SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended May 31, 1996 Commission File Number:1-9852
CHASE CORPORATION
(Exact name of registrant as specified in its charter)
Massachusetts 11-1797126
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
Suite 220
50 Braintree Hill Park
Braintree, Massachusetts 02184
(Address of principal executive offices) (Zip Code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months, and
(2) has been subject to such filing requirements for the past 90
days.
Yes X No
Common Shares Outstanding as of June 30, 1996 3,609,292
<TABLE>
<CAPTION>
PART 1: FINANCIAL INFORMATION
CHASE CORPORATION
CONSOLIDATED BALANCE SHEET
ASSETS May 31 Aug.31
1996 1995
(UNAUDITED) (AUDITED)
<S> <C> <C>
CURRENT ASSETS
Cash $ 203,205 $ 108,587
Trade receivables,less allowance
for doubtful accounts of $147,684
$95,500 respectively 5,681,695 5,808,641
Note receivable from related party 208,286 207,166
Inventories(Note B)
Finished and in process 1,919,441 1,647,181
Raw materials 1,689,541 3,145,151
------------ -----------
3,608,982 4,792,332
Prepaid expenses & other curr assets 196,075 402,774
Deferred federal taxes 156,886 179,886
------------ -----------
TOTAL CURRENT ASSETS 10,055,129 11,499,386
PROPERTY, PLANT AND EQUIPMENT
Land and improvements 312,332 384,490
Buildings 1,730,506 2,455,077
Machinery & equipment 9,623,897 9,568,270
Construction in progress 161,828 44,346
------------ -----------
11,828,563 12,452,183
Less allowance for depreciation 7,633,029 7,733,414
------------ -----------
4,195,534 4,718,769
OTHER ASSETS
Note receivable from related party 416,754 517,975
Excess of cost over net assets of
acquired businesses less amortization 81,394 85,337
Patents, agreements and trademarks
less amortization 1,262,059 1,335,822
Cash surrender value of life ins. net 1,580,204 1,397,822
Deferred federal taxes 880 58,205
Investment in joint venture 1,191,102 382,270
Other 7,000 7,000
----------- -----------
4,539,393 3,784,431
----------- -----------
$ 18,790,056 $ 20,002,586
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY May 31 Aug.31
1996 1995
(UNAUDITED) (AUDITED)
CURRENT LIABILITIES
Accounts payable $ 1,648,030 $ 2,911,293
Notes payable 91,325 81,851
Accrued expenses 1,567,555 1,635,060
Accrued pension expense - current 384,556 384,556
Federal income taxes (21,399) (42,510)
Deferred compensation 302,216 302,216
Current portion of L.T. debt 1,207,175 1,208,726
------------ -----------
TOTAL CURRENT LIABILITIES 5,179,458 6,481,192
LONG-TERM DEBT, less current portion 5,771,870 6,464,260
Long-term deferred compensation
obligations 251,517 367,950
ACCRUED PENSION EXPENSE 137,200 284,832
STOCKHOLDERS' EQUITY
First Serial Preferred Stock, par value
$1.00 a share authorized 100,000
shares; (issued-none)
Common Stock. par value $.10 a share,
Authorized 10,000,000 shares; issued
and outstanding 4,634,401 shares at
May 31, 1996 and 4,459,848 shares at
Aug. 31, 1995 respectively 463,440 445,985
Additional paid-in capital 2,694,942 2,674,897
Treasury Stock, 1,037,693 shares at
May 31, 1996, and August 31, 1995 (3,990,400) (3,990,400)
Cum. G/(L) on currency translation (106,740) (79,030)
Retained earnings 8,388,769 7,352,900
------------ -----------
7,450,011 6,404,352
------------ -----------
$ 18,790,056 $ 20,002,586
============ ===========
See accompanying notes to the consolidated financial
statements and accountants' review report.
</TABLE>
<TABLE>
<CAPTION>
CHASE CORPORATION
STATEMENT OF CONSOLIDATED OPERATIONS
(UNAUDITED)
Nine Months Ended Three Months End
May 31 May 31 May 31 May 31
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Sales $ 24,570,987 $ 23,817,965 $ 8,673,573 $ 8,694,676
Comm. and other income 277,921 264,037 106,368 76,381
Interest 58,488 36,511 15,752 11,556
----------- ----------- ----------- -----------
24,907,396 24,118,513 8,795,693 8,782,613
Cost and Expenses
Cost of products sold(Note B) 16,811,956 16,292,604 5,881,525 6,107,029
Sell.,gen. and admin. expen. 5,458,260 5,483,388 1,977,069 1,922,179
Bad debt expense 64,500 45,000 21,500 15,000
Interest expense 488,972 252,519 161,709 85,638
----------- ----------- ----------- -----------
22,823,688 22,073,511 8,041,803 8,129,846
Income before income taxes 2,083,708 2,045,002 753,890 652,767
Income taxes 749,400 743,500 268,400 257,300
----------- ----------- ----------- -----------
Income from operations 1,334,308 1,301,502 485,490 395,467
Income from minority interest 58,832 25,649
----------- ----------- ----------- -----------
$ 1,393,140 $ 1,301,502 $ 511,139 $ 395,467
=========== =========== =========== ===========
Income per share
of Common Stock
Primary $ 0.371 $ 0.283 $ 0.136 $ 0.086
=========== =========== =========== ===========
Fully Diluted $ 0.371 $ 0.283 $ 0.136 $ 0.086
=========== =========== =========== ===========
See accompanying notes to the consolidated financial statements
and accountants' review report.
</TABLE>
<TABLE>
<CAPTION>
CHASE CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
9 MONTHS ENDED MAY 31, 1996 AND MAY 31, 1995
Cummulative
Common Stock Additional Effect of Total
Shares Paid-In Treasury Stock Retained Currency Shareholders
Issued Amount Capital Shares Amount Earnings Translation Equity
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance @ Aug. 31, 1994 4,362,848 $ 436,285 $ 2,555,658 $ 5,775,693 $ (116,929) $ 8,650,707
Curr. translation adjmt. 3,227 3,227
Exer.of stock options 97,000 9,700 122,250 131,950
Net Income for 9 months 1,301,502 1,301,502
Dividends paid in cash
$.08 a share on
common stock (350,628) (350,628)
---------- -------- ---------- ---------- ---------- ---------- ----------- ------------
Balance @ May 31, 1995 4,459,848 445,985 2,677,908 6,726,567 (113,702) 9,736,758
Curr. translation adjmt. 34,672 34,672
Exer.of stock options 88,520 88,520
Purch.of treasury stock 1,302,693 (5,009,431) (5,009,431)
Sale of treasury stock (91,531) (265,000) 1,019,031 927,500
Net Income for 3 months 626,333 626,333
---------- -------- ---------- ---------- ----------- ---------- ---------- -----------
Balance @ Aug. 31, 1995 4,459,848 445,985 2,674,897 1,037,693 (3,990,400)7,352,900 (79,030) 6,404,352
Curr. translation adjustment (27,710) (27,710)
Stock issued for compensation174,553 17,455 657,545 675,000
Unvested stock based comp. (675,000) (675,000)
Amort.of stock based comp. 37,500 37,500
Net Income for 9 months 1,393,140 1,393,140
Dividends paid in cash
$.10 a share on
common stock (357,271) (357,271)
---------- -------- ---------- ---------- ----------- ---------- ---------- ------------
Balance @ May 31, 1996 4,634,401 $ 463,440 $ 2,694,942 1,037,693 $ (3,990,400)$ 8,388,769 $ (106,740)$ 7,450,011
========== ======== ========== ========== =========== ========== =========== ===========
See accompanying notes to the consolidated financial statements
and accountants' review report.
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
Nine Month Ended
May 31 May 31
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 1,393,140 $ 1,301,502
Adjmts. to reconcile net income to net
cash provided by operating activities:
Gain on Sale of Fixed Assets (40,000)
Depreciation 660,982 625,668
Amortization 77,707 77,707
Provision for losses on accts. receivable 52,184 37,608
Stock issued for compensation 37,500
Deferred federal taxes 80,325 32,030
Change in assets and liabilities
Trade receivables 74,762 (1,192,303)
Inventories 1,183,350 (1,032,711)
Prepd. expenses & other curr. assets 206,699 (115,043)
Accounts payable (1,263,263) 829,090
Accrued expenses (222,691) (269,302)
Federal income taxes payable 21,111 (132,700)
Deferred compensation (116,433) (247,065)
Other assets 4,027
------------ -----------
TOTAL ADJUSTMENTS 752,233 (1,382,994)
NET CASH FROM OPERATIONS 2,145,373 (81,492)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (212,843) (275,810)
Purchase of cash surrender value (182,382) (240,311)
Proceeds from note receivable 100,101 98,120
Cum. effect of currency translation (27,710) 3,227
Investment in joint venture (808,832)
Proceeds of Sale of Fixed Assets 122,649
------------ -----------
(1,009,017) (414,774)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in long-term debt 3,400,000 4,350,000
Payments of principal on debt (4,093,941) (3,833,657)
Net borrowing under line-of-credit 9,474 14,592
Dividend paid (357,271) (350,628)
Cash received on option exercise 131,950
------------ ------------
(1,041,738) 312,257
NET CHANGE IN CASH 94,618 (184,009)
CASH AT BEGINNING OF PERIOD 108,587 211,041
------------ -----------
CASH AT END OF PERIOD $ 203,205 $ 27,032
============ ===========
CASH PAID DURING PERIOD FOR:
Income taxes $ 475,200 $ 580,147
Interest $ 488,972 $ 252,519
See accompanying notes to the consolidated financial statements
and accountants' review report.
</TABLE>
ACCOUNTANTS' REVIEW REPORT
To the Board of Directors
Chase Corporation
Braintree, Massachusetts
We have reviewed the consolidated balance sheet of Chase
Corporation and Subsidiary as of May 31, 1996, and the related
consolidated statements of operations, stockholders' equity, and
cash flows for the periods of nine months ended May 31, 1996 and
1995, in accordance with Statements on Standards for Accounting
and Review Services issued by the American Institute of Certified
Public Accountants.
A review of interim financial information consists principally of
obtaining an understanding of the system for the preparation of
interim financial information, applying analytical procedures to
financial data, and making inquiries of persons responsible for
financial and accounting matters. It is substantially less in
scope than an audit conducted in accordance with generally
accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the accompanying
consolidated financial statements referred to above for them to
be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of Chase
Corporation and Subsidiary as of August 31, 1995, and the related
statements of operations, stockholders' equity, and cash flows
for the year then ended (not presented herein); and in our report
dated November 9, 1995, we expressed an unqualified opinion on
those financial statements. In our opinion, the information set
forth in the accompanying consolidated balance sheet as of August
31, 1995, is fairly stated in all material respects in relation
to the consolidated balance sheet from which it has been derived.
/S/ LIVINGSTON & HAYNES, P.C.
Wellesley Hills, Massachusetts
June 24, 1996
CHASE CORPORATION SECURITIES AND EXCHANGE COMMISSION
NOTES TO CONSOLIDATED FINANCIAL STATEMENT
July 9, 1996
Note A - Basis of Presentation
The accompanying unaudited Consolidated Financial Statements
have been prepared in accordance with the instructions to Form
10-Q and all adjustments (consisting of nonrecurring accruals)
have been made which are, in the opinion of Management, necessary
to a fair statement of the results for the interim periods
reported. The financial statements of Chase Corporation include
the activities of its divisions and its foreign sales subsidiary.
Note B - Inventories
Certain divisions used estimated gross profit rates to
determine the cost of goods sold. No significant adjustments
have resulted from reconciling with the interim physical
inventories as a result of using this method.
Note C - Income per Share of Common Stock
Income per share is based on the average number of shares
and share equivalents outstanding during the period. The average
number of shares and share equivalents outstanding used in
determining primary per share results was 3,750,679 for the
period of nine months ended May 31, 1996. Earnings per share on
a fully diluted basis are calculated on 3,760,074 common shares
and share equivalents. Common share equivalents arise from the
issuance of certain stock options.
Note D - Stock Issued for Compensation
The Company issued 150,000 shares of common stock restricted
as to sale to its president. The fair market value of the stock
at time of grant is being amortized over the nine year vesting
period. The restriction on sale is removed at the end of nine
years subject to certain service requirements.
Note E - Review by Independent Public Accountant
The financial information included in this form has been
reviewed by an independent public accountant in accordance with
established professional standards and procedures. Based upon
such review, no adjustments or additional disclosures were
recommended. Letter from the independent public accountant is
included as a part of this report.
Results of Operations
Net revenues increased 3% for the nine months ended May 31,
1996 versus the same period last year. Third quarter revenues
were basically unchanged when compared to the similar period last
year. The Webster facility of the Chase and Sons division
continues to provide steady growth during the period to date.
This is somewhat offset by the difficult wire and cable market in
Canada and some softness in products sold into the commercial
construction market.
The increase in the cost of products sold during the nine
months of the current year over the same period last year is
largely volume related. During the third quarter the reduction
to cost of products generally relates to a more favorable product
mix. As a percent of sales, during the period to date, the rate
was unchanged. The Company's products are largely mature and
some are highly competitive which could result in low margins.
Competitive pressure prevents us from being able to recover all
our material price increases from our customers.
Selling and Administrative expenses during the current year
are about the same as the prior year while as a percent of sales
have decreased by almost 1%.
Interest expense increased during the comparable periods as
a result of increased borrowing associated with acquisitions and
the stock repurchase in July 1995.
Changes in the product mix for the third quarter, when
compared to last year, caused lower raw material costs and the
improvement to profits. As a result, operating income improved
by over 20% in the quarter. This improvement and the income from
our minority interest are the primary reasons for the improvement
in our income for the current period to date.
The effective tax rate when compared to the applicable tax
rate for both 1996 and 1995 are lower resulting from the benefits
of export sales through our Chase Export Corporation subsidiary.
Income from minority interest during the current period
relates to the equity position ownership in The Stewart Group,
Inc., Toronto, Canada.
Liquidity and Sources of Capital
The ratio of current assets to current liabilities was 1.9
at the end of the third quarter of 1996, compared to 1.8 at the
prior year end. The improvement in the ratio is largely the
result of a reduction to payables which is somewhat offset by a
reduction in inventory that were associated with increased sales
during the last quarter of fiscal 1995.
Long-Term debt decreased $692,000 from the prior year end
while total liabilities, inclusive of long-term debt, decreased
$2,240,000. This improvement is primarily the result of improved
cash flow from operations.
The Company had $1,540,000 in unused available credit at May
31, 1996 under its credit arrangement with its bank and plans to
utilize this means to help finance its interim needs during the
year. Current financial resources and anticipated funds from
operations are expected to be adequate to meet requirements for
funds in the year ahead.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
Reg. S-K
Item 601
Subsection Description of Exhibit State Page Number
Pursuant to reg. S-K item 601
no exhibits are required.
(b)Reports on Form 8-K
No 8-K reports were filed during the three months ended
May 31, 1996.
No financial statements were filed during the three
months ended May 31, 1996.
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.
CHASE CORPORATION
/s/ Peter R.Chase
Peter R.Chase, President & CEO
Dated: July 9, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from SEC Form
10-Q and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> MAY-31-1996
<CASH> 203,205
<SECURITIES> 0
<RECEIVABLES> 5,829,379
<ALLOWANCES> 147,684
<INVENTORY> 3,608,982
<CURRENT-ASSETS> 10,055,129
<PP&E> 11,828,563
<DEPRECIATION> 7,633,029
<TOTAL-ASSETS> 18,790,056
<CURRENT-LIABILITIES> 5,179,458
<BONDS> 0
0
0
<COMMON> 463,440
<OTHER-SE> 6,986,571
<TOTAL-LIABILITY-AND-EQUITY> 18,790,056
<SALES> 24,570,987
<TOTAL-REVENUES> 24,907,396
<CGS> 16,811,956
<TOTAL-COSTS> 16,811,956
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 64,500
<INTEREST-EXPENSE> 488,972
<INCOME-PRETAX> 2,083,708
<INCOME-TAX> 749,400
<INCOME-CONTINUING> 1,334,308
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,393,140
<EPS-PRIMARY> 0.371
<EPS-DILUTED> 0.371
</TABLE>
