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"Worldly wisdom teaches us that it is far better for reputation to fail conventionally than to succeed unconventionally." - John Maynard Keynes We are ok being lonely and taking an unconventional approach to investing, for that is where we find the greatest long-term success. Although... More
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  • MacDermid Shareholder Letter 1999 0 comments
    Mar 24, 2014 7:07 PM | about stocks: PAH

    1999:

    Dear Shareholders,

    We are pleased to report our eighth consecutive year of record earnings and earnings per share and the fifth year for revenues. We earned $1.43 per share, a 19% increase over last year's $1.20. Revenues were up 22% to $383 million. Net earnings were up 19% to $36 million. Net after-tax cash flow (net earnings + depreciation + amortization - capital expenditures) was a record $1.79 per share. Our goal remains to create one of the world's greatest industrial companies, which we define, in part, as growing earnings per share 25% compounded over 10 years. Since 1994, that growth rate has been 43%.

    Following last year's 41% earnings per share growth, we planned fiscal 1999 as a year of consolidation. But given the volatile global economic environment, we had to work harder than ever. The best word to describe the overall market last year was awful. The electronics market was weak. Asia bumped along the bottom. Our graphic arts sector experienced lower activity. Against this background, our teams in Europe, industrial products, equipment, and our US-based shared services produced excellent results. In December, we closed the Canning Acquisition, our largest to date, increasing our revenues to over $500 million. Importantly, with the Canning acquisition came the addition of capable, enthusiastic people to the MacDermid Clan. Combining the Canning team with our industrial products team creates a world leader in plating additives and added two new specialty niche businesses, offshore drilling lubricants and fuel oil additives. Due to the efforts of the combined team, we are ahead of schedule in integrating this acquisition. As a result, the transaction was accretive in the fourth quarter, a pleasant surprise.

    The metal finishing market is important to us. Our consolidation strategy was accelerated by Canning and by increasing our stake in Galvanevet. As a result we now enjoy significantly strengthened positions in the US, UK, Germany, Italy and Asia. As a global leader in the metal finishing business we have scale and thus are better able to offer unsurpassed service to our customers. In February, we announced the acquisition of Polyfibron Technologies Inc., a leader in the graphic arts industry, with projected revenues of $250 million. We await government approval. As of this writing, we remain optimistic, although there remains some risk this acquisition will not close.

    With regard to acquisitions, while our primary focus is to strengthen our existing businesses, as was the case with all recent acquisitions, we will consider using excess cash flow to invest in corollary businesses we understand. Rest assured, we recognize the challenges of integrating an acquisition and have worked hard to develop an aptitude in this important area. Each potential acquisition is examined thoroughly by our top management team. Once acquired, we try to bring a clarity and excitement to the management of acquired companies. Together we work to generate cost savings and a more aggressive effort to grow the top line. We find customers welcome MacDermid as the acquirer due to our industry commitment and our long term investment horizon. Importantly our recent acquisitions resulted from exclusive negotiations. We were chosen as the preferred partner as a result, we believe, of our reputation for integrity and fair dealing.

    Internal growth remains our primary strategy and we are excited about a number of initiatives. In electronics, ViaTek, our new process for producing double sided boards, continues to progress. Our industrial products team introduced a new process for painting airframes. In graphic arts, Twin Lock, our revolutionary new technology for mounting printing plates, received the prestigious Flexographic Technical Innovation Award recognizing the "significant commercial application of recent innovative technology." We have investment programs in each of our businesses that can materially increase their underlying growth and profitability.

    Our culture of constant cost improvement, and our focus on cash flow allow us the flexibility of pursuing the dual strategy of internal growth and acquisitions all with one intention - to increase intrinsic per share value. During the year, our corporate management was strengthened with the addition of R. Nelson (Oz) Griebel who joined us as President and Chief Operating Officer and Stephen Largan as Vice President of Finance. Jay LoVetere, my long standing partner, has left his executive management role but continues to consult on the ViaTek program. We have experienced management running all of our business areas. The presidents of each of our business areas have over 20 years experience in our business. They think and act as long-term owners. At corporate, our focus is maintaining the culture, establishing strategy, allocating resources, and setting performance targets. We believe our entrepreneurial environment, that rewards initiative and intelligent risk-taking, is crucial to attracting and retaining talented and motivated individuals. We encourage people to take calculated risks knowing that projects often fail. We spend a lot of time maintaining this culture. We set high standards. We tie our compensation practices to those standards. Our bonus, profit sharing, and stock ownership plans offer Clan members the opportunity of significant personal wealth. We operate with one expectation- grow the cash flow of our business over the long term. Life at MacDermid, is really fun, but not easy.

    At last year's Annual Meeting, we introduced our Shareholder Principles which, along with the MacDermid Philosophy, we refer to as the MacDermid Magna Carta. They are printed on the inside cover and first page of this report. You can expect us to act consistently with them. While fiscal 1999 produced record per share results, even more importantly, we improved our strategic position as a dynamic leader in our markets. Even though the external environment remains challenging, we are confident we can continue to deliver. Our goal is creating one of the world's greatest industrial companies.

    To our customers, we greatfully appreciate your business which we do not take for granted. We are very committed to improving the quality of our products and service to you. To the Clan MacDermid, thank you for your determination to give our customers the finest service and to push to another record. To our shareholder partners, take comfort that more than a quarter of the outstanding shares are owned by your employees either directly, through options, or stock plans. Rest assured we think as owners. You have our sincere thanks for your continued confidence.

    Disclosure: I am long PAH.

    Themes: Outsider CEO, Chemical Stocks: PAH
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