MacDermid, Incorporated Announces Third Quarter Earnings
Press release from the issuing company
DENVER--Oct. 31, 2005-- MacDermid, Incorporated a worldwide manufacturer of proprietary specialty chemical products and materials for the electronics, metal finishing and graphic arts industries today reported third quarter sales of $193.3 million, a 19.6% increase over the same period in 2004. The company's acquisition of Autotype in June of 2005 contributed $22.3 million to sales in the third quarter. Sales without Autotype increased $9.4 million, or 5.8% over last year. Sales for the nine months ended September 30th were $541.8 million, or 10.9% above the same period in 2004. Autotype contributed $27.2 million to sales year to date. Year to date sales without Autotype would have increased $26.0 million or 5.3% over the prior year to date.
Diluted earnings per share for the quarter of $0.42 were $0.03 more than the $0.39 per share from continuing operations in 2004. Earnings in the quarter were negatively impacted by acquisition and restructuring charges amounting to $0.04. Accordingly earnings before these charges would have been $0.46 per share, an increase of 17.9% over the third quarter last year.
Diluted earnings per share for the nine-month period were $1.19 or $0.05 less than the same period last year. This was offset by the negative impacts of acquisition and restructuring charges of $0.05 per share and by the impact of the litigation settlement in the second quarter amounting to $0.06 per share.
Owner Earnings, a measure of free cash flow (defined below and shown in BOLD in the attached Condensed Consolidated Summary of Cash Flows), were $ 1.8 million for the quarter ended September 30 2005. Owner earnings were negatively impacted by the payment of the litigation settlement of $5.0 million that was accrued that was accrued as of the end of the second quarter and by the semi-annual payment of interest on our bonds amounting to $ 13.8 million.
Advanced Surface Finishing (ASF) segment
Sales in our ASF segment for the quarter increased by $14.9 million or 15.5% compared with the same quarter last year, of which $10.7 million is attributable to Autotype. Sales excluding Autotype increased $4.2 million, or 4.3%. Sales for the nine months ended September 30th increased $27.5 million, or 9.6% compared to the same nine-month period last year, of which $13.0 million was attributable to Autotype. Sales excluding Autotype increased $14.6 million or 5.1%.
Gross profit for the quarter is down by 3.9 percentage points primarily due to the affect of the lower inherent gross profit margin of Autotype (2.2%), and increased raw material costs and higher overhead costs in percentage terms due in part to lower volumes in Europe and North America. The seasonal summer effect in Europe was particularly pronounced this year.
Operating profit for the quarter was $16.9 million or 4.0% ahead of last year, Asia and Offshore Solutions increased and the Americas and Europe are down from last year. The decrease in the operating profit percentage from 16.9% to 15.2% is entirely attributable to the lower operating margins as a percentage of sales at Autotype. For the nine-month period operating profit was $47.8 million or 2.2% ahead of last year, but down 1.1% as a percent of sales for the same reasons as for the quarter.
Printing Solutions Segment
The Printing Solutions business increased sales by $16.8 million, or 25.7% for the quarter, of which $11.5 million was attributable to Autotype. Sales excluding Autotype were up $5.3 million or 8.1%. Sales for the nine months increased by $25.7 million, or 12.7%, of which $14.3 million is attributable to Autotype. Sales year to date excluding Autotype increased $11.4 million, or 5.6%. Colorspan had another excellent quarter. MPS Europe was affected by the summer slow down and continued poor underlying performance. As a result a restructuring was announced during the quarter.
The gross profit % is down 4.0 percentage points for the quarter and by 3.0 percentage points year to date. The decline is due in part to the inclusion of Autotype with its inherently lower gross profit percentage.
Operating profit of $7.2 million is down 23.9% in the quarter as compared to last year due to restructuring charges in France of $ 0.7 million, increased selling, technical and R&D costs. Year to date operating profits were $24.4 million, or 24.7% less than last year due to $2.5 million in litigation settlement expenses from the second quarter, restructuring charges in France and increased selling, technical and R & D expenses. MPS France is consolidating its' manufacturing operations to improve profitability by moving one of three factories it operates in Europe.
Autotype began reorganizing its operations to realize synergies brought about by the acquisition by announcing the closing of its' US plant, which will be merged into an existing MacDermid plant. Management continues to further plan for cost reducing synergies.
Dan Leever Chairman and CEO said, "Overall the quarter was satisfactory. MPS North America stabilized this quarter and we are hopeful we will grow from this base. In Europe, the summer effect, which always reduces our August revenues, was more pronounced than normal. We did not see the bounce back in September that we usually do. The challenges in the US automotive industry are not helping ASF North America, but the Asia demand is still robust. We believe our momentum in ASF is building.
Offshore Solutions and Colorspan continued their excellent performance.
MacDermid Autotype is off to a poor start. Revenues and profits are already significantly behind our plan. However, we remain confident this business will provide the returns and growth opportunities we envisioned. We understand the business much better than we did before we acquired it, and are much more confident we have cost and synergy levers far beyond the planned levels. We will exercise the appropriate balance between short-term earnings and longer-term growth.
Owner Earnings were below our expectations although the underlying working capital remains in control. Acquisition activity remains high. It is the company's intent to grow through acquisition in a responsible manner. Although there can be no assurance we will be successful in finding acquisition candidates that meet our criteria, we are optimistic."
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