................ 227,350 270,606 317,668 399,144 440,226
Selling, technical and administrative 138,942 155,182 176,385 224,726 230,057
Amortization of intangibles,
primarily goodwill................ 8,777 9,999 12,330 17,563 20,641
Merger-related costs................. -- -- -- 7,617 1,473
Restructuring costs.................. -- -- -- -- 6,663
Impairment charge.................... -- -- -- -- 4,800
Write-off of acquired R&D............ -- 10,495 -- -- --
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375,069 446,282 506,383 649,050 703,860
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Operating profit........................ 65,228 82,285 106,418 109,030 90,916
Other income (expense), net............. (275) (739) 2,688 (935) (2,735)
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Earnings before interest and taxes...... 64,953 81,546 109,106 108,095 88,181
Net interest expense.................... (18,036) (22,237) (25,639) (31,043) (33,244)
Income Taxes............................ (18,319) (27,920) (27,841) (27,932) (20,133)
Extraordinary charge(1)................. -- (1,322) -- (3,762) --
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Net earnings............................ $28,598 $30,067 $55,626 $45,358 $34,804
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OTHER FINANCIAL DATA:
Depreciation............................ $12,523 $12,892 $14,522 $18,895 $22,193
EBITDA (before certain costs and
expenses)(2)......................... 86,253 114,932 135,958 152,170 143,951
EBITDA (before certain costs and
expenses) margin(2)(3)............... 19.6% 21.7% 22.2% 20.1% 18.1%
Capital expenditures(4)................. $11,669 $14,158 $20,036 $24,039 $22,437
Ratio of earnings to fixed charges(5)... 3.57x 3.40x 4.22x 3.13x 2.58x
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(1) Extraordinary charges result from debt refinancing in the case of
fiscal 1998 and the early retirement of debt associated with the
PTI, Inc. acquisition in the case of fiscal 2000.
(2) EBITDA (before certain costs and expenses) represents earnings
before interest, taxes, depreciation, amortization and
extraordinary charge and is presented before the effect of certain
other costs and expenses. For fiscal 1998, we have added back a
non-cash charge attributable to write-off of acquired R&D of
$10,495, which represents write-off of acquired R&D in connection
with PTI Inc.'s acquisition of NAPP Systems, Inc. For fiscal 2000
and fiscal 2001, we have added back the cash charges attributable
to merger-related costs of
$7,617 and $1,473, respectively, resulting primarily from the
acquisition of PTI, Inc. For fiscal 2001, we have added back a cash
charge attributable to restructuring costs of $6,663 resulting
primarily from severance of management and office support
redundancies. For fiscal 2001, we have also added back a non-cash
impairment charge of $4,800 primarily resulting from our domestic
printed circuit board manufacturing activities. EBITDA (before
certain costs and expenses) is not a measure of operating income,
operating performance or liquidity under GAAP. We include EBITDA
(before certain costs and expenses) data because we understand such
data are used by certain investors to determine our historical
ability to service our indebtedness. Nevertheless, this measure
should not be considered in isolation or as a substitute for
operating income (as determined in accordance with GAAP) as an
indicator of MacDermid's operating performance, or to cash flows
from operating activities (as determined in accordance with GAAP)
as a measure of liquidity. In addition, it should be noted that
companies calculate EBITDA differently and therefore EBITDA (before
certain costs and expenses) as presented for MacDermid may not be
comparable to EBITDA reported by other companies. EBITDA (before
certain costs and expenses) may not be indicative of historical
operating results, and we do not mean it to be predictive of future
results of operations or cash flows. You should also see the
statements of cash flows contained within the historical
consolidated financial statements that are included in our annual
report for fiscal 2001 or Form 10-K.
(3) EBITDA (before certain costs and expenses) as a percentage of net
sales.
(4) Capital expenditures excludes acquisitions and dispositions of
businesses and proceeds from the disposition of fixed assets.
(5) For purposes of computing this ratio, earnings consist of earnings
before taxes on income and fixed charges. Fixed charges consist of
interest expense, amortization of deferred debt issue costs and
one-third of rental expense, deemed representative of that portion
of rental expense estimated to be attributable to interest. The
ratio of earnings to fixed charges plus preferred dividends for
fiscal 1997 and fiscal 1998 was 3.24 to 1.0 and 3.36 to 1.0,
respectively. In fiscal 1998, we redeemed all of our outstanding
redeemable preferred stock.
Differences between EBITDA (before certain costs and expenses) for fiscal
2000 and fiscal 2001
The difference between EBITDA (before certain costs and expenses) of
approximately $144.0 million for fiscal 2001 and approximately $152.2 for
fiscal 2000 can be attributed to the cumulative effect of the following: a
decrease of approximately $2.6 million in the EBITDA (before certain costs
and expenses) of a our Graphic Arts segment for fiscal 2001 as compared to
fiscal 2000, an increase of approximately $3.7 million in the EBITDA
(before certain costs and expenses) of our Advanced Surface Finishes
segment for fiscal 2001 as compared to fiscal 2000, a decrease of
approximately $7.1 million in EBITDA (before certain costs and expenses)
for fiscal 2001 as compared to fiscal 2000 attributable to the net effect
of acquisitions and divestures, a decrease of approximately $6.1 million in
EBITDA (before certain costs and expenses) for fiscal 2001 as compared to
fiscal 2000 attributable to foreign currency translation, an increase of
approximately $3.0 million in EBITDA (before certain costs and expenses)
for fiscal 2001 as compared to fiscal 2000 attributable to restructuring
savings achieved in fiscal 2001, and an increase of approximately $0.9
million in EBITDA (before certain costs and expenses) for fiscal 2001 as
compared to fiscal 2000 attributable to other reasons.
Eurocir
The purchase and sale agreement under which we acquired our 60%
interest in Eurocir S.A. includes a put-and-call arrangement for the
remaining 40% interest that expires after the fifth anniversary of the
closing date the acquisition. The additional purchase price is based on a
multiple of 6 (in the case of a put to us) or 8 (in the case of a call by
us) times average annual earnings from operations before interest, taxes on
earnings, depreciation and amortization, less the outstanding debt of
Eurocir S.A. We acquired our interest in Eurocir S.A. and one printed
circuit board manufacturing facility in the United States in order to
further develop our proprietary ViaTek(R) system, which we may license.
Sales
In fiscal 2001, sales to our customers in the electronics industry
(including sales by our Electronics Manufacturing group) and the automotive
industry represented approximately 30% and 14%, respectively, of our total
sales. In fiscal 2001, we generated approximately 50% of our sales in
foreign currency and we incurred approximately 50% of our total costs in
foreign currency.
Forward-Looking Statements
This current report on Form 8-K includes forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
These statements relate to analyses and other information that are based on
forecasts of future results and estimates of amounts not yet determinable.
These statements also relate to our future prospects, developments and
business strategies. The statements contained in this current report that
are not statements of historical fact may include forward-looking
statements that involve a number of risks and uncertainties.
We have used the words "anticipate," "believe," "could," "estimate,"
"expect," "intend," "may," "plan," "predict," "project," "will" and similar
terms and phrases, including references to assumptions, in this current
report to identify forward-looking statements. These forward- looking
statements are made based on our management's expectations and beliefs
concerning future events affecting us and are subject to uncertainties and
factors relating to our operations and business environment, all of which
are difficult to predict and many of which are beyond our control, that
could cause our 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 our forward-looking statements: cyclicality in our customers' end-use
markets; 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; and the availability, terms and deployment of capital.
All of our forward-looking statements should be considered in light of
these factors. We undertake no obligation to update our forward-looking
statements to reflect new information, future events or otherwise.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
MacDermid, Incorporated
(Registrant)
Date: June 5, 2001 /s/ Gregory M. Bolingbroke
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Title: Vice President
Treasurer and Controller