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 February 28, 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.)
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 March 31, 1997 3,814,280
<TABLE>
<CAPTION>
PART 1: FINANCIAL INFORMATION
CHASE CORPORATION
CONSOLIDATED BALANCE SHEET
ASSETS Feb. 28, Aug.31
1997 1996
(UNAUDITED) (AUDITED)
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash $ 239,797 $ 191,429
Trade receivables,less allowance
for doubtful accounts of $185,787 and
$127,500 respectively 5,971,807 5,770,152
Note receivable from related party 210,337 208,966
Inventories(Note B)
Finished and in process 1,719,799 1,073,226
Raw materials 2,448,516 2,599,427
------------ -----------
4,168,315 3,672,653
Prepaid expenses & other curr assets 547,031 272,626
Deferred federal taxes 145,864 148,886
------------ -----------
TOTAL CURRENT ASSETS 11,283,151 10,264,712
PROPERTY, PLANT AND EQUIPMENT
Land and improvements 332,536 322,423
Buildings 2,221,089 1,758,538
Machinery & equipment 10,691,505 9,839,816
Construction in progress 86,056 4,639
------------ -----------
13,331,186 11,925,416
Less allowance for depreciation 8,696,744 7,741,587
------------ -----------
4,634,442 4,183,829
OTHER ASSETS
Note receivable from related party 239,761 309,042
Excess of cost over net assets of
acquired businesses less amortization 1,254,649 80,080
Patents, agreements and trademarks
less amortization 1,193,034 1,237,160
Cash surrender value of life ins. net 1,786,895 1,658,288
Deferred federal taxes 18,978
Investment in joint venture 1,481,110 2,027,735
Other 7,000 7,000
------------ -----------
5,962,449 5,338,283
------------ -----------
$ 21,880,042 $ 19,786,824
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY Feb. 28, Aug.31
1997 1996
(UNAUDITED) (AUDITED)
CURRENT LIABILITIES
Accounts payable $ 2,349,099 $ 2,370,616
Notes payable 69,435 -
Accrued expenses 1,716,145 2,049,718
Accrued pension expense - current 389,322 389,322
Federal income taxes (280,925) 67,261
Deferred compensation 258,000 302,216
Current portion of L.T. debt 1,711,485 1,223,178
------------ -----------
TOTAL CURRENT LIABILITIES 6,212,561 6,402,311
LONG-TERM DEBT, less current portion 5,309,451 4,481,071
Long-term deferred compensation
obligations 166,554 217,539
ACCRUED PENSION EXPENSE 398,572 227,968
Minority interest 410,172
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 4,851,973 shares at
Feb 28, 1997 and 4,676,397 shares at
Aug. 31, 1996 respectively 485,197 467,640
Additional paid-in capital 3,041,437 2,815,216
Treasury Stock, 1,037,693 shares at
February 28, 1997, and August 31, 1996 (3,990,400) (3,990,400)
Cum. G/(L) on currency translation (106,928) (108,100)
Retained earnings 9,953,426 9,273,579
------------ -----------
9,382,732 8,457,935
------------ -----------
$ 21,880,042 $ 19,786,824
============ ===========
See accompanying notes to the consolidated financial
statements and accountants' review report.
</TABLE>
<TABLE>
<CAPTION>
CHASE CORPORATION
STATEMENT OF CONSOLIDATED OPERATIONS
(UNAUDITED)
Six Months Ended Three Months Ended
Feb. 28 Feb. 29 Feb. 28 Feb. 29
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Sales $ 18,166,765 $ 15,897,414 $ 9,162,770 $ 7,664,955
Comm. and other income 154,953 171,553 75,451 61,233
Interest 20,292 42,736 9,719 26,834
----------- ----------- ----------- -----------
18,342,010 16,111,703 9,247,940 7,753,022
Cost and Expenses
Cost of products sold(Note B) 12,210,169 10,930,431 6,279,594 5,301,975
Sell.,gen. and admin. expen. 4,091,780 3,481,191 2,052,401 1,704,948
Bad debt expense 23,200 43,000 14,200 30,500
Interest expense 228,677 327,263 123,179 155,221
----------- ----------- ----------- -----------
16,553,826 14,781,885 8,469,374 7,192,644
Income before income taxes 1,788,184 1,329,818 778,566 560,378
Income taxes 722,500 481,000 345,800 199,000
----------- ----------- ----------- -----------
Income from operations 1,065,684 848,818 432,766 361,378
Income from minority interest 97,375 33,183 35,000 13,183
Minority interest in subsidiary 88,316 88,316
----------- ----------- ----------- -----------
$ 1,251,375 $ 882,001 $ 556,082 $ 374,561
=========== =========== =========== ===========
Income per share
of Common Stock
Primary $ 0.319 $ 0.235 $ 0.142 $ 0.100
=========== =========== =========== ===========
Fully Diluted $ 0.320 $ 0.235 $ 0.142 $ 0.100
=========== =========== =========== ===========
See accompanying notes to the consolidated financial statements
and accountants' review report.
</TABLE>
<TABLE>
<CAPTION>
CHASE CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
6 MONTHS ENDED FEBRUARY 28, 1997 AND FEBRUARY 29, 1996
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.31,1995 4,459,848 $445,985 $2,674,897 1,037,693 (3,990,400) $7,352,900 $ (79,030) $6,404,352
Curr. translation adjmt. (30,026) (30,026)
Exer.of stock options 167,650 16,765 (16,765) 0
Compensatory stock issuance 18,750 18,750
Net Income for 6 months 882,001 882,001
Dividends paid in cash
$.10 a share on
common stock (357,271) (357,271)
---------- -------- --------- ---------- ---------- ---------- --------- -----------
Balance @ Feb. 29, 1996 4,627,498 462,750 2,676,882 1,037,693 (3,990,400) 7,877,630 (109,056) 6,917,806
Curr. translation adjmt. 956 956
Exer.of stock options 48,899 4,890 100,834 105,724
Compensatory stock issuance. 37,500 37,500
Net income for 6 months 1,395,949 1,395,949
---------- -------- ---------- ---------- ----------- ---------- ---------- ----------
Balance @ Aug.31,1996 4,676,397 467,640 2,815,216 1,037,693 (3,990,400) 9,273,579 (108,100) 8,457,935
Curr. translation adjmt. 1,172 1,172
Exer.of stock options 175,576 17,557 177,002 194,559
Compensatory stock issuance. 49,219 49,219
Net income for 6 months 1,251,375 1,251,375
Dividends paid in cash
$.15 a share on
common stock (571,528) (571,528)
---------- -------- ---------- ---------- ----------- ---------- ---------- ----------
Balance @ Feb.28,1997 4,851,973 $485,197 $3,041,437 1,037,693 $(3,990,400) $9,953,426 $(106,928) $9,382,732
========== ======== ========== ========== =========== ========== ========= ==========
See accompanying notes to the consolidated financial statements
and accountants' review report.
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
Six Months Ended
Feb. 28, Feb. 29,
1997 1996
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 1,251,375 $ 882,001
Adjmts. to reconcile net income to net
cash provided by operating activities:
(Gain) on sale of fixed assets
Depreciation 955,157 440,875
Amortization 52,044 51,804
Provision for losses on accts. rece 58,287 34,781
Stock issued for compensation 49,219 18,750
Tax effect of cashless option exerc 194,560
Deferred federal taxes 22,000 62,325
Change in assets and liabilities
Trade receivables (259,942) 419,046
Inventories (495,662) 271,776
Prepd. expenses & other curr. asset (274,405) 33,479
Accounts payable (21,517) (629,249)
Accrued expenses (162,969) (389,960)
Federal income taxes payable (348,186) 23,782
Deferred compensation (95,201) (77,622)
------------ ------------
TOTAL ADJUSTMENTS (326,615) 259,787
NET CASH FROM OPERATIONS 924,760 1,141,788
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (1,411,060) (172,727)
Purchase of cash surrender value (128,607) (133,417)
Proceeds from note receivable 67,910 66,567
Cum. effect of currency translation 1,172 (30,026)
Investment in joint venture (630,573) (333,183)
Minority interest 410,172
------------ ------------
(1,690,986) (602,786)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in long-term debt 3,000,000 2,700,000
Payments of principal on debt (1,683,313) (2,920,069)
Net borrowing under line-of-credit 69,435 (23,483)
Dividend paid (571,528) (357,271)
------------ ------------
814,594 (600,823)
NET CHANGE IN CASH 48,368 (61,821)
CASH AT BEGINNING OF PERIOD 191,429 108,587
------------ ------------
CASH AT END OF PERIOD $ 239,797 $ 46,766
============ ============
CASH PAID DURING PERIOD FOR:
Income taxes $ 770,729 $ 355,000
Interest $ 228,677 $ 327,262
See accompanying notes to the consolidated financial statement
and accountants' review report.
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENT
CHASE CORPORATION SECURITIES AND EXCHANGE COMMISSION
April 11, 1997
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 3,916,935 for the period
of six months ended February 28, 1997. Earnings per share on a
fully diluted basis are calculated on 3,912,674 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 100,000 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 eight 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.
CHASE CORPORATION
SECURITIES AND EXCHANGE COMMISSION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Net revenues for the second quarter and first half of 1997,
increased by 19% and 14% respectively, over comparable periods in
1996. Some of the second quarter increase is the result of our
increased investment in DC Scientific which became a subsidiary of
Chase during January 1997. The balance of the increase, both for
the quarter and year to date, relates to increases by each
division as a result of both our capital investments and
acquisitions, along with the more favorable business climate.
When compared to fiscal 1995, the increase of about
$3 million relates primarily to the steady growth of sales from the
Webster facility of the Chase & Sons division, the Fluid Polymer
acquisition and the addition of DC Scientific as a subsidiary to
the Company.
The increase in the cost of products sold for the second
quarter and the first half of the current year over the same
periods last year was largely volume related. For the first half
as a percent of sales, there was a reduction of 1.5%. This
reduction was due mostly because of a more favorable product mix
and also some decreases to certain raw materials costs. The
Company's products are largely mature and some are highly
competitive which result in low margins. Competitive pressure
prevents us from being able to recover all of our matured price
increases from our customers.
Selling and administrative expenses were higher during the
current year and as a percent or sales increased by 0.6%. A
significant amount of this increase relates to costs associated
with our strategy of continued investments in related and
complimentary businesses and technologies.
Interest expense decreased during the comparable periods
which is related to a reduction in bank debt during most of the
period.
The sales increase, lower operating costs and associated
changes in product mix and productivity improvements, along with
stronger earnings from minority owned companies, this year
compared to last year, assisted in the improved profitability of
both income before taxes and net income.
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 which
were reserved against and which are not consolidated for tax
filings. During 1996 the effective tax rate was somewhat lower as
a result of the export sales through Chase Export.
Income from minority interest for the six month period
through both 1997 and 1996 relate to the equity position ownership
in The Stewart Group, Inc., Toronto, Canada.
Minority Interest in subsidiary represents the minority
shareholder's 49.9% equity in the losses of DC Scientific.
Liquidity and Sources of Capital
The ratio of current assets to current liabilities was 1.8
at the end of the second quarter of 1997, compared to 1.6 at the
prior year end. The improved ratio is the result of increases in
receivables and inventory that are associated with the increased
sales and improved cash flow related to the higher profitability.
Long term debt increased $1,316,000 from the prior year end
and total liabilities, inclusive of long term debt increased
$770,000. The increase in long term debt is primarily the result
of increased borrowing associated with the investment in DC
Scientific and the fact that the DC Scientific liabilities are now
consolidated with those of Chase.
The Company had $2,280,000 in unused available credit at
February 28, 1997 under its credit arrangement with its bank and
plan 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.
INDEPENDENT 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 February 28, 1997, and the
related consolidated statements of operations, stockholders'
equity, and cash flows for the periods of six months ended
February 28, 1997 and February 29, 1996, 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, 1996, and the related
statements of operations, stockholders' equity, and cash flows for
the year then ended (not presented herein); and in our report
dated October 16, 1996, 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, 1996, 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, Massachusetts
April 9, 1997
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 February 28, 1997.
No financial statements were filed during the three
months ended February 28, 1997.
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: April 11, 1997
<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 stateme
nts.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> FEB-28-1997
<CASH> 239,797
<SECURITIES> 0
<RECEIVABLES> 6,157,594
<ALLOWANCES> 185,787
<INVENTORY> 4,168,315
<CURRENT-ASSETS> 11,283,151
<PP&E> 13,331,186
<DEPRECIATION> 8,696,744
<TOTAL-ASSETS> 21,880,042
<CURRENT-LIABILITIES> 6,212,561
<BONDS> 0
0
0
<COMMON> 485,197
<OTHER-SE> 8,897,535
<TOTAL-LIABILITY-AND-EQUITY> 21,880,042
<SALES> 18,166,765
<TOTAL-REVENUES> 18,342,010
<CGS> 12,210,169
<TOTAL-COSTS> 12,210,169
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 23,200
<INTEREST-EXPENSE> 228,677
<INCOME-PRETAX> 1,788,184
<INCOME-TAX> 722,500
<INCOME-CONTINUING> 1,065,684
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,251,375
<EPS-PRIMARY> 0.319
<EPS-DILUTED> 0.320
</TABLE>
