SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year Ended August 31, 1997 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.)
50 Braintree Hill Park, Braintree, Massachusetts 02184
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (781) 848-2810
Securities registered pursuant to section 12(b) of the Act:
Common Stock, $.10 par value American Stock Exchange
(Title of class)
Name of each exchange on which registered
Securities registered pursuant to section 12(g) of the Act:
Common Stock, $.10 par value
(Title of class)
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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [ x ]
As of October 31, 1997, the Company had outstanding 3,843,168 shares of common
stock, $.10 par value, which is its only class of common stock; and the
aggregate market value of the voting stock held by non-affiliates of the
registrant was $50,442,000.
DOCUMENT INCORPORATED BY REFERENCE
The registrant's definitive proxy statement (the "Definitive Proxy Statement")
to be filed in connection with the Annual Meeting of Shareholders to be held
on January 20, 1998, is incorporated by this reference into items 10-13 hereof.
Item 1. Business.
General Development and Industry Segment.
Chase Corporation (the "Company") is primarily engaged in the
manufacture of protective coatings and tape products. The Company
implemented a strategy of maximizing its core businesses while seeking future
opportunities through selective acquisitions. This led to the divestment of
its elastomeric materials division and the discontinuance of the fuel
technology products and services division during fiscal 1991. During 1992, a
facility that manufactures tape and related products in Webster,
Massachusetts became operational. In April 1992, the Company acquired
certain tape product lines and associated assets for cash from The Stewart
Group, Ltd. This division, Chase Canada, maintains manufacturing operations
in Winnipeg, Manitoba, Canada. Effective May 25, 1994, the Company purchased
the electrical cable insulation tape product lines and certain associated
assets from Haartz Mason, Inc. and these products were folded into the Chase
& Sons division. On June 5, 1995, the Company formed a joint venture with
The Stewart Group, Ltd. which was called The Stewart Group, Inc. This
venture produced a variety of dielectric strength members from composite
materials and sold into the fiber optic cable market. The original
investment was increased on February 1, 1996 and at that time the Company
owned 42% of the venture. It was announced on May 16, 1997 that the majority
of the assets related to the original business were sold to Owens Corning.
The venture will continue to provide consulting services for several years to
Owens Corning while pursuing other market opportunities. On June 29, 1995,
certain assets of Fluid Polymers, Inc. of Las Vegas, Nevada were acquired and
then relocated to the Royston facility. On August 7, 1996 the Company
announced the purchase of a 20% interest in DC Scientific, Inc., which
provides circuit board assembly services to electronic goods manufacturers.
This investment was increased to 51% at which time DC became a subsidiary of
Chase. There have not been any other material changes or developments since
September 1, 1997.
As of October 31, 1997, the Company employed approximately 215 people,
of which 60 individuals were associated with DC Scientific, Inc.
Products and Markets.
The Company's principal products are protective coatings and tape
products that are sold by Company salespeople and manufacturers'
representatives. These products consist of: (i)insulating and conducting
materials for the manufacture of electrical and telephone wire and cable, and
electrical splicing, terminating and repair tapes which are marketed to wire
and cable manufacturers and public utilities; (ii)protective pipe coating
tapes and other protectants for valves, regulators, casings, joints, metals,
concrete, and wood that are sold to oil companies, gas utilities, and
pipeline companies; (iii)protectants for highway bridge deck metal surfaces
sold to municipal transportation authorities; (iv)thermo-electric insulation
for transformers, motors, and other electrical equipment that are sold to
original equipment manufacturers; (v)moisture protective coatings that are
sold to the electronics industry; and (vi)its subsidiary, DC Scientific,
Inc., provides circuit board assembly service to electronic goods
manufacturers. There are no material seasonal aspects to the Company's
business and the Company has introduced no new products or segments requiring
an investment of a material amount of the Company's assets.
Backlog, Customers and Competition.
As of October 31, 1997, the backlog of orders believed to be firm was
approximately $1,913,000, all of which are expected to be filled in fiscal
year 1998. As of October 31, 1996 the backlog was approximately $1,654,000.
In addition, the backlog at 10/31/97 for our subsidiary, DC Scientific, Inc.
was $1,281,000. The backlog is not seasonal. The Company does not do
business with any customer the loss of which would have a material adverse
effect on the Company and no material portion of the Company's business is
subject to renegotiation or termination of profits or contracts at the
election of the government.
There are other companies which manufacture or sell protective coatings
and tape products similar to those made and sold by the Company. Many of
those companies are larger and have greater financial resources than the
Company. Competition is principally based on technical performance, service
reliability, quality and price.
Raw Materials.
The Company obtains raw materials from a wide variety of suppliers with
alternative sources of all essential materials available within reasonable
lead times.
Patents, Trademarks, Licenses, Franchises and Concessions.
Other than Humiseal, a trademark for moisture protective coatings sold
to the electronics industry, Chase BLH2OCK, a trademark for water blocking
compound sold to the wire and cable industry, and Rosphalt50, a trademark
for an asphalt additive used predominantly on bridge decks for waterproofing
protection, there are no material trademarks, licenses, franchises, or
concessions. The Company holds various patents, but believes that at this
time they are not material to the success of the business.
Working Capital and Research and Development.
There are no special practices followed by the Company relating to
working capital. Approximately $540,000, $502,000 and $511,000 was spent for
Company-sponsored research and development during the fiscal years 1997, 1996
and 1995, respectively.
Environmental Disclosures.
The Company is aware of potential claims concerning a site in Bruin,
Pennsylvania where an affiliate of the Company had sponsored research into
experimental oil and coal-based fuels in the early 1980's. In August 1991, a
spill of the affiliate's stored material occurred at the Bruin site,
apparently due to vandalism of the storage tanks. Upon learning of the
spill, the Company provided notice of the release to appropriate authorities
and undertook to remedy the spill. The remedy was completed in October 1992
under plans approved by the Pennsylvania Department of Environmental
Protection ("Pennsylvania DEP"). The Company believes that this work
terminated its liabilities for the spill, but Pennsylvania DEP has not
provided a final release.
The Bruin site had been used for many years for a variety of oil
refining operations by unrelated parties. The site has significant
contamination from those unrelated activities. Since the spill of the
material remedied by the Company, the U.S. Environmental Protection Agency
has conducted an investigation of the site, conducted emergency clean-up
activities at the site focused on materials other than the affiliate's
material and spill, and turned responsibility for the site back to
Pennsylvania DEP. To date, EPA has not made any claim against the Company.
During 1993 to 1995, Pennsylvania DEP has conducted an investigation of
the site, has completed a surface cleanup, and has proposed a permanent
remedy. Pennsylvania DEP has notified the Company that it may be a person
responsible under Pennsylvania law to contribute to the costs of those
activities. During 1995, Pennsylvania DEP suggested that the Company
contribute an amount toward the costs of the investigation and the surface
cleanup in an attempt to settle with the Company. On July 18, 1996, the
Pennsylvania DEP sent a settlement proposal to Chase requesting a payment of
$335,000 to resolve all of Chase's potential liabilities to the State of
Pennsylvania at the Bruin site. While the amount proposed is not deemed
material, the Company still believes that the work previously performed to
remedy the spill terminated its liabilities and therefore declined the
proposal.
The Company remains in communication with Pennsylvania DEP, and expects
that these settlement discussions will eventually resolve the Company's
potential liability at this site.
See also Legal Proceedings Caption.
Financial Information about Foreign and Domestic Operations and Export Sales.
Export sales from continuing domestic operations to unaffiliated third
parties were $4,592,000, $3,594,000 and $2,764,000 for the years ended August
31, 1997, 1996 and 1995, respectively. The Company does not anticipate any
material change to export sales during fiscal 1998. The Company's products
are sold world-wide with no foreign geographic area accounting for more than
10% of revenues. The Company's Canadian operations accounted for 7.2% of
consolidated sales and 5.8% of its assets.
The Company has very limited currency exposure since all invoices,
except those from the Canadian operation to Canadian customers, are
denominated in US dollars. The Company maintains minimal cash balances in
Canada and, other than the currency conversion effects on the fixed assets in
Canada, which are deferred and recorded directly in equity per FAS52, there
are no significant assets held in foreign currencies. The Company does not
engage in hedging activities. Foreign currency transaction gains or losses
have not been material.
Item 1A. Executive Officers of the Registrant.
The following table sets forth information concerning the Company's
executive officers. Each officer is selected by the Company's Board of
Directors and holds office until his successor is elected and qualified.
Name Age Offices Held and Business Experience during
Past Five Years.
Peter R. Chase 49 Chief Executive Officer of the Company since
September 1993 and President of the Company
since April 1992; Chief Operating Officer of
the Company since September 1988.
Everett Chadwick,Jr. 56 Treasurer of the Company since September 1993
and Chief Financial Officer since September,
1992; Director of Finance of the Company from
April 1991 to August 1993 and Controller of the
Company from September 1988 to August 1993.
Item 2. Properties.
The Company leases its principal executive office, which is located in
Braintree, Massachusetts and contains approximately 4,300 square feet. The
Company also rents a modern one-story building of approximately 5,000 square
feet in Woodside, New York, which is used by the conformal coatings division.
A division of the Company engaged in the manufacture and sale of
electrical protective coatings and tape products uses offices and plants
owned by the Company that are located on seven acres in Randolph,
Massachusetts and consist of a three-story building containing about 10,500
square feet and ten one-story buildings, aggregating about 67,000 square
feet. This division also currently leases about 25,000 square feet of
manufacturing space in a new building in Webster, Massachusetts. This plant
manufactures tape and related products for the electronic, telecommunication
and high technology industries.
Another division of the Company uses offices and a plant, owned by the
Company, that are located on three acres in Pittsburgh, Pennsylvania and
consist of thirteen buildings, three of which are used for offices, one of
which is rented as a residence and the rest of which are used as
manufacturing and warehouse facilities. These facilities, excluding the
residence, contain about 44,000 square feet and are used in the manufacture
and sale of protective coatings and tape products.
The Canadian division of the Company is engaged in the process of
laminating and slitting film, foils and papers primarily for the wire and
cable industry. This division leases about 14,000 square feet of
manufacturing space in Winnipeg, Manitoba, Canada.
DC Scientific, Inc., a subsidiary of the Company provides circuit board
assembly services to electronic manufacturers and leases 35,700 square feet
of manufacturing space in West Bridgewater, MA.
The above facilities range in age from new to about 100 years. They
generally are in good condition and, in the opinion of management, adequate
and suitable for present operations. The Company also owns equipment and
machinery that is in good repair and, in the opinion of management, adequate
and suitable for present operations. The Company could significantly add to
its capacity by increasing shift operations. Availability of machine hours
through additional shifts would provide expansion of current product volume
without significant additional capital investment.
Item 3. Legal Proceedings.
The Company has been named as a third party defendant in eighteen
personal injury lawsuits filed in state court in Jackson County, Mississippi.
These lawsuits, each of which has multiple plaintiffs and defendants, arose
out of alleged asbestos exposure by the plaintiffs as a result of their work
at the Ingalls Shipyard. The Company was sued as a third-party defendant by
USX Corporation, General Cable Corporation and G.K. Technologies, Inc., each
of whom is a primary defendant in these actions. USX, General Cable and G.K.
are alleged to have supplied wire and cable products containing asbestos to
the shipyard. The third-party complaints allege that tape products
containing asbestos were manufactured by the Company, sold to USX, General
Cable and G.K., and then incorporated in their wire and cable products sold
for use in the ships. USX, General Cable and G.K. are seeking
indemnification from the Company for damages that may be assessed against
them and expenses including legal fees.
The third-party claims against the Company, along with all other third-
party and crossclaims, were severed from the trial of the primary actions.
USX, General Cable and G.K. were each dismissed by the plaintiffs prior to
the commencement of trial of nine of the primary actions, which took place in
the summer of 1993. It is not known how much, if anything, each paid to
settle these claims. To date, no effort has been made by USX, General Cable
or G.K. to pursue the third-party claims against the Company arising out of
the resolution of any of the cases tried in the summer of 1993. Some of the
remaining primary actions remain pending, but it is not now known when those
cases will be tried, whether the plaintiffs will proceed against any of the
wire and cable manufacturers, including USX, General Cable or G.K., and
whether any of these defendants will, in turn, pursue their claims against
the Company.
The Company's liability insurer has assumed defense of these claims
subject to reservation of its rights as to coverage for any underlying
liability assessed.
In July 1994, the Company received a notice letter from General Cable
and G.K. that they have been sued in fourteen additional asbestos personal
injury lawsuits, ten of which are pending in Mississippi, two in Pennsylvania
and two in Texas. Each of these cases involves multiple plaintiffs and
defendants. This notice letter is an effort to bind the Company to the
factual determination made in these cases, if General Cable or G.K. brings an
action against the Company for indemnification arising out of these cases.
No such action for indemnification has yet been brought and the Company is
not now a party in any of these fourteen additional cases. The company's
liability insurer has been informed that the Company has been notified of
these potential claims.
The Company is investigating the defenses available to it in connection
with all these matters and its rights against its supplier. Although the
Company cannot predict whether any of these claims will be pursued,
management believes that such claims will not have any material financial
impact on the Company.
See also Environmental Disclosures Caption.
Item 4. Submission of Matters to a Vote of Security Holders.
There were no matters submitted to a vote of the Company's security
holders during the fourth quarter of the Company's last fiscal year.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters.
The Company's common stock is traded on the American Stock Exchange
(symbol CCF). The approximate number of record holders of the Company's
common stock on October 31, 1997 was 871.
The quarterly high and low sales prices for the Company's common stock
over the last two years were as follows:
Year ended August 31, 1997 Year ended August 31, 1996
Sales Price Sales Price
Quarter Ended High Low High Low
November 30 9 3/16 5 1/4 5 1/4 4 5/16
February 28 9 3/8 7 1/4 5 5/8 4 1/16
May 31 8 1/4 7 5 3/8 4 1/4
August 31 12 3/8 8 7 5 1/4
<TABLE>
<CAPTION>
Item 6. Selected Financial Data.
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Net Sales and other $40,991,125 $34,366,029 $32,734,893 $28,654,421 $25,894,603
operating revenues
Income from operations 2,811,460 2,194,985 1,907,884 1,608,621 1,039,866
Equity in earnings 197,375 82,965 19,951 - -
of unconsolidated
joint venture
Minority Participation 303,680 - - - -
in Subsidiary
Net Income 3,312,515 2,277,950 1,927,835 1,608,621 1,039,866
Total Assets 22,635,761 19,786,824 20,002,586 18,134,618 14,747,462
Long-term debt and 3,020,708 4,481,071 6,464,260 2,897,976 1,772,080
capital leases
Per Common Share:
Income per share .84 .61 .43 .35 .24
fully diluted
Cash dividends* .21 .15 .10 .08 .06
*Single annual payments declared and paid subsequent to fiscal year end.
</TABLE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
<TABLE>
<CAPTION>
SELECTED RELATIONSHIPS WITHIN THE CONSOLIDATED
STATEMENTS OF OPERATIONS
Years Ended August 31,
1997 1996 1995
(Dollars in thousands)
<S> <C> <C> <C>
Net revenue..............................$40,991 $34,366 $32,735
Net Income...............................$ 3,313 $ 2,278 $ 1,928
Increase in net revenue from previous
year......................
Amount............................ $ 6,625 $ 1,631 $ 4,081
Percentage........................ 19% 5% 14%
Increase(Decrease) in net income from
previous year........... $ 1,035 $ 350 $ 319
Percentage of net revenue:
Net revenue........................ 100.0% 100.0% 100.0%
Expenses:
Cost of Sales................ 65.5 66.0 67.1
Selling, general and
administrative expenses.... 21.5 22.1 22.2
Other expenses............... 1.3 1.9 1.3
Income from operations
before income taxes........... 11.7 10.0 9.4
Provision for income taxes........ 4.8 3.6 3.6
Income from operations............ 6.9% 6.4% 5.8%
Minority participation in subsidiary .7 - -
Equity in earnings of unconsolidated
joint venture.................. .5 .2 .1
Net Income......................... 8.1% 6.6% 5.9%
</TABLE>
Results of Operations.
Total revenues for fiscal 1997 increased 19% to $41 million when compared
to $34.4 million in 1996. The majority of this increase was related to the
strong demand for most of our traditional products. Some increase was also
associated with our subsidiary, DC Scientific, Inc., as those sales are
consolidated, and to an increase in our international business.
The increase in revenues in fiscal 1996 over fiscal 1995 was largely due
to the steady growth of sales from the Webster facility of the Chase & Son's
division. Last year we also received some benefit from revenue related to the
Fluid Polymer acquisition along with continued strengthening of our
international sales.
The dollar value of cost of products was higher in fiscal 1997 compared to
both 1996 and 1995. These increases were predominantly volume related. As a
percent of sales, cost of products decreased to 66.4% in 1997 as compared to
66.9% and 67.9% for 1996 and 1995 respectively. During the past year, lower
raw material costs were somewhat offset by increases of some direct
manufacturing expenses. Competitive pressures prevents the company from
recovering any significant amount of cost increases from its customers. Gross
profit margins during the past three years as a percent of sales have remained
relatively stable. We would expect that these margins will continue as long
as the current market trends prevail, however, no assurances can be given in
this regard.
Selling and administrative expenses in 1997 increased by $1.2 million and
$1.5 million respectively when compared to 1996 and 1995. However, as a percent
of sales, 1997 was lower by 0.6% and 0.8% respectively in comparison with 1996
and 1995. The dollar increases relate to costs associated with increased levels
of sales as well as investments in staffing required to continue our ability to
improve revenues and profitability.
Interest expense decreased to $470,000 in 1997 as compared to $595,000 in
1996. Interest expense in 1996 is higher than 1995 by about $200,000. A
significant amount of the increased interest cost during both 1997 and 1996
related to the obligation associated with the repurchase of shares and the buy
out of a Consulting and Non-Compete Agreement from a retired officer of the
Company. Any future change in interest rates will affect interest paid on both
short-term and long-term borrowings. Some interest expense was offset by notes
receivable. The Company continues to benefit from low borrowing rates from its
lender providing funds at its bank's prime rate or a LIBOR - based rate,
whichever is lower.
The sales increases, lower operating costs and associated changes in
product mix and productivity improvements, along with improved earnings from
minority owned companies, have assisted in the improvement of our profitability
over the past few years. Management will continue this approach of seeking to
maximize our current businesses and at the same time seek out future
opportunities through selective acquisitions.
The effective tax rate for 1997 is about equal to the applicable tax rate.
However, the benefit received as a result of strong export sales through our
Chase Export Corporation subsidiary was offset by losses incurred by DC
Scientific, Inc. which were reserved against and which are not consolidated for
tax filings. During 1996 and 1995, the effective tax rate was somewhat lower
because of the improved export sales.
Income from minority interest for the past three years relates primarily to
the equity ownership in The Stewart Group, Inc., Toronto, Canada.
As announced on May 16, 1997, the Company and The Stewart Group, Ltd.,
joint venture partners in The Stewart Group, Inc., signed an agreement to sell
assets related to the manufacture of reinforcement products for the
telecommunication industry to Owens Corning. On November 12, 1997, the Company
announced the conclusion of this transaction and will realize a net non-
recurring gain of $1.7 million. The Stewart Group, Inc. will continue to
provide consulting services to Owens Corning for the next several years. The
Stewart Group, Inc. has also declared a cash dividend of $2.4 million to the
Company.
Minority participation in subsidiary represents the minority shareholders
49.9% equity in the losses of DC Scientific, Inc.
Liquidity and Sources of Capital.
Cash flow generated from operations was $3,538,000 in 1997 as compared to
$4,419,000 1996. Increases to inventory and receivables were mostly related to
the consolidation of the DC Scientific, Inc results along with some receivable
increases associated with our improvement in sales. The previous year cash
flow improvement was related to improvements in inventory.
The ratio of current assets to current liabilities was 1.6 at the end of
both fiscal years 1997 and 1996, compared to 1.8 at the end of the 1995 fiscal
year.
The unused available long-term credit amounted to $4,440,000 at August,
1997, compared to $2,440,000 at August, 1996. The Company will utilize this
facility to help finance its interim needs in the coming year. Current
financial resources and anticipated funds from operations are expected to be
adequate to meet requirements for funds in the year ahead.
Impact of Inflation.
Inflation has not had a significant long-term impact on earnings. In the
event of significant inflation, the Company's efforts to cover cost increases
would be hampered as a result of the competitive nature of the products.
Item 8. Financial Statements and Supplementary Data.
Financial statements and supplementary financial information required to
be filed hereunder may be located through the List of Financial Statements and
Schedules attached to this report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures.
Not applicable.
PART III
Item 10.Directors and Executive Officers of the Registrant.
Information with respect to the names, ages, positions with the Company,
terms of office, periods of service, business experience, and other
directorships of the Company's Directors and Executive Officers is incorporated
herein by reference to Item 1A of the report and to the Definitive Proxy
Statement (under the caption "Election of Directors").
Item 11. Executive Compensation
The information required in Item 11 is contained in the Definitive Proxy
Statement (under the caption "Executive Compensation"). Such information is
incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Information regarding the ownership of the Company's common stock by
certain beneficial owners and by management is incorporated herein by reference
to the Definitive Proxy Statement under the captions "Principal Holders of
Voting Securities" and "Election of Director's."
Item 13. Certain Relationships and Related Transactions.
Information regarding certain relationships and related transactions with
the Company's Directors and Executive Officers is incorporated herein by
reference to the Definitive Proxy Statement under the captions "Election of
Directors" and "Remuneration of Directors and Executive Officers."
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K
See the List of Financial Statements and Schedules included in this report
for a list of the financial statements and schedules included with this report
and see the Exhibit Index included in this report for a list of the exhibits
required to be filed with this report. Copies of any of the Company did not
file any reports on Form 8K during the fourth quarter of its most recent fiscal
year. The exhibits are available to beneficial shareholders as of the record
date (December 1, 1997) without charge upon written request to the Investor
Relations Department, Chase Corporation, 50 Braintree Hill Park, Braintree,
Massachusetts 02184.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 Date
By /s/ Peter R. Chase President and November 24, 1997
Peter R. Chase Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Capacity Date
By /s/ Peter R. Chase President, Chief November 24, 1997
Peter R. Chase Executive Officer and
Director (Principal
Executive Officer)
By /s/ Everett Chadwick, Jr. Treasurer and Chief November 24, 1997
Everett Chadwick, Jr. Financial Officer
(Principal Financial
and Accounting Officer)
By /s/ Edward L. Chase Director November 24, 1997
Edward L. Chase
By /s/ Sarah Chase Director November 24, 1997
Sarah Chase
By /s/ William H. Dykstra Director November 24, 1997
William H. Dykstra
By /s/ George M. Hughes Director November 24, 1997
George M. Hughes
By /s/ Ronald Levy Director November 24, 1997
Ronald Levy
By /s/ Ernest E. Siegfriedt, Jr.Director November 24, 1997
Ernest E. Siegfriedt, Jr.
EXHIBIT INDEX
Exhibit
Number Description
3.1 Articles of Organization (incorporated by reference from Exhibit 3 to
the Company's annual report on Form 10-K for the fiscal year ended
August 31, 1988)
3.2 By-Laws (incorporated by reference from Exhibit 3 to the Company's
annual report on Form 10-K for the fiscal year ended August 31, 1988)
3.3 Amendment to By-Laws (adding Article IV, Section 7) (incorporated by
reference from Exhibit 3.3 to the Company's annual report on Form 10-K
for the fiscal year ended August 31, 1990)
10.1 Split Dollar Insurance Agreement dated December 2, 1983 by and between
the Company and Edward L. Chase (incorporated by reference from Exhibit
10.1 to the Company's annual report on Form 10-K for the fiscal year
ended August 31, 1990)
10.2 Split Dollar Insurance Agreement dated December 2, 1983 by and between
the Company and Francis M. Chase (incorporated by reference from Exhibit
10.2 to the Company's annual report on Form 10-K for the fiscal year
ended August 31, 1990)
10.3 Edward L. Chase Consulting and Non-Compete Agreement (incorporated by
reference from Exhibit 10.3 to the Company's annual report on Form 10-K
for the fiscal year ended August 31, 1986)
10.6 Edward L. Chase Retirement and Succession Agreement (incorporated by
reference from Exhibit 10.6 to the Company's annual report on Form 10-K
for the fiscal year ended August 31, 1988)
10.9 Edward L. Chase Right of First Refusal (incorporated by reference from
Exhibit 10.9 to the Company's annual report on Form 10-K for the fiscal
year ended August 31, 1988)
10.11 Purchase and Sale Agreement dated October 26, 1990 by and between the
Company and Avon Custom Mixing Service, Inc. (incorporated by reference
from Exhibit 2.1 to the Company's Current Report on Form 8-K dated
October 26, 1990)
10.14 Amendment dated August 7, 1990 to Edward L. Chase Retirement and
Succession Agreement (incorporated by reference from Exhibit 10.14 to
the Company's annual report on Form 10-K for the fiscal year ended
August 31, 1990)
10.17 Amendment dated April 30, 1992 to Split Dollar Insurance Agreement
dated December 2, 1983 by and between the Company and Edward L. Chase
(incorporated by reference from Exhibit 10.17 to the Company's annual
report on Form 10-K for the fiscal year ended August 31, 1992)
10.18 Amendment dated April 30, 1992 to Split Dollar Insurance Agreement
dated November 10, 1987 by and between the Company and Edward L. Chase
and Claire Chase (incorporated by reference from Exhibit 10.18 to the
Company's annual report on Form 10-K for the fiscal year ended August
31, 1992)
10.19 Amendment dated April 30, 1992 to Edward L. Chase Consulting and Non-
Compete Agreement dated January 17, 1986 (incorporated by reference from
Exhibit 10.19 to the Company's annual report on Form 10-K for the fiscal
year ended August 31, 1992)
10.20 Amendment dated August 31, 1992 to Split Dollar Insurance Agreement
dated December 2, 1983 by and between the Company and Francis M. Chase
(incorporated by reference from Exhibit 10.20 to the Company's annual
report on Form 10-K for the fiscal year ended August 31, 1992)
10.21 Amendment dated August 31, 1992 to Split Dollar Insurance Agreement
dated November 10, 1987 by and between the Company and Francis M. Chase
and Barbara Chase (incorporated by reference from Exhibit 10.21 to
the Company's annual report on Form 10-K for the fiscal year ended
August 31, 1992)
10.23 Stock Redemption Agreement dated July 18, 1995 by and between the
Company and Francis M. Chase (incorporated by reference from Exhibit
99.1 to the Company's Current Report on Form 8-K dated July 18, 1995)
10.24 Amendment dated July 18, 1995 terminating the Consulting and Non-
Compete Agreement by and between the Company and Francis M. Chase.
22 Subsidiaries of the Company (incorporated by reference from Exhibit 22
to the Company's annual report on Form 10-K for the fiscal year ended
August 31, 1989)
List of Financial Statements and Schedules
Report of Independent Certified Public Accountants................... 16
Consolidated Balance Sheets as of August 31, 1996 and
August 31, 1995................................................. 17
Consolidated Statements of Operations for each of the three
fiscal years in the period ended August 31, 1996................ 19
Consolidated Statements of Shareholders' Equity for each of
the three fiscal years in the period ended August 31, 1996...... 20
Consolidated Statements of Cash Flows for each of the three
fiscal years in the period ended August 31, 1996................ 21
Notes to Consolidated Financial Statements........................... 22
Schedules:
VIII- Valuation and Qualifying Accounts and Reserves.........37
CHASE CORPORATION AND SUBSIDIARIES
BRAINTREE, MASSACHUSETTS
CONSOLIDATED FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS' REPORT
AUGUST 31, 1997 AND 1996
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
Chase Corporation
Braintree, Massachusetts
We have audited the consolidated balance sheets of Chase Corporation
and subsidiaries as of August 31, 1997 and 1996, and the related consolidated
statements of operations, shareholders' equity and cash flows for each year
in the three year period ended August 31, 1997 and the schedule VIII,
Valuation and Qualifying Accounts and Reserves. These financial statements
and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Chase Corporation and subsidiaries at August 31, 1997 and 1996, and the
consolidated results of their operations and cash flows for each year in the
three year period ended August 31, 1997, in conformity with generally
accepted accounting principles, and the schedule referred to above presents
fairly, in all material respects, when read in conjunction with the related
financial statements, the information therein set forth.
/s/ Livingston & Haynes, P.C.
Wellesley, Massachusetts
October 15, 1997
<TABLE>
<CAPTION>
CHASE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AUGUST 31, 1997 AND 1996
ASSETS
1997 1996
<S> <C> <C>
CURRENT ASSETS
Cash $ 158,881 $ 191,429
Trade receivables, less allowance for doubtful
accounts of $152,500 and $127,500, at August 31,
1997 and 1996, respectively 7,121,218 5,770,152
Inventories:
Finished and in process 1,209,960 1,073,226
Raw materials 3,069,372 2,599,427
4,279,332 3,672,653
Prepaid expenses 40,964 104,862
Other current assets 127,321 167,764
Note receivable from related parties,
current portion 92,517 208,966
Deferred income taxes 119,561 148,886
TOTAL CURRENT ASSETS 11,939,794 10,264,712
PROPERTY, PLANT AND EQUIPMENT
Land and improvements 332,536 322,423
Buildings 2,255,684 1,758,538
Machinery and equipment 11,211,621 9,839,816
Construction in progress 244,173 4,639
14,044,014 11,925,416
Less allowances for depreciation 9,131,813 7,741,587
4,912,201 4,183,829
OTHER ASSETS
Excess of cost over net assets of acquired
businesses, less amortization of $238,695
and $181,594 at August 31, 1997 and 1996,
respectively 1,189,487 80,080
Patents, agreements and trademarks, less
amortization of $408,368 and $399,049 at
August 31, 1997 and 1996, respectively 1,142,818 1,237,160
Cash surrender value of life insurance, net of
loans of $154,268 and $158,049 at August 31,
1997 and 1996, respectively 1,962,849 1,658,288
Deferred income taxes 70,814 18,978
Note receivable from related parties - 309,042
Investments in minority interests 1,410,798 2,027,735
Other 7,000 7,000
5,783,766 5,338,283
$22,635,761 $19,786,824
=========== ===========
See accompanying notes to the consolidated financial statements.
CHASE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AUGUST 31, 1997 AND 1996
LIABILITIES AND SHAREHOLDERS' EQUITY
1997 1996
CURRENT LIABILITIES
Accounts payable $ 2,386,390 $ 2,370,616
Notes payable to bank 662,063 -
Accrued payroll and other compensation 1,383,776 837,989
Accrued pension expense - current 316,714 389,322
Other accrued expenses 1,437,285 1,211,729
Federal taxes payable 208,916 67,261
Deferred compensation 258,000 302,216
Current portion of long-term debt 952,878 1,223,178
TOTAL CURRENT LIABILITIES 7,606,022 6,402,311
LONG-TERM DEBT, less current portion 3,020,708 4,481,071
DEFERRED COMPENSATION 66,518 217,539
ACCRUED PENSION EXPENSE 222,702 227,968
MINORITY INTEREST IN SUBSIDIARY 166,508 -
COMMITMENTS (See Note G) - -
CONTINGENCIES (See Note L) - -
SHAREHOLDERS' EQUITY
First Serial Preferred Stock,
par value $1.00 a share:
Authorized 100,000 shares; none issued - -
Common Stock, par value $.10 a share:
Authorized 10,000,000 shares;
issued and outstanding 4,873,797 and
4,676,397 shares at August 31, 1997
and 1996, respectively 487,380 467,640
Additional paid-in capital 3,191,328 2,815,216
Treasury Stock, 1,040,473 and 1,037,693
shares of Common Stock at August 31,
1997 and 1996, respectively (4,017,850) (3,990,400)
Cumulative effect of currency translation (122,121) (108,100)
Retained earnings 12,014,566 9,273,579
11,553,303 8,457,935
$22,635,761 $19,786,824
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
CHASE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR EACH YEAR IN THE THREE YEAR PERIOD ENDED AUGUST 31, 1997
1997 1996 1995
Revenue:
<S> <C> <C> <C>
Sales $40,473,809 $33,948,292 $32,332,541
Commissions and other income 481,881 349,103 345,898
Interest 35,435 68,634 56,454
40,991,125 34,366,029 32,734,893
Costs and expenses:
Costs of products and services sold 26,868,127 22,695,744 21,957,684
Selling, general and administrative
expenses 8,798,549 7,590,223 7,274,612
Bad debt expense 68,544 42,731 23,815
Interest expense 469,878 594,746 396,020
36,205,098 30,923,444 29,652,131
INCOME FROM OPERATIONS
BEFORE INCOME TAXES 4,786,027 3,442,585 3,082,762
Income taxes 1,974,567 1,247,600 1,174,878
INCOME FROM OPERATIONS 2,811,460 2,194,985 1,907,884
Minority participation in subsidiary 303,680 - -
Equity in earnings of unconsolidated
joint venture 197,375 82,965 19,951
NET INCOME $ 3,312,515 $ 2,277,950 $ 1,927,835
=========== =========== ===========
Income from operations
per share of Common Stock
Primary $ .71 $ .58 $ .43
===== ===== =====
Fully diluted $ .71 $ .58 $ .42
===== ===== =====
Net income per share of Common Stock
Primary $ .84 $ .61 $ .43
===== ===== =====
Fully diluted $ .84 $ .61 $ .43
===== ===== =====
See accompanying notes to the consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
CHASE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR EACH YEAR IN THE THREE YEAR PERIOD ENDED AUGUST 31, 1997
CUMULATIVE
ADDITIONAL EFFECT OF
COMMON STOCK PAID-IN TREASURY STOCK RETAINED CURRENCY SHAREHOLDERS'
SHARES AMOUNT CAPITAL SHARES AMOUNT EARNINGS TRANSLATION EQUITY
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at August 31,
1994 4,362,848 $436,285 $2,555,658 - $ - $ 5,775,693 $(116,929) $ 8,650,707
Cash dividend paid,
$0.08 per share - - - - - (350,628) - (350,628)
Currency translation
adjustment - - - - - - 37,899 37,899
Exercise of stock
options 97,000 9,700 210,770 - - - - 220,470
Purchase 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 - - - - - 1,927,835 - 1,927,835
Balance at August 31,
1995 4,459,848 445,985 2,674,897 1,037,693 (3,990,400) 7,352,900 (79,030) 6,404,352
Cash dividend paid,
$0.10 per share - - - - - (357,271) - (357,271)
Currency translation
adjustment - - - - - - (29,070) (29,070)
Compensatory stock
issuance 150,000 15,000 56,250 - - - - 71,250
Exercise of stock
options 66,549 6,655 84,069 - - - - 90,724
Net income - - - - - 2,277,950 - 2,277,950
Balance at August 31,
1996 4,676,397 467,640 2,815,216 1,037,693 (3,990,400) 9,273,579 (108,100) 8,457,935
Cash dividend paid,
$0.15 per share - - - - - (571,528) - (571,528)
Currency translation
adjustment - - - - - - (14,021) (14,021)
Exercise of stock opt. 97,400 9,740 287,675 - - - - 297,415
Compensatory stock
issuance 100,000 10,000 88,437 - - - - 98,437
Purchase of Treasury
Stock - - - 2,780 (27,450) - - (27,450)
Net income - - - - - 3,312,515 - 3,312,515
Balance at August 31,
1997 4,873,797 $487,380 $3,191,328 1,040,473 $(4,017,850) $12,014,566 $(122,121) $11,553,303
========= ======== ========== ========= =========== =========== ========= ==========
See accompanying notes to the consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
CHASE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR EACH YEAR IN THE THREE YEAR PERIOD ENDED AUGUST 31, 1997
1997 1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income $ 3,312,516 $2,277,950 $ 1,927,835
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 849,266 775,571 741,869
Amortization 155,945 103,921 104,027
(Gain) on sale of assets - (40,000) -
Stock issued for compensation 98,437 56,250 -
Increase (decrease) in provision
for losses on trade receivables - 32,000 (5,000)
Tax effect of cashless option exercise 297,415 105,724 -
Deferred federal tax 22,511 70,227 251,463
Change in assets and liabilities:
Trade receivables (1,351,066) 6,489 (1,461,697)
Inventories (606,679) 1,119,679 (1,000,449)
Prepaid expenses 63,898 197,329 (233,215)
Other current assets 40,443 (67,181) 16,098
Other assets - - 4,027
Accounts payable 15,774 (540,677) 746,740
Accrued expenses 693,469 362,560 157,535
Federal taxes payable 141,655 109,771 (202,116)
Deferred compensation (195,237) (150,411) (889,801)
TOTAL ADJUSTMENTS 225,831 2,141,252 (1,770,519)
NET CASH FROM OPERATIONS 3,538,347 4,419,202 157,316
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds of note receivable 63,172 207,133 131,153
Proceeds of asset sales - 122,649 -
Capital expenditures including patents
and agreements (1,492,615) (323,282) (602,479)
Cumulative effect of currency translation (14,021) (29,070) 37,899
(Increase) decrease in net cash surrender
value (304,561) (260,466) 828,371
Investments in minority interests 32,389 (1,645,465) (382,271)
Note received from joint venture 362,319 - (362,319)
Investment in subsidiary (550,000) - -
(1,903,317) (1,928,501) (349,646)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in long-term debt 4,952,967 4,300,000 11,935,099
Payments of principal on debt (6,683,630) (6,268,737) (7,714,985)
Net borrowing under line-of-credit 662,063 (81,851) 81,851
Cash dividends paid (571,528) (357,271) (350,628)
Cash received on options exercise - - 220,470
Purchase of Common Shares for Treasury (27,450) - (5,009,431)
Sale of Common Shares from Treasury - - 927,500
(1,667,578) (2,407,859) 89,876
NET CHANGE IN CASH (32,548) 82,842 (102,454)
CASH AT BEGINNING OF YEAR 191,429 108,587 211,041
CASH AT END OF YEAR $ 158,881 $ 191,429 $ 108,587
========== ========== ===========
See Note M for supplemental cash flow data.
See accompanying notes to the consolidated financial statements.
</TABLE>
CHASE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR EACH YEAR IN THE THREE YEAR PERIOD ENDED AUGUST 31, 1997
NOTE A - ACCOUNTING POLICIES
The principal accounting policies of Chase Corporation ("the
Company") and its subsidiaries are as follows:
Basis of Presentation
The financial statements include the accounts of the Company, DC
Scientific, Inc., its majority owned contract manufacturing subsidiary and
its wholly-owned foreign sales corporation subsidiary. Investments in
unconsolidated companies which are at least 20% owned are carried at cost
plus equity in undistributed earnings since acquisition. All significant
intercompany transactions and balances have been eliminated in consolidation.
The Company uses the U.S. dollar as the functional currency for financial
reporting.
Products and Markets
The Company's principal products are protective coatings and tape
products that are sold in national and international markets. These products
consist of: (i) insulating and conducting materials for the manufacture of
electrical and telephone wire and cable, and electrical splicing, terminating
and repair tapes which are marketed to wire and cable manufacturers and
public utilities; (ii) protective pipe coating tapes and other protectants
for valves, regulators, casings, joints, metals, concrete, and wood that are
sold to oil companies, gas utilities and pipeline companies; (iii)
protectants for highway bridge deck metal surfaces which are sold to
municipal transportation authorities; (iv) thermo-electric insulation for
transformers, motors, and other electrical equipment that are sold to
original equipment manufacturers, and (v) moisture protective coatings that
are sold to the electronics industry. The Company's DC Scientific, Inc.
subsidiary provides assembly and contract manufacturing services to the
electronics industry.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash
For the purpose of the statement of cash flows, the Company considers
all highly liquid debt instruments purchased with a maturity of three months
or less to be cash equivalents.
CHASE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR EACH YEAR IN THE THREE YEAR PERIOD ENDED AUGUST 31, 1997
NOTE A - ACCOUNTING POLICIES (Continued)
Inventories
Inventories are stated at first-in, first-out cost, which is not in
excess of market.
Investment in Minority Interests
The Company makes investments in closely held companies. These
investments are recorded on the equity method reflecting the Company's
original investment and a proportional interest in the net operations of
these companies since no public quotations exist for these investments. The
carrying values of these investments are periodically reviewed based upon
estimated market values.
Property, Plant and Equipment
These assets are reflected at cost. Provisions for depreciation of
property, plant and equipment were computed by both straight-line and
accelerated methods.
Expenditures for maintenance repairs and minor renewals have been
charged to expense as incurred. Betterments and major renewals have been
capitalized. Upon retirement or other disposition of assets, related
allowances for depreciation and amortization have been eliminated from the
accounts and any resulting profit or loss reflected in consolidated net
income. The annual provisions for depreciation have been computed
principally in accordance with the following range of rates:
Buildings - 4% to 7%
Machinery and equipment - 10% to 20%
Excess of Cost Over Net Assets of Acquired Businesses
The excess of cost over the fair value of net assets of acquired
businesses is being amortized over periods from fifteen to forty years or
until the disposal of the acquired business. The carrying value of goodwill
is periodically reviewed for impairment whenever events or changes in
circumstances indicate that the carrying value may not be recoverable.
Patents and Agreements
The Company capitalizes costs related to patent applications and
technology agreements. The costs of these assets are amortized using the
straight-line method over the lesser of the useful life of the asset or its
statutory life. Capitalized costs are periodically reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount
of the asset may not be recoverable.
CHASE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR EACH YEAR IN THE THREE YEAR PERIOD ENDED AUGUST 31, 1997
NOTE A - ACCOUNTING POLICIES (Continued)
Pension Plan
The projected unit credit method is utilized for measuring net
periodic pension cost over the employee's service life.
Stock-Based Compensation
The Company has elected to follow Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" (APB 25) and related
interpretations in accounting for its stock-based compensation plans, rather
than the alternative fair value accounting provided for under Financial
Accounting Standards Board Statement No. 123, "Accounting for Stock-Based
Compensation". Grants of restricted stock are recorded as compensation
expense over the vesting period at the fair market value of the stock at the
date of grant. No compensation expense is recorded for options granted in
which the exercise price equals or exceeds the market price of the underlying
stock on the date of grant.
Deferred Compensation
The net present value of the estimated payments to be made under
agreements for deferred compensation is accrued over the period of active
employment from the time of the agreement to the anticipated date of
retirement.
Translation of Foreign Currency
The financial position and results of operations of the Company's
Canadian branch are measured using the Canadian dollar as the functional
currency. Revenues and expenses of the branch have been translated at
average exchange rates. Assets and liabilities have been translated at the
year-end exchange rate. Translation gains and losses are being deferred as
a separate component of shareholders' equity, unless there is a sale or
liquidation of the underlying foreign investments. The Company has no
present plans for the sale or liquidation of its foreign investment.
Aggregate foreign currency transaction gains and losses are included in
determining net income ($11,366 loss for the year ended August 31, 1997).
Income Taxes
The Company has adopted the method of accounting for income taxes of
SFAS No. 109. This method compares the tax basis and financial reporting
basis of the Company's assets and liabilities and recognizes the related tax
benefits and liabilities under enacted tax law. Assets arising from future
tax benefits are recognized when it is more likely than not that the Company
will have sufficient future taxable income or has had sufficient taxable
income in the available carryback period to allow realization of the tax
asset. A valuation allowance is provided for potential limitations on the
realization of future benefits.
CHASE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR EACH YEAR IN THE THREE YEAR PERIOD ENDED AUGUST 31, 1997
NOTE A - ACCOUNTING POLICIES (Continued)
Income Per Share of Common Stock
Income per share is computed based upon the weighted average number
of shares outstanding, after giving effect to the number of shares purchased
for Treasury and the dilutive effect of potential stock options. The number
of shares used in the computation of primary income per share as restated was
3,938,123 at August 31, 1997, 3,759,467 at August 31, 1996 and 4,474,854 at
August 31, 1995. Fully diluted income per share was computed based upon
3,955,509 shares at August 31, 1997, 3,765,913 shares at August 31, 1996 and
4,490,413 shares at August 31, 1995.
NOTE B - NOTE RECEIVABLE
The Company has a note receivable from Avon Custom Mixing Service,
Inc., the purchaser of its Avon Custom Mixing Division, secured by the assets
of the purchaser. Effective May 1993, the note provides for monthly payments
of $8,333 with interest payable at First National Bank of Boston base rate
(8.5% at August 31, 1997).
NOTE C - CASH SURRENDER VALUE OF LIFE INSURANCE
The Company recognizes cash surrender value in life insurance
policies, net of loans secured by the policies, with Aurora National Life
Assurance Company, the Manufacturers' Life Insurance Company, Sun Life
Assurance Company of Canada and Metropolitan Life Insurance of $511,968;
$972,707; $197,728; and $280,446, respectively. Subject to periodic review,
the Company intends to maintain these policies through the lives of the
insureds.
CHASE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR EACH YEAR IN THE THREE YEAR PERIOD ENDED AUGUST 31, 1997
NOTE D - LONG-TERM DEBT
Long-term debt consists of the following at August 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Note payable to bank with payments of interest
only through March 1, 1998 at LIBOR plus two
percent, currently at 7.59%. A single
principal payment is due March 1, 1999 with
prepayments allowed at the Company's option.
The note is secured by all assets. $1,400,000 $2,400,000
Note payable to bank in quarterly installments
of $160,000 through July 2000 with interest
at LIBOR plus two percent, currently at
7.69%. The note is secured by all assets. $1,600,000 $2,400,000
Capitalized lease obligation with monthly
payments of $15,418, including interest at
7.514% through May 1999, secured by
production equipment with a cost of $897,000
and accumulated depreciation of $224,250. 315,982 445,830
Capitalized lease obligation with monthly
payments of $2,539, including interest at
6.85% through August 1998, secured by
production equipment with a cost of $130,335
and accumulated depreciation of $58,651. - 54,581
Term note payable to bank with principal
payments of $125,000 per quarter - 375,000
Capitalized lease obligation with monthly
payments of $1,988, including interest at
7.602% through November 1997, secured by
a computer with a cost of $99,590 and
accumulated depreciation of $89,631. 3,939 26,550
Capitalized lease obligation with monthly
payments of $142, including interest at
7.44% through February 1998, secured by
computer peripheral equipment with a cost
of $7,150 and accumulated depreciation
of $6,435. 698 2,288
Term note payable to bank with principal
payments of $9,350 per month with interest
at LIBOR plus two percent secured by all
assets of DC Scientific, Inc. 561,000 -
Mortgage note payable to a bank secured
by land and building of DC Scientific,
Inc. payable in monthly installments
of $950 plus interest at prime plus
two percent, currently 10.25% 91,967 -
3,973,586 5,704,249
Less portion payable within one year
classified as a current liability. 952,878 1,223,178
$3,020,708 $4,481,071
========== =========
</TABLE>
CHASE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR EACH YEAR IN THE THREE YEAR PERIOD ENDED AUGUST 31, 1997
NOTE D - LONG-TERM DEBT (Continued)
The Company has long-term credit available up to a maximum amount of
$6,000,000 at the bank's base lending rate or, at the option of the Company,
at the effective London Interbank Offered Rate (LIBOR) for ninety days plus
two percent. The line of credit is secured by all assets and is limited to
50% of inventory and 80% of current receivables. The Company had net
borrowings of $1,400,000 and $2,400,000 under the credit agreement at
August 31, 1997 and 1996, respectively. The unused available long-term credit
amounted to $4,440,000 at August 31, 1997.
NOTE E - NOTES PAYABLE TO BANK
The Company has a short-term credit facility at one half percent over
prime with a Canadian bank secured by a letter of credit.
The Company's DC Scientific, Inc. subsidiary has a revolving line of
credit at one half percent over prime or LIBOR plus 2%, secured by the assets
of the subsidiary.
NOTE F - INCOME TAXES
A reconciliation of federal income taxes computed at applicable rates of
income from continuing operations before income taxes to the amounts provided
in the consolidated financial statements is as follows:
<TABLE>
<CAPTION>
Year Ended August 31,
1997 1996 1995
<S> <C> <C> <C>
Federal income taxes at applicable
rates $1,627,249 $1,170,479 $1,048,139
Adjustments resulting from the tax
effect of:
Increase in cash surrender value
of life insurance (143,100) (120,625) (116,384)
Benefit plans not qualified for
deduction from federal tax 154,038 121,060 108,678
Net loss of subsidiary not
consolidated for tax 146,671 - -
State and local taxes net of
federal tax effect 289,172 151,314 167,239
Other (99,463) (74,628) (32,794)
INCOME TAXES $1,974,567 $1,247,600 $1,174,878
========== ========== ==========
</TABLE>
CHASE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR EACH YEAR IN THE THREE YEAR PERIOD ENDED AUGUST 31, 1997
NOTE F - INCOME TAXES (Continued)
<TABLE>
<CAPTION>
Year Ended August 31,
1997 1996 1995
<S> <C> <C> <C>
Current $2,010,423 $1,283,097 $ 923,415
Deferred (benefit):
Pension expense 19,078 20,819 36,345
Depreciation 5,480 14,427 (96,957)
Allowance for doubtful accounts - (12,800) 2,000
Market valuation of investments 110,000 - -
Deferred compensation 39,294 59,781 338,617
Deferred state taxes 119,707 - 24,000
Reserve (32,000) (12,000) (52,542)
Total Deferred 261,559 70,227 251,463
(Benefit) of option exercises
credited to shareholders' equity (297,415) (105,72) -
$1,974,567 $1,247,600 $1,174,878
========== ========== ==========
</TABLE>
The timing differences that give rise to the components of net tax
assets are as follows at August 31, 1997 and 1996:
<TABLE> 1997 1996
<S> <C> <C>
Assets:
Reserve for bad debt $ 51,000 $ 51,000
Patents and agreements 35,200 38,761
Pension accrual 110,850 246,916
State tax accrual 140,507 20,800
Deferred compensation 113,813 207,902
Investments marked to market 110,000 -
561,370 565,379
Less valuation allowance 12,000 44,000
549,370 521,379
Liabilities:
Depreciation 358,995 353,515
Net Assets $ 190,375 $ 167,864
========== ==========
</TABLE>
NOTE G - OPERATING LEASES
The following is a schedule for the next five years of future minimum
rental payments required under operating leases that have initial or remaining
noncancellable lease terms in excess of one year as of August 31, 1997:
Year Ending August 31, Buildings
1998 $163,024
1999 147,191
2000 68,024
2001 68,024
2002 22,510
$468,773
========
CHASE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR EACH YEAR IN THE THREE YEAR PERIOD ENDED AUGUST 31, 1997
NOTE G - OPERATING LEASES (Continued)
Total rental expense for all operating leases amounted to $494,435,
$353,265, and $340,068 for the years ended August 31, 1997, 1996 and 1995,
respectively.
NOTE H - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected unaudited quarterly financial data for 1997, 1996 and 1995,
is as follows:
<TABLE>
<CAPTION>
Quarter
1997 First Second Third Fourth Year
<S> <C> <C> <C> <C> <C>
Net sales $9,003,995 $9,162,770 $11,263,033 $11,044,011 $40,473,809
Gross profit $3,073,420 $2,883,176 $3,856,522 $3,792,564 $13,605,682
Net income $695,293 $556,082 $823,976 $1,237,164 $3,312,515
Net income per
common share $.18 $.14 $.21 $.31 $.84
==== ==== ==== ==== ====
Quarter
1996 First Second Third Fourth Year
Net sales $8,232,459 $7,664,955 $8,673,573 $9,377,305 $33,948,292
Gross profit $2,604,003 $2,362,980 $2,792,048 $3,493,517 $11,252,548
Net income $507,440 $374,561 $511,139 $884,810 $2,277,950
Net income per
common share $.14 $.10 $.14 $.23 $.61
==== ==== ==== ==== ====
Quarter
1995 First Second Third Fourth Year
Net sales $7,833,974 $7,289,315 $8,694,676 $8,514,576 $32,332,541
Gross profit $2,671,974 $2,265,740 $2,587,647 $2,849,496 $10,374,857
Net income $553,384 $352,651 $395,467 $626,333 $1,927,835
Net income per
common share $.12 $.08 $.09 $.14 $.43
==== ==== ==== ==== ====
</TABLE>
CHASE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR EACH YEAR IN THE THREE YEAR PERIOD ENDED AUGUST 31, 1997
NOTE I - EXPORT SALES AND FOREIGN OPERATIONS
Export sales from continuing domestic operations to unaffiliated third
parties were $4,591,695, $3,594,317 and $2,764,170 for the years ended
August 31, 1997, 1996 and 1995, respectively. The Company's products are
sold world-wide with no foreign geographic area accounting for more than 10
percent of revenues from continuing operations. The Company's Canadian
operations accounted for 7.2 percent of consolidated sales and 5.8 percent of
assets.
NOTE J - RESEARCH AND DEVELOPMENT EXPENSE
Research and development expense amounted to approximately $540,467,
$501,964, and $511,355 for the years ended August 31, 1997, 1996 and 1995,
respectively.
NOTE K - BENEFITS
401(K) Plan
The Company has a deferred compensation plan adopted pursuant to Section
401(k) of the Internal Revenue Code of 1986. Any qualified employee who has
attained age 21 and has been employed by the Company for at least six months may
contribute a portion of their salary to the plan and the Company will match
50% of such contribution up to an amount equal to three percent of such
employee's yearly salary.
Pension Plan
The Company has non-contributory defined benefit pension plans covering
substantially all employees. Total pension expense, including the net periodic
pension cost and the effects of settlements, was $311,447, $332,458 and
$275,188 for the years ended August 31, 1997, 1996 and 1995, respectively.
The Company has a funded, qualified plan and an unfunded supplemental
retirement plan designed to maintain benefits for all employees at the plan
formula level.
CHASE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR EACH YEAR IN THE THREE YEAR PERIOD ENDED AUGUST 31, 1997
NOTE K - BENEFITS (Continued)
<TABLE>
Net pension expense components: Year Ended August 31,
1997 1996 1995
<S> <C> <C> <C>
Service cost of benefits earned
during the period $220,639 $196,790 $164,024
Interest cost on projected benefit
obligations 295,285 255,690 200,022
Return on plan assets (506,142) (200,988) (184,866)
Net amortization and deferra l 301,665 80,966 96,008
Net periodic pension cost $311,447 $332,458 $275,188
======== ======== ========
</TABLE>
The following table sets forth the actuarial present value of benefit
obligations and funded status:
<TABLE>
<CAPTION>
August 31,
1997 1996 1995
<S> <C> <C> <C>
Accumulated benefit obligations,
including vested benefits of
$2,410,404, $2,138,788 and
$1,903,479 at August 31, 1997,
1996 and 1995, respectively $ 2,483,200 $ 2,182,250 $ 1,935,313
=========== =========== ===========
Projected benefit obligations $(4,142,846) $(3,552,626) $(3,336,642)
Plan assets at fair value,
including prefunded amounts 3,096,643 2,215,085 1,778,327
Funded status (1,046,203) (1,337,541) (1,558,315)
Unrecognized net loss 264,888 461,280 612,884
Unrecognized prior service cost 262,894 286,965 311,036
Unamortized net transition assets (20,995) (27,994) (34,993)
(Accrued) pension expense $ (539,416) $ (617,290) $ (669,388)
=========== =========== ===========
</TABLE>
CHASE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR EACH YEAR IN THE THREE YEAR PERIOD ENDED AUGUST 31, 1997
NOTE K - BENEFITS (Continued)
The net transition assets amount is being amortized at a level rate over
15 years. The actuarial calculations were based on assumptions of a weighted
average discount rate of 8.0% and a future rate of increase in compensation
levels of 5%. The expected rate of return on plan assets is 10%. Prior service
cost arose from the amendment of the plan's benefit schedules to comply with
the Tax Reform Act of 1986 (TRA) and adoption of the unfunded supplemental
pension plan.
Deferred Compensation
The Company has deferred compensation agreements with a former officer
providing for post retirement health benefits and annual payments of $200,000
for the officer through August 31, 1998.
Additionally, life insurance is provided under a split dollar life
insurance agreement whereby the Company will recover the premiums paid from the
proceeds of the policies. The Company recognizes an offset to expense for the
growth in the cash surrender value of the policies.
The Company also has an agreement with its former Chairman of the Board,
who retired August 31, 1991, that the Company will make ten annual payments of
$58,000 to him or his beneficiaries.
Stock Option Plans
1989 Non-Statutory Plan - Options to purchase 612,000 shares of Common
Stock were granted to officers, senior employees, and independent directors.
Options on 44,500 shares of Common Stock are currently outstanding. The
options are exercisable at the fair market value of the shares at the date of
grant adjusted for stock dividends. Directors' options vest ratably over a two
year period and officer and employee options vest over a four year period.
All options are fully vested.
1995 Stock Option Plan - Effective July 18, 1995, the Company adopted,
and the stockholders subsequently approved, a stock award plan and an incentive
plan which permit the issuance of options and restricted stock to selected
employees of the Company. The plans reserve 600,000 shares of Common Stock for
grant.
CHASE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR EACH YEAR IN THE THREE YEAR PERIOD ENDED AUGUST 31, 1997
NOTE K - BENEFITS (Continued)
Stock Option Plans (Continued)
Under the terms of the 1995 stock option plan, options granted may be
either nonqualified or incentive stock options and the exercise price may not
be less than the fair market value of a share at the date of grant. The board
of directors approved issuance of 450,000 options (at $3.375, based upon the
market value at July 18, 1995).
The options vest ratably over ten years. In addition, the board of directors
granted 250,000 shares of restricted Common Stock to the Company's CEO, Mr.
Peter Chase, at no cost. Other than the restrictions which limit the sale and
transfer of these shares, Mr. Chase is entitled to all rights of a
shareholder.
The grants vest at the end of nine years. If Mr. Chase is not providing
services to the Company prior to vesting, the shares revert to the Company.
Officers and
Directors Employees
August 31, 1995
Issued and outstanding 77,000 622,500
Exercisable 77,000 172,500
Exercise price per share $1.24 - $1.43 $1.51 - $3.712
August 31, 1996
Issued and outstanding 128,500 540,000
Exercisable 70,165 120,000
Exercise price per share $1.24 - $5.09 $1.51 - $3.712
August 31, 1997
Issued and outstanding 117,000 454,000
Exercisable 71,500 96,920
Exercise price per share $1.24 - $9.08 $1.51 - $5.625
Options exercisable and exercise prices are shown after adjustment for
10% stock dividend issued June 1, 1990.
<TABLE>
<CAPTION>
Stock option plan activity was as follows:
Weighted Weighted
Average Officers Average
Exercise and Exercise
Directors Price Employees Price
<S> <C> <C> <C> <C>
Outstanding August 31, 1994 154,000 $1.32 192,500 $1.51
Grants at market price - - 450,000 3.49
Exercises (77,000) 1.32 (20,000) 1.51
Outstanding August 31, 1995 77,000 1.32 622,500 2.94
Grants at market price 62,500 4.72 - -
Exercises (11,000) 1.43 (82,500) 1.51
Outstanding August 31, 1996 128,500 2.96 540,000 3.16
Grants at market price 10,000 9.08 15,000 5.625
Exercises (21,500) 1.29 (101,000) 1.74
Outstanding August 31, 1997 117,000 3.79 454,000 3.55
======= ========
</TABLE>
CHASE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR EACH YEAR IN THE THREE YEAR PERIOD ENDED AUGUST 31, 1997
NOTE K - BENEFITS (Continued)
Proforma Disclosures - The Company accounts for stock options issued to
directors, officers and employees under Accounting Principles Board Opinion
No. 25 (see Note A). The proforma net income and earnings per share, based
upon a Black-Scholes pricing model, using a volatility of 26.57%, a risk-free
interest rate of 7.5% and a dividend yield of 4%, had Financial Accounting
Standards Board Statement No. 123 been applied, is as follows:
August 31,
1997 1996 1995
Net income $3,257,837 $2,232,410 $1,882,295
Net income per share $ .83 $ .60 $ .42
NOTE L - CONTINGENCIES
Environmental
The Company is aware of potential claims concerning a site in Bruin,
Pennsylvania where an affiliate of the Company had sponsored research into
experimental oil and coal-based fuels in the early 1980s. In August 1991, a
spill of the affiliate's stored material occurred at the Bruin site,
apparently due to vandalism of the storage tanks. Upon learning of the spill,
the Company provided notice of the release to appropriate authorities and
undertook to remedy the spill. The remedy was completed in October 1992 under
plans approved by the Pennsylvania Department of Environmental Protection
("Pennsylvania DEP"). The Company believes that this work terminated its
liabilities for the spill, but Pennsylvania DEP has not provided a final
release.
The Bruin site had been used for many years for a variety of oil
refining operations by unrelated parties. The site has significant
contamination from those unrelated activities. Since the spill of the
material remedied by the Company, the U.S. Environmental Protection Agency
has conducted an investigation of the site, conducted emergency clean-up
activities at the site focused on materials other than the affiliate's
material and spill, and turned responsibility for the site back to
Pennsylvania DEP. To date, EPA has not made any claim against the Company.
During 1993 to 1995, Pennsylvania DEP has conducted an investigation of
the site, has completed a surface cleanup, and has proposed a permanent remedy.
Pennsylvania DEP has notified the Company that it may be a person responsible
under Pennsylvania law to contribute to the costs of those activities.
During 1995, Pennsylvania DEP suggested that the Company contribute an amount
toward the costs of the investigation and the surface cleanup in an attempt
to settle with the Company. On July 18, 1996, the Pennsylvania DEP sent a
settlement proposal to Chase requesting a payment of $335,000 to resolve all
of Chase's potential liabilities to the State of Pennsylvania at the Bruin
site. While the amount proposed is not deemed material, the Company still
believes that the work previously performed to remedy the spill terminated
its liabilities and therefore declined the proposal.
CHASE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR EACH YEAR IN THE THREE YEAR PERIOD ENDED AUGUST 31, 1997
NOTE L - CONTINGENCIES (Continued)
The Company remains in communication with Pennsylvania DEP, and expects
that these settlement discussions will eventually resolve the Company's
potential liability at this site.
Legal
The Company has been named as a third-party defendant in eighteen
personal injury lawsuits filed in state court in Jackson County, Mississippi.
These lawsuits, each of which has multiple plaintiffs and defendants, arose out
of alleged asbestos exposure by the plaintiffs as a result of their work at
the Ingalls Shipyard. The Company was sued as a third-party defendant by USX
Corporation, General Cable Corporation and G. K. Technologies, Inc., each of
whom is a primary defendant in these actions. USX, General Cable and G.K. are
alleged to have supplied wire and cable products containing asbestos to the
shipyard. The third-party complaints allege that tape products containing
asbestos were manufactured by the Company, sold to USX, General Cable and G.K.,
and then incorporated in their wire and cable products sold for use in the
ships. USX, General Cable and G.K. are seeking indemnification from the
Company for damages that may be assessed against them and expenses including
legal fees.
The third-party claims against the Company, along with all other third-
party and crossclaims, were severed from the trial of the primary actions. USX,
General Cable and G.K. were each dismissed by the plaintiffs prior to the
commencement of trial of nine of the primary actions, which took place in the
summer of 1993. It is not known how much, if anything, each paid to settle
these claims. To date, no effort has been made by USX, General Cable and G.K.
to pursue the third-party claims against the Company arising out of the
resolution of any of the cases tried in the summer of 1993. Some of the
remaining primary actions remain pending, but it is not now known when those
cases will be tried, whether the plaintiffs will proceed against any of the
wire and cable manufacturers, including USX, General Cable or G.K., and
whether any of these defendants will, in turn, pursue their claims against
the Company.
The Company's liability insurer has assumed defense of these claims
subject to reservation of its rights as to coverage for any underlying
liability assessed.
In July 1994 the Company received a notice letter from General Cable
and G.K. that they have been sued in fourteen additional asbestos personal
injury lawsuits, ten of which are pending in Mississippi, two in Pennsylvania
and two in Texas. Each of these cases involves multiple plaintiffs and
defendants. This notice letter is an effort to bind the Company to the factual
determination made in these cases, if General Cable or G.K. brings an action
against the Company for indemnification arising out of these cases. No such
action for indemnification has yet been brought and the Company is not now a
party in any of these fourteen additional cases. The Company's liability
insurer has been informed that the Company has been notified of these
potential claims.
CHASE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR EACH YEAR IN THE THREE YEAR PERIOD ENDED AUGUST 31, 1997
NOTE L - CONTINGENCIES (Continued)
The Company is investigating the defenses available to it in connection
with all these matters and its rights against its supplier. Although the
Company cannot predict whether any of these claims will be pursued, management
believes that such claims will not have any material financial impact on the
Company.
NOTE M - SUPPLEMENTAL CASH FLOW DATA
Cash paid during the year for:
1997 1996 1995
Income taxes $1,509,125 $855,000 $730,000
Interest $ 477,768 $594,746 $396,020
NOTE N - INVESTMENT IN MINORITY INTERESTS
The Company has formed a joint venture, The Stewart Group, Inc., with
The Stewart Group, Ltd. of Canada, to produce various products for the fiber
optical cable market. Chase Corporation owned a 42% interest in the joint
venture at August 31, 1997.
The Company has invested in minority interests in various closely held
companies. Investments at August 31, 1997, in addition to The Stewart Group,
Inc., consist of a 20% interest in Wireless, Inc., a telecommunications
marketing company and a 32% interest in webpa.com, an Internet software
developer.
NOTE O - SALE OF AVON REAL ESTATE
During April 1996, the Company sold the real estate formerly leased to
Avon Custom Mixing Service, Inc. for $122,649 and recorded a gain on the sale
of $40,000. The assets sold consisted of land and buildings with a cost of
$835,488 and accumulated depreciation of $760,393, with expenses related to
the sale of $7,554.
<TABLE>
<CAPTION>
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
CHASE CORPORATION AND SUBSIDIARY
COL. A COL. B COL. C COL. D COL. E
<S> <C> <C> <C> <C> <C>
BALANCE AT (1) (2) BALANCE AT
BEGINNING CHARGED TO COSTS CHARGED TO END OF
DESCRIPTION OF PERIOD AND EXPENSES OTHER ACCOUNTS DEDUCTIONS PERIOD
Year ended August 31, 1997:
Allowance for doubtful
accounts $127,500 $68,544 $25,000 $68,544 $152,500
Year ended August 31, 1996:
Allowance for doubtful
accounts $95,500 $42,731 $ - $10,731 $127,500
Year ended August 31, 1995:
Allowance for doubtful
accounts $100,500 $23,815 $ - $28,815 $95,500
</TABLE>
(1) Deductions are charged to accounts receivable when specific accounts are
judged to be uncollectible.
(2) $25,000 reserve acquired with majority interest in DC Scientific, Inc.
<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> 12-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> AUG-31-1997
<CASH> 158,881
<SECURITIES> 0
<RECEIVABLES> 7,273,718
<ALLOWANCES> 152,500
<INVENTORY> 4,279,332
<CURRENT-ASSETS> 11,939,794
<PP&E> 14,044,014
<DEPRECIATION> 9,131,813
<TOTAL-ASSETS> 22,635,761
<CURRENT-LIABILITIES> 7,606,022
<BONDS> 0
0
0
<COMMON> 487,380
<OTHER-SE> 11,065,923
<TOTAL-LIABILITY-AND-EQUITY> 22,635,761
<SALES> 40,473,809
<TOTAL-REVENUES> 40,473,809
<CGS> 26,868,127
<TOTAL-COSTS> 26,868,127
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 68,544
<INTEREST-EXPENSE> 469,878
<INCOME-PRETAX> 4,786,027
<INCOME-TAX> 1,974,567
<INCOME-CONTINUING> 2,811,460
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,312,515
<EPS-PRIMARY> 0.837
<EPS-DILUTED> 0.837
</TABLE>
