MacDermid Q3 Earnings Release; Third Quarter Diluted Earnings Per Share of $0.43 Including Special Gain on Repurchase of Shares; Owner Earnings $13.8 Million.Business Editors WATERBURY Waterbury, industrial city (1990 pop. 108,961), New Haven co., W Conn., on the Naugatuck River; settled 1674, inc. as a city 1853. The city, once famous for its brass industry, is a financial and commercial center of W Connecticut. , Conn.--(BUSINESS WIRE)--Oct. 29, 2003 MacDermid, Incorporated, a worldwide manufacturer of proprietary specialty chemical A Specialty chemical is a chemical produced for a specialized use. They are produced in lower volume than bulk chemicals, of which petrochemicals, made from oil feedstocks, are the most common. However, both are produced in a chemical plant. products and materials for the electronics, metal finishing and graphic arts graphic arts: see aquatint; drawing; drypoint; engraving; etching; illustration; linoleum block printing; lithography; mezzotint; niello; pastel; poster; silk-screen printing; silhouette; silverpoint; sketch; stencil; woodcut and wood engraving. industries, today reports earnings for its quarter ended September September: see month. 30, 2003. Quarter ended September 30, 2003 compared to September 30, 2002 Earnings for the third quarter were $13.4 million or $0.43 per share. Included in earnings is $1.0 million for accounting change and $2.2 million of gain as a result of the share purchase from Citicorp Venture Capital Ltd (CVC See CSC. ). In addition the earnings include a tax charge of $0.7 million over and above the Company's effective tax rate of 32%. Earnings not including the foregoing items were $.36 per share compared to $0.27 per share in the prior year quarter. Proprietary sales of $137.6 million decreased by 2% or $3.1 million, and total sales were $167.8 down $0.4 million or 0.2%. Favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. currency exchange rates aided total sales by $8.8 million, proprietary sales by $5.8 million, and earnings by $0.7 million or $0.02 per share. Owner Earnings In 1986, Warren Buffett detailed his valuation method. He stated that what he used to determine income was something called Owner Earnings. He defined owner earnings as follows: Quarter ended September 30, 2003 compared to Quarter ended June June: see month. 30, 2003 Diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of were $0.43 ($0.36 after net gains described above) for the quarter ended September 2003 compared to the previous sequential One after the other in some consecutive order such as by name or number. quarter of $0.38. Proprietary sales were lower by $5.9 million and total sales decreased by $7.9 million (4.5%). There was no currency effect on sales between quarters. Affect of accounting change and SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System 150 The company adopted SFAS 150 as required during the current quarter. The SFAS requires MacDermid to recognize in the Income Statement the gain on the call and put for the repurchase of stock Repurchase of stock Technique to pay cash to firm's shareholders that provides more preferential tax treatment for shareholders than dividends. Treasury stock is the name given to previously issued stock that has been repurchased by the firm. arising from the previously announced agreement with CVC. Daniel Daniel, book of the Bible Daniel, book of the Bible. It combines "court" tales, perhaps originating from the 6th cent. B.C., and a series of apocalyptic visions arising from the time of the Maccabean emergency (167–164 B.C. Leever, Chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. said, "The cash flow strategy of the company was demonstrated in the quarter. Even though the quarter was affected by normal seasonal slowness and the continued difficult external environment, we were able to use our strong cash flow to repay debt, thereby lowering our interest costs, reduce our line of credit which reduced the amortization of financing fees, increased our dividend, and bought back $21 million in our own stock ($52 million for the year), without increasing our bank borrowing. The quarter started off soft and picked up momentum as it progressed. We are reluctant to call this a trend as we saw a similar pattern in the March quarter that proved short lived. Nevertheless we do feel more optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op than we have in some time. The external environment continues to be difficult. Recent industrial production indices showed declines for USA, Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). , and
Japan, all important markets for us. These declines affect our
Industrial product lines, as well as our Printing business. We are more
optimistic about the short term for our electronic product lines,
cautioned by previous false starts.
Owner earnings for the quarter were a solid $13.8 million after payment of bond interest. Inventories and receivables Receivables An asset designation applicable to all debts, unsettled transactions or other monetary obligations owed to a company by its debtors or customers. Receivables are recorded by a company's accountants and reported on the balance sheet, and they and include all debts owed improved modestly in the quarter. Even after buying back $52 million in stock this year we ended the quarter with net debt to EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become of 2.4, below our internal "not to exceed" target of 2.5X" Note: Owner Earnings is calculated as Net Cash flows provided by operating activities (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). definition) less net capital expenditures. This press release and additional financial information together with our reconciliation of GAAP to Non-GAAP numbers are available on our website. Website: http://www/macdermid.com NYSE NYSE See: New York Stock Exchange - MRD MRD or mrd abbr. minimal reacting dose CUSIP CUSIP See: Committee on Uniform Securities Identification Procedures CUSIP See Committee on Uniform Securities Identification Procedures. 554273 10 2 This report and other Corporation reports and statements describe many of the positive factors affecting the Corporation's future business prospects. Investors should also be aware of factors that could have a negative impact on those prospects. These include political, economic or other conditions such as currency exchange rates, inflation rates, recessionary or expansive trends, taxes and regulations and laws affecting the business; competitive products, advertising, promotional and pricing activity; the degree of acceptance of new product introductions in the marketplace; technical difficulties which may arise with new product introductions; and the difficulty of forecasting sales at certain times in certain markets.
MacDermid, Incorporated
Condensed Consolidated Summary of Earnings
$ inThousands, except share and per share amounts
Three Months Three Months Nine Months
Ended Ended Ended
Sep. 30th Sep. 30th Jun. 30th Sep. 30th Sep. 30th
2003 2002 2003 2003 2002
---------- ---------- ---------- ---------- ----------
Proprietary
sales $137,638 $140,703 $143,546 $421,962 $422,988
Other sales 30,152 27,443 32,193 93,997 88,836
---------- ---------- ---------- ---------- ----------
Total net sales $167,790 $168,146 $175,739 $515,959 $511,824
---------- ---------- ---------- ---------- ----------
Gross margin 71,619 70,964 75,915 221,784 216,355
GM % 42.7% 42.2% 43.2% 43.0% 42.3%
Selling,
technical,
administrative
expense 47,773 46,723 49,354 146,249 145,108
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subtotal
operating
profit
before
amortization 23,846 24,241 26,561 75,535 71,247
OP % 14.2% 14.4% 15.1% 14.6% 13.9%
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Amortization 794 1,558 852 2,416 4,696
---------- ---------- ---------- ---------- ----------
Operating
profit (loss) 23,052 22,683 25,709 73,119 66,551
Net other
(income)
expense (2,830) 1,136 (142) (3,320) 1,689
Net interest
expense 7,607 8,659 8,013 23,316 26,326
---------- ---------- ---------- ---------- ----------
Earnings (loss)
before income
taxes,
minority
interest and
cumulative
effect of
accounting
change 18,275 12,888 17,838 53,123 38,536
Income tax
(expense)
benefit (5,848) (4,123) (5,708) (17,000) (12,331)
Minority
interest 0 (100) 0 0 (535)
---------- ---------- ---------- ---------- ----------
Net earnings
before
cumulative
effect of
accounting
change 12,427 8,665 12,130 36,123 25,670
Cumulative
effect of
accounting
change 1,014 0 0 1,014 0
---------- ---------- ---------- ---------- ----------
Net earnings
(loss) $13,441 $8,665 $12,130 $37,137 $25,670
========== ========== ========== ========== ==========
Diluted
earnings
(loss) per
share $0.43 $0.27 $0.38 $1.17 $0.79
Diluted average
common shares
outstanding 31,059,431 32,480,682 31,720,959 31,743,571 32,496,043
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Net earnings
excluding
accounting
change $12,427 $8,665 $12,130 $36,123 $25,670
Diluted EPS
excluding
accounting
change $0.40 $0.27 $0.38 $1.14 $0.79
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MacDermid, Incorporated
Sales and Margins by Region
$ inThousands
Three Months Three Months Nine Months
Ended Ended Ended
Sep. 30th Sep. 30th Jun. 30th Sep. 30th Sep. 30th
2003 2002 2003 2003 2002
---------- ---------- ---------- ---------- ----------
Americas
Sales $64,216 $70,981 $67,148 $199,881 $224,148
Operating
Profit(a) $9,658 $10,606 $12,363 $32,927 $34,490
OP % 15.0% 14.9% 18.4% 16.5% 15.4%
Europe
Sales $69,568 $65,443 $76,817 $220,849 $201,579
Operating
Profit(a) $7,389 $6,893 $7,867 $23,421 $21,681
OP % 10.6% 10.5% 10.2% 10.6% 10.8%
Asia
Sales $34,006 $31,722 $31,774 $95,229 $86,097
Operating
Profit(a) $6,799 $6,742 $6,331 $19,187 $15,076
OP % 20.0% 21.3% 19.9% 20.1% 17.5%
Consolidated
Total
Sales $167,790 $168,146 $175,739 $515,959 $511,824
Operating
Profit(a) $23,846 $24,241 $26,561 $75,535 $71,247
OP % 14.2% 14.4% 15.1% 14.6% 13.9%
MacDermid, Incorporated
Sales and Margins by Group
$ inThousands
Three Months Three Months Nine Months
Ended Ended Ended
Sep. 30th Sep. 30th Jun. 30th Sep. 30th Sep. 30th
2003 2002 2003 2003 2002
---------- ---------- ---------- ---------- ----------
Advanced
Surface
Finishing
Sales $84,466 $80,476 $84,256 $252,536 $239,465
Operating
Profit(a) $13,238 $11,233 $13,204 $39,343 $32,131
OP % 15.7% 14.0% 15.7% 15.6% 13.4%
Printing
Solutions
Sales $64,214 $69,959 $69,693 $201,740 $211,810
Operating
Profit(a) $10,332 $12,455 $13,081 $35,672 $36,277
OP % 16.1% 17.8% 18.8% 17.7% 17.1%
Electronics
Manufacturing
Sales $19,110 $17,711 $21,790 $61,683 $60,549
Operating
Profit(a) $276 $553 $276 $520 $2,839
OP % 1.4% 3.1% 1.3% 0.8% 4.7%
Consolidated
Total
Sales $167,790 $168,146 $175,739 $515,959 $511,824
Operating
Profit(a) $23,846 $24,241 $26,561 $75,535 $71,247
OP % 14.2% 14.4% 15.1% 14.6% 13.9%
(a) before amortization or special charges.
MacDermid, Incorporated
Condensed Consolidated Balance Sheets
$ inThousands
Sep. 30th Jun. 30th Dec. 31st
2003 2003 2002
---- ---- ----
Cash and Equivalents $30,105 $38,303 $32,019
Accounts Receivable, net 142,921 146,706 142,806
Inventories, net 88,312 91,965 85,738
Other Current Assets 30,822 28,955 28,055
-------- -------- --------
292,160 305,929 288,618
Property, Plant & Equipment, net 127,635 129,879 132,581
Goodwill 194,200 194,200 194,200
Intangibles 30,626 31,095 31,825
Other Long Lived Assets 57,500 58,691 60,669
-------- -------- --------
Total Assets $702,121 $719,794 $707,893
Payables and Accruals $134,806 $145,602 $136,008
Short Term Debt 10,978 9,132 11,354
Long Term Debt 310,103 310,641 310,238
Other Long Term Liabilities 30,538 30,338 29,682
Minority Interest 2,873 2,873 2,873
Shareholders' Equity 212,823 221,208 217,738
-------- -------- --------
Total Liabilities & Shareholders'
Equity $702,121 $719,794 $707,893
Debt to Total Capital 60% 59% 60%
MacDermid, Incorporated
Condensed Consolidated Summary of Cash Flows
Three Months Three Months Nine Months
$ inThousands Ended Ended Ended
Sep. 30th Sep. 30th Jun. 30th Sep. 30th Sep. 30th
2003 2002 2003 2003 2002
---------- ---------- ---------- ---------- ----------
Net Income
(Loss) $13,441 $8,665 $12,130 $37,137 $25,670
Depreciation 4,968 5,128 5,357 15,571 15,828
Amortization 794 1,558 852 2,416 4,696
Provision for
Bad Debt 1,078 460 890 3,757 4,451
Stock
Compensation
Expense 915 599 1,154 3,100 2,143
Impact of
adopting
SFAS150 (3,228) 0 0 (3,228) 0
Working Capital
changes (1,338) 12,526 5,203 2,860 26,101
---------- ---------- ---------- ---------- ----------
Cash from
Operations 16,630 28,936 25,586 61,613 78,889
Capital
Spending (Net) (2,790) 3 (1,722) (5,491) (2,277)
---------- ---------- ---------- ---------- ----------
Owner Earnings $13,840 $28,939 $23,864 $56,122 $76,612
Dividends to
Shareholders (934) (645) (620) (2,200) (1,935)
Increase/
(Decrease) in
Debt (940) (20,996) (2,022) (6,532) (69,309)
Treasury Shares (21,293) (341) (30,510) (51,753) (444)
Currency
Translation/
Other 1,129 (334) 957 2,449 325
---------- ---------- ---------- ---------- ----------
Increase/
(Decrease) in
Cash ($8,198) $6,623 ($8,331) ($1,914) $5,249
========== ========== ========== ========== ==========
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**Note: Pro
forma owner
earnings
adjusted for
semi-annual
bond interest
payments would
have been as
follows: $20,740 $35,839 $16,964 $63,022 $83,512
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