245 Freight Street
Waterbury, CT 06702
May 23, 2002
TO: Mr. Jonathan G. Katz, Secretary
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549-6009
CC: Greg Bolingbroke
Vice President, Treasurer and Corporate Controller
CC: John Malfettone
Executive Vice President and Chief Financial Officer
Dear Mr. Katz
MacDermid, Incorporated is pleased to respond to the Release No. 33-3089 Acceleration of Period Report Filing Dates and Disclosure Concerning Website Access to Reports.
We agree that investors in our financial markets must be provided timely and reliable information. The integrity of those markets themselves also is dependant on access to clear financial information in press releases and websites, in addition to SEC filed documents.
In the wake of Enron and similar situations we need to understand whether quicker access to information is really the answer. To have the same reports filed by Enron sooner would not have changed the outcome. We would be faced with the same dilemma, only earlier on the timeline. We need to focus on the reliability of the reports, regardless of when they are filed. More meaningful information is the key and if this can be done sooner then we should do so without upsetting the balance between timely and meaningfully reliable.
If the 10K filing period shortens from 90 to 60 days there is greater likelihood for less reliable information. The time for the basic preparation of financial statements and collection of the related disclosures in the notes would remain very similar. The overall time frame will be shortened, most likely, from the efforts of senior management and auditor reviews. The level of detail during the audit period should not be sacrificed, whether you are concerned with fraud or just innocent errors and omissions. To make a stricter deadline by such wide margin would potentially lead to a less valuable process although the intention is to improve the process. The financials are not extremely time consuming as compared with the additional disclosures and MD&A. These items should be prepared in conjunction with each other, in light of the duplication required between the financial statement notes and MD&A. The pressure to produce, effectively review and audit these items with 30 less days surely opens the door to the application of poor judgment in preparing and reviewing the MD&A. Sufficient time should be allotted to allow for a logical application of the ever-increasing FASB standards because the events underlying the numbers and related disclosures may be vastly different each period. Separate filing dates surely will not work and could result in inconsistency, or confusion.
Avoiding confusion is paramount. Providing for additional filings under the 8K or similar means should be avoided. There should be no distinction between companies, all or none should be affected by accelerated filing to avoid inconsistency that could lead to confusion. There is a 15 day extension that basically is automatic for 10K filings. Rather than change to 60 days and build in potential confusion by allowing for, almost necessitating, an extension to 75 days, it may make more sense to go from 90 to 75 days and eliminate, or make extensions difficult to qualify for.
With the goal to improve investor and market awareness, it would make more sense to institute stricter press release requirements than to accelerate filings, or promote additional filings such as an 8-K concurrent to the press release. Traditional experience has shown that our stock trades more heavily after our analysts call. Perhaps all public companies should be required to conduct an analysts call coincidental to their earnings release. This way an accelerated flow of meaningful information could be achieved, or at least progress made towards such goal.
Addressing timeliness in the 10K filing is more critical than for the 10Q filing. Ninety days may be a long time and, for the reasons above, perhaps 75 days is a reasonable change. However, if an accelerated due date becomes the requirement, then only the annual reporting should be shortened. The requirements and level of detail are ever increasing for quarterly reporting so to shorten the quarterly filings probably is greater hardship than for annual filings. The difference between 45 and 30 days is not really that beneficial from a time standpoint and is much more difficult from the standpoint of good judgment and efficient preparation of meaningful information.
Scheduling requirements on senior management or auditors to properly review before going to print will consistently be a burden. Although difficult to predict, the costs to prepare accelerated filings will surely increase. The increased costs will serve no economic benefit and could be more wisely spent growing the business and promoting economic progress, especially at a time when economic recovery is an issue.
Sound financials and auditor confidence in the underlying transactions will be of greater value to investors over solely having financials at an earlier date that are potentially not as reliable, or are equally reliable at best. The proposed earlier dates put at risk the quality of the reports and so we respectfully submit the comments above for consideration.