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, 1999 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.)
26 Summer Street, Bridgewater, Massachusetts 02324
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (508) 279-1789
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 29, 1999, the Company had outstanding 3,906,344 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 $35,401,000.
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 18, 2000, is incorporated by this
reference into items 10-13 hereof.
Item 1. Business.
General Development and Industry Segment.
Chase Corporation (the "Company") is a multi-divisional advanced
manufacturing company providing industrial products to a wide variety of
industries including wire and cable, construction and electronics.
During fiscal 1991, the Company implemented a strategy of maximizing the
core businesses while seeking future opportunities through selective
acquisitions. 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 that it had purchased
a 20% interest in DC Scientific and then purchased a controlling
interest on January 16, 1997. On January 27, 1999 the Company acquired
the remaining interest of DC Scientific Inc. and changed the name to
Sunburst Electronic Manufacturing Solutions Inc., (Sunburst EMS). The
Company expanded its electronic manufacturing holding on May 26, 1999
with the acquisition of RWA, Inc., Melrose, MA. Northeast Quality Products,
Co. Inc., Newburyport, MA, a specialty printer producing custom pressure
sensitive labels, was acquired July 29, 1999. There have not been any other
material changes or developments since September 1, 1999.
As of October 29, 1999, the Company employed approximately 315
people.
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 supported 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)in addition, the Company's
electronic manufacturing subsidiaries, Sunburst EMS and RWA, 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 29, 1999, the backlog of orders believed to be firm
was about $7,888,000, of which $5,949,000 was related to our electronic
contract manufacturing group. This compared with a total of $2,736,000
as of October 31, 1998 with $1,306,000 associated with electronic
manufacturing. The backlog is not seasonal. During fiscal 1999, the
Company did business with a customer that resulted in about 14% of it's
total sales. 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 that manufacture or sell products and
services 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 $618,000, $574,000,and $540,000 was
spent for Company-sponsored research and development during the fiscal
years 1999, 1998 and 1997, respectively.
Financial Information about Foreign and Domestic Operations and Export
Sales.
Export sales from continuing domestic operations to unaffiliated
third parties were $4,460,000, $5,207,000,and $4,592,000 for the years
ended August 31, 1999, 1998 and 1997, respectively. The Company does
not anticipate any material change to export sales during fiscal 2000.
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 7.3% of consolidated sales and 3.6% 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, and reported in the Statement of Changes in Equity per FAS 130,
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 51 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. 58 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
During 1998 the Company purchased a building containing about 5,200
square feet located in Bridgewater, MA to which it relocated its principle
executive office. 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.
Chase and Sons 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.
The Royston and Fluid Polymers division use 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.
Sunburst EMS and RWA, Inc. are both subsidiaries and provide
electronic manufacturing services. Sunburst EMS leases 35,700 square feet
in West Bridgewater, MA. and RWA, Inc. rents about 21,000 square feet in
Melrose, MA.
Another subsidiary, Northeast Quality Products Co., Inc., a
specialty printer producing customer pressure-sensitive labels, occupies
about 15,000 square foot of space in Newburyport, Ma.
The above facilities range in age from new to about 100 years,
are generally 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.
In 1992 the Company was named as a third party defendant by USX
Corporation, General Cable Corporation and G.K. Technologies, Inc. in
eighteen personal injury lawsuits filed in Jackson County, Mississippi
alleging asbestos exposure at the Ingalls Shipyard. The Company is
alleged to have sold tape products containing asbestos which were
incorporated into wire and cable products used in ships manufactured at
that shipyard. Many of the primary cases have been resolved, but some
remain pending. Nothing has been done to pursue the third party claims
against the Company. The Company's insurer has assumed defense of these
claims subject to reservation of its rights as to coverage for any
underlying liability assessed. In addition, the Company received notice
from General Cable and G.K. in July 1994 of the pendency of 14
additional asbestos personal injury lawsuits, but no claims have been
filed against the Company in any of those cases. Although the Company
cannot predict whether any of these claims or potential claims will be
pursued, management believes that such claims will not have any material
financial impact on the Company.
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 shareholder's of common stock on
October 29, 1999 was 1734.
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, 1999 Year ended August 31, 1998
Sales Price Sales Price
Quarter Ended High Low High Low
November 30 16 5/8 8 7/8 15 10 1/2
February 28 13 1/4 11 16 1/2 12 1/2
May 31 12 1/2 9 1/8 19 13 1/8
August 31 12 3/4 10 3/4 14 3/4 8 7/8
6. Selected Financial Data.
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net Sales and other $49,569,430 $46,639,338 $40,991,125 $34,366,029 $32,734,893
operating revenues
Income from operations 4,870,677 4,101,643 2,811,460 2,194,985 1,907,884
Equity in earnings
of unconsolidated
joint venture 238,000 195,000 195,375 82,965 9,951
Minority Participation
in Subsidiary 99,633 107,585 303,680 - -
Gain in sale of assets
from unconsolidated
joint venture - 1,718,425 - - -
Net Income 5,208,310 6,122,6531 3,312,515 2,277,950 927,835
Total Assets 38,984,136 25,261,786 22,635,761 19,786,824 20,002,586
Long-term debt and 6,508,471 682,576 3,020,708 4,481,071 6,464,260
capital leases
Per Common Share:
Diluted 1.30 1.561 .84 .61 .43
Basic 1.34 1.581 .84 .61 .43
Cash dividends* .32 .28 .21 .15 .10
*Single annual payments declared and paid subsequent to fiscal year
end.
1 Includes a non-recurring gain of $1,718,425 ($0.44 per share)
related to the sale of certain assets by The Stewart Group, Inc. joint
venture.
</TABLE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
SELECTED RELATIONSHIPS WITHIN THE CONSOLIDATED
STATEMENTS OF OPERATIONS
Years Ended August 31,
1999 1998 1997
(Dollars in thousands)
Net revenue..............................$49,569 $46,639 $40,991
Net Income from Operations...............$ 5,208 $ 4,404 $ 3,313
Increase in net revenue from previous
year......................
Amount............................ $ 2,930 $ 5,648 $ 6,625
Percentage........................ 6% 14% 19%
Increase(Decrease) in net income from
Operations from previous year........... $ 804 $ 1,091 $ 1,035
Percentage of net revenue:
Net revenue....................... 100.0% 100.0% 100.0%
Expenses:
Cost of Sales................ 65.9 64.3 65.5
Selling, general and
administrative expenses.... 18.1 20.8 21.5
Other expenses............... 0.5 0.5 1.3
Income from operations
before income taxes.......... 15.5 14.3 11.7
Provision for income taxes........ 5.7 5.5 4.8
Income from operations............ 9.8% 8.8% 6.9%
Minority participation in subsidiary .2 .2 .7
Equity in earnings of unconsolidated
joint venture................ .5 .4 .5
Gain on sales of assets by
Unconsolidated joint venture.... - 3.7 -
Net Income....................... 10.5% 13.1% 8.1%
Overview
Net revenues of $49.6 million reached record levels in fiscal year 1999,
surpassing the prior year by 6%. During fiscal 1998, the Company recognized
the gain related to the sale of assets by our joint venture partner of $1.7
million or $0.44 per share on a diluted basis. This year, net
income from operations and earnings per share on a diluted basis were $5.2
million and $1.30 per share fully diluted, respectively, a net increase of 18%
after adjusting for the asset sale last year by The Stewart Group, Ltd. joint
venture.
During fiscal 1999, the Company acquired the remaining interest in its
subsidiary, Sunburst EMS and also acquired RWA, Inc. Both of these
companies participate within the electronic manufacturing services industry.
To align the requirements of the Financial Accounting Standards with the
Company's operational and organizational structure, the Company now has two
reportable segments, the Specialized Manufacturing segment and the Electronic
Manufacturing Services segment.
Results of Operations.
Total revenues for fiscal 1999 increased $2.9 million to $49.6
million, a 6% increase over the prior year. Our policy of balanced
diversification continues to create increased stakeholder value through strong
growth in sales and earnings. A significant portion of the increase relates to
our continued penetration within the electronic cable markets and the benefits
received from our Electronic Manufacturing Services segment that includes our
acquisition of RWA, Inc. effective May 1, 1999.
The Specialized Manufacturing segment continued to provide some growth
although it was effected by the loss of certain sales that were included last
year due to a distribution agreement that was terminated as of September 30,
1998. These sales reductions were offset by increases within our existing
divisions and at increased margins as the product was manufactured by the
Company. The compounded rate of revenue growth over the past two years for
this segment is 9%.
Sales and Operating Profit by Segment
($-000's) for the year ended
8/31/99
Electronic
Specialized Manufacturing
Manufacturing Services
Revenues $ 43,033 $ 6,537
Operating Profit $ 9,182 $ 164
Prior to the year ended August 31, 1999, the electronic manufacturing
services segment accounted for less than 10% of operations and assets.
Fiscal 1998 revenue increased about 14% to $46.6 million when compared to
1997. This improvement benefitted from generally strong domestic and
Canadian economies which provided all of our divisions with growth in their
traditional markets. In addition new product development and the inclusion
of a full year of sales by our subsidiary, Sunburst EMS, which had been
consolidated since January 1997 were all important to our revenue growth
during this period.
The dollar value of cost of products was higher in fiscal 1999 compared to
both 1998 and 1997. These increases were mostly volume related. As a percent
of sales, cost of products increased to 66.3% in 1999 when compared to 64.9% in
1998 while 1997 was about the same as the current year. The increase is due to
some increase in raw material costs, product mix and some selling price
erosion created by competitive pressure. When comparing 1998 to 1997, raw
materials cost decreases were a significant part of the gross profit margin
improvement. Gross profit margins during the past three years have been
relatively stable and we would expect continued solid margins during the
current fiscal year as long as current market trends prevail. However, no
assurances can be given in this regard. Competitive pressures prevent the
Company from recovering any significant amount of related cost increases.
Selling and administrative expenses decreased $800,000 to $8.9 million
during 1999 when compared to fiscal 1998. These expenses in 1998 were also
higher than 1997 by $900,000. A significant amount of the increased expenses
during 1998 were associated with certain warranty and administrative costs
related to a large bridge construction contract, costs required to adjust
certain values of some investments, and expenses associated with our
investment in personnel all associated with our ability to improve revenues and
profitability. The Company continues to be focused on improving certain costs
and continues to review activities and processes in order to assess all costs
while continuing to provide quality products and services to the marketplace.
Interest expense increased to $341,000 in 1999 as compared to $258,000 and
$470,000 respectively when compared to 1998 and 1997. The increase this year is
associated with our acquisitions. A significant amount of the interest and bad
debt reduction during fiscal 1998 was the result of the cash dividend declared
and paid by our joint venture partner, The Stewart Group, Inc. The Company
continues to benefit from solid earnings and low borrowing rates from its
lenders.
The improvement in sales from our traditional products more than offset the
loss of certain sales due to the terminated distribution agreement as of
September 30, 1998. These sales were replaced with sales of Chase manufactured
value added products. The Company also benefited somewhat from the recently
concluded acquisitions. These improved sales and the elimination of a need to
adjust certain investments assisted in our profit enhancement. Management will
continue its approach of seeking to maximize and expand our current businesses
while at the same time seeking future opportunities through selective
acquisitions.
The effective tax rates for fiscal 1999 when compared to the prior two
years are lower. The Company continues to receive the benefit of solid export
sales through our Chase Export Corporation subsidiary. Also, effective January
1999, Chase acquired 100% ownership of Sunburst EMS that enabled us to
consolidate their losses for income tax purposes.
Minority participation in subsidiary represented the minority shareholders
49.9% equity in the losses of Sunburst EMS.
The equity in earnings of unconsolidated joint ventures over the past few
years relates to our ownership position in The Stewart Group Inc., Toronto,
Canada.
Our gain in sales of assets by unconsolidated joint venture during fiscal
1998 is a non-recurring gain and the result of the sales of certain assets by
The Stewart Group, Inc. joint venture to Owens Corning.
Liquidity and Sources of Capital
Cash flow generated from operations was $3,264,000 in 1999 as compared to
$5,551,000 and $3,538,000 during 1998 and 1997 respectively. During fiscal
1998 a cash dividend was received from our joint venture partner, The Stewart
Group, Inc., that was related to the sale of assets to Owens Corning.
Receivable and inventory increases during 1999 were related to increased
business and the recent acquisition.
The ratio of current assets to current liabilities was 1.5 at the end of
fiscal 1999 as compared to 1.9 and 1.6 for 1998 and 1997, respectively. This
year's current ratio was affected by the debt incurred in order to conclude our
recent acquisitions.
The unused available long-term credit amounted to $5,140,000 at August 31,
1999 as compared to $5,840,000 at the previous year-end. Current financial
resources and anticipated funds from operations are expected to be adequate to
meet requirements for funds in the year ahead.
Year 2000.
The year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the
Company's programs that have time sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000, which could result in a major
system failure or miscalculations.
Management established an executive committee to review the year 2000 issue
as well as our informational system. The committee completed an assessment
of the Company's computer systems and the embedded systems contained in its
manufacturing process. Machinery and equipment used in key production process
that were purchased over the last two - five years are Y2K compliant. However,
many of the Company's programs had time sensitive software that could result in
a system failure. It was determined that our internal computer operation, both
hardware and software needed upgrading. A decision was made to update and
upgrade our entire informational system.
The conversion to our new information system has been completed at a cost of
about $630,000 and will be amortized over 5 years in accordance with generally
accepted accounting practices.
The Company notes that there are risk factors associated with year 2000 that
it cannot directly control, namely that its key suppliers, distributors and
other third parties will have timely converted their systems. The Company
does not anticipate that year 2000 issues will have any material adverse
effects to the Company.
Forward-Looking Information.
From time to time, the Company may publish, verbally or in written form,
forward-looking statements relating to such matters as anticipated financial
performance, business prospects, technological developments, new products,
research and development activities and similar matters. In fact, this Form
10-K (or any other periodic reporting documents required by the 1934 Act) may
contain forward-looking statements reflecting the current views of the Company
concerning potential future events or developments. The Private Securities
Litigation Reform Act of 1995 (the "Act") provides a "safe harbor" for forward-
looking statements. In order to comply with the terms of the "safe harbor,"
the Company cautions investors that any forward-looking statements made by the
Company are not guarantees of future performance and that a variety of factors
could cause the Company's actual results and experience to differ materially
from the anticipated results or other expectations expressed in the Company's
forward-looking statements. The risks and uncertainties which may affect the
operations, performance, development and results of the Company's business
include, but are not limited to, the following: uncertainties relating to
economic conditions; uncertainties relating to government and regulatory
policies; uncertainties relating to customer plans and commitments; the pricing
and availability of equipment, materials and inventories; technological
developments; performance issues with key suppliers and subcontractors;
worldwide political stability and economic growth; regulatory uncertainties;
delays in testing of new products; rapid technology changes and the highly
competitive environment in which the Company operates. Readers are cautioned
not to place undue reliance on these forward-looking statements, which speak
only as of the date the statement was made.
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.
Form 8K was filed referencing the acquisition of RWA, Inc. on June 8, 1999,
and amended to include certain financial data on August 12, 1999. Copies of
any of the exhibits are available to beneficial shareholders as of the record
date (December 1, 1999) without charge upon written request to the Investor
Relations Department, Chase Corporation, 26 Summer St., Bridgewater, MA. 02324.
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, 1999
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, 1999
Peter R. Chase Executive Officer and
Director (Principal
Executive Officer)
By /s/ Everett Chadwick, Jr. Treasurer and Chief November 24, 1999
Everett Chadwick, Jr. Financial Officer
(Principal Financial
and Accounting Officer)
By /s/ Edward L. Chase Director November 24, 1999
Edward L. Chase
By /s/ Sarah Chase Director November 24, 1999
Sarah Chase
By /s/ William H. Dykstra Director November 24, 1999
William H. Dykstra
By /s/ George M. Hughes Director November 24, 1999
George M. Hughes
By /s/ Ronald Levy Director November 24, 1999
Ronald Levy
By /s/ Ernest E. Siegfriedt, Jr. Director November 24, 1999
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)
10.11 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)
10.17 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)
10.20 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)
10.25 Endorsement Split-Dollar Agreement dated June 8, 1995 by and between the
Company and Edward L. Chase and Claire Chase.
10.26 Amendment to and Confirmation of Split Dollar Insurance Agreement dated
June 8, 1995 by and between the Company and Edward L. Chase and Claire Chase.
10.27 Stock Purchase Agreement effective May 25, 1999 by and between the
Company and RWA, Inc., (incorporated by reference from Exhibit 2.1 to the
Company's current report on Form 8K dated 6/8/99 and amended on 8/12/99 to
include financials).
22 Subsidiaries of the Company
List of Financial Statements and Schedules
Report of Independent Certified Public Accountants...........
Consolidated Balance Sheets as of August 31, 1999 and
August 31, 1998...............................................1
Consolidated Statements of Operations for each of the three
fiscal years in the period ended August 31, 1999..............2
Consolidated Statements of Shareholders' Equity for each of
the three fiscal years in the period ended August 31, 1999.....3
Consolidated Statements of Cash Flows for each of the three
Fiscal years in the period ended August 31, 1999..............4
Notes to Consolidated Financial Statements......................... 5
CHASE CORPORATION AND SUBSIDIARIES
BRAINTREE, MASSACHUSETTS
CONSOLIDATED FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS' REPORT
AUGUST 31, 1999 AND 1998
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, 1999 and 1998, and the related consolidated
statements of operations, shareholders' equity and cash flows for each year in
the three year period ended August 31, 1999 and the Schedule II, 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, 1999 and 1998, and the consolidated
results of their operations and cash flows for each year in the three year
period ended August 31, 1999, 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 & Hayes, P.C.
Wellesley, Massachusetts
November 24, 1999
CHASE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AUGUST 31, 1999 AND 1998
<TABLE>
<CAPTION>
ASSETS
1999 1998
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 185,269 $ 2,296,384
Trade receivables, less allowance for doubtful
accounts of $257,049 and $201,135, at August 31,
1999 and 1998, respectively 8,870,786 7,320,022
Inventories:
Finished and in process 2,041,496 1,671,770
Raw materials 5,407,813 3,064,684
7,449,309 4,736,454
Prepaid expenses 330,710 352,652
Other current assets - 27,410
Receivable from related parties 107,582 46,406
Deferred income taxes 90,294 90,294
TOTAL CURRENT ASSETS 17,033,950 14,869,622
PROPERTY, PLANT AND EQUIPMENT
Land and improvements 322,423 332,536
Buildings 3,587,304 2,385,647
Machinery and equipment 14,609,754 11,763,321
Construction in progress 835,445 532,628
19,354,926 15,014,132
Less allowances for depreciation 12,047,487 9,904,243
7,307,439 5,109,889
OTHER ASSETS
Excess of cost over net assets of acquired
businesses, less amortization of $595,270
and $321,720 at August 31, 1999 and 1998,
respectively 9,304,559 1,106,462
Patents, agreements and trademarks, less
amortization of $694,530 and $596,319 at
August 31, 1999 and 1998, respectively 946,193 1,044,404
Cash surrender value of life insurance, net of
loans of $158,049 at August 31, 1999 and 199 8 2,931,984 2,423,851
Deferred income taxes 81,266 72,266
Investments in minority interests 1,044,797 486,795
Other 333,948 148,497
14,642,747 5,282,275
$38,984,136 $25,261,786
=========== ===========
</TABLE>
See accompanying notes to the consolidated financial statements.
<TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
1999 1998
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 4,387,943 $ 2,848,199
Notes payable to bank 1,576,477 1,136,000
Accrued payroll and other compensation 1,292,816 1,406,909
Accrued pension expense - current 251,273 289,478
Other accrued expenses 1,164,022 1,821,028
Federal taxes payable 53,008 (134,809)
Deferred compensation 41,999 41,999
Current portion of long-term debt 2,540,457 287,317
TOTAL CURRENT LIABILITIES 11,307,995 7,696,121
LONG-TERM DEBT, less current portion 6,508,471 682,576
DEFERRED COMPENSATION 338,582 199,131
ACCRUED PENSION EXPENSE 294,023 201,369
MINORITY INTEREST IN SUBSIDIARY - 58,923
COMMITMENTS (See Note G) - -
CONTINGENCIES (See Note M) - -
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 4,994,928 and
4,977,650 shares at August 31, 1999
and 1998, respectively 499,493 497,765
Additional paid-in capital 3,466,834 3,370,066
Treasury Stock, 1,088,584 and 1,072,084
shares of Common Stock at August 31,
1999 and 1998, respectively (4,687,565) (4,535,476)
Cumulative effect of currency translation (188,331) (238,728)
Retained earnings 21,444,634 17,330,039
20,535,065 16,423,666
$38,984,136 $25,261,786
=========== ===========
</TABLE>
- 1 -
CHASE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR EACH YEAR IN THE THREE YEAR PERIOD ENDED AUGUST 31, 1999
<TABLE>
1999 1998 1997
Revenue:
<S> <C> <C> <C>
Sales $49,247,915 $46,228,818 $40,473,809
Commissions and other income 272,320 331,354 481,881
Interest 49,195 79,166 35,435
49,569,430 46,639,338 40,991,125
Costs and expenses:
Costs of products and services sold 32,695,014 30,003,343 26,868,127
Selling, general and administrative
expenses 8,931,753 9,731,083 8,798,549
Bad debt expense - net of recoveries (88,940) (5,807) 68,544
Interest expense 340,977 258,476 469,878
41,878,804 39,987,095 36,205,098
INCOME FROM OPERATIONS
BEFORE INCOME TAXES 7,690,626 6,652,243 4,786,027
Income taxes 2,819,949 2,550,600 1,974,567
INCOME FROM OPERATIONS 4,870,677 4,101,643 2,811,460
Minority participation in subsidiary 99,633 107,585 303,680
Equity in earnings of unconsolidated
joint venture 238,000 195,000 197,375
Gain on sales of assets by
unconsolidated joint venture - 1,718,42 -
NET INCOME $ 5,208,310 $ 6,122,653* $ 3,312,515
=========== =========== ===========
</TABLE>
Net income per share of Common Stock
Basic $1.34 $1.58* $ .84
===== ===== =====
Fully diluted $1.30 $1.56* $ .84
===== ===== =====
* Includes a non-recurring gain of $1,718,425 ($0.44 per share) related to the
sale of certain unconsolidated assets by The Stewart Group, Inc. joint venture.
See accompanying notes to the consolidated financial statements.
- 2 -
CHASE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR EACH YEAR IN THE THREE YEAR PERIOD ENDED AUGUST 31, 1999
<TABLE>
<CAPTION>
CUMULATIVE
ADDITIONAL EFFECT OF
COMMON STOCK PAID-IN TREASURY STOCK RETAINED CURRENCY SHAREHOLDERS'
SHARES AMOUNT CAPITAL SHARES AMOUNT EARNINGS TRANSLATION EQUITY
Balance at August 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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
options 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
Cash dividend paid,
$0.21 per share - - - - - (807,180) - (807,180)
Currency translation
adjustment - - - - - - (116,607) (116,607)
Exercise of stock options 103,853 10,385 80,301 - - - - 90,686
Compensatory stock
issuance - - 98,437 - - - - 98,437
Purchase of Treasury
Stock - - - 31,611 (517,626) - - (517,626)
Net income - - - - - 6,122,653 - 6,122,653
Balance at August 31,
1998 4,977,650 497,765 3,370,066 1,072,084 (4,535,476) 17,330,039 (238,728) 16,423,666
Cash dividend paid,
$0.28 per share - - - - - (1,093,715) - (1,093,715)
Currency translation
adjustment - - - - - - 50,397 50,397
Exercise of stock
options 17,278 1,728 (1,728) - - - - -
Compensatory stock
issuance - - 98,496 - - - - 98,496
Purchase of Treasury
Stock - - 16,500 (152,089) - - (152,089)
Net income - - - - - 5,208,310 - 5,208,310
Balance at August 31,
1999 4,994,928 $499,493 $3,466,834 1,088,584 $(4,687,565) $21,444,634 $(188,331) $20,535,065
========= ======== ========== ========= =========== =========== ========= ===========
See accompanying notes to the consolidated financial statements.
- 3 -
</TABLE>
<TABLE>
<CAPTION>
CHASE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR EACH YEAR IN THE THREE YEAR PERIOD ENDED AUGUST 31, 1999
1999 1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income $ 5,208,310 $ 6,122,653 $ 3,312,515
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 1,019,715 844,237 849,266
Amortization 371,761 181,442 155,946
(Gain) on sale of assets - (1,718,425) -
Stock issued for compensation 98,496 98,437 98,437
Change in provision for losses
on trade receivables (64,086) 48,635 -
Tax effect of option exercise - - 297,415
Deferred federal tax - 27,815 22,511
Revaluation of investments in
minority interests (300,000) 470,000 -
Change in assets and liabilities:
Trade receivables (1,547,854) (247,439) (1,351,066)
Inventories (2,712,855) (457,122) (606,679)
Prepaid expenses 21,942 (311,688) 63,898
Other current assets 27,410 99,911 40,443
Accounts payable 1,539,744 461,809 15,774
Accrued expenses (716,651) 358,307 693,469
Federal taxes payable 178,817 (343,725) 141,655
Deferred compensation 139,451 (83,388) (195,237)
TOTAL ADJUSTMENTS (1,944,110) (571,194) 225,832
NET CASH FROM OPERATIONS 3,264,200 5,551,459 3,538,347
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds of note receivable - 46,111 63,172
Capital expenditures including patents
and agreements (3,166,868) (1,158,535) (1,506,636)
Investment in trusteed assets (185,451) (141,497) -
(Increase) in net cash surrender value (508,133) (461,002) (304,561)
Investments in minority interests (258,002) - 32,389
Note received from joint venture - - 362,319
Dividend received from joint venture - 1,757,693 -
Cash received on options exercise - 23,595 -
Investment in subsidiaries (8,530,570) - (550,000)
(12,649,024) 66,365 (1,903,317)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in long-term debt 8,941,219 200,000 4,952,967
Payments of principal on debt (862,184) (2,829,452) (6,683,630)
Net borrowing under line-of-credit 440,477 473,937 662,063
Cash dividends paid (1,093,714) (807,180) (571,528)
Purchase of Common Shares for Treasury (152,089) (517,626) (27,450)
7,273,709 (3,480,321) (1,667,578)
NET CHANGE IN CASH (2,111,115) 2,137,503 (32,548)
CASH AT BEGINNING OF YEAR 2,296,384 158,881 191,429
CASH AT END OF YEAR $ 185,269 $2,296,384 $ 158,881
========== ========== ===========
</TABLE>
See Note N for supplemental cash flow data.
See accompanying notes to the consolidated financial statements.
- 4 -
CHASE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR EACH YEAR IN THE THREE YEAR PERIOD ENDED AUGUST 31, 1999
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 and its
wholly-owned subsidiaries. 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 supported 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 Sunburst Electronics Manufacturing Solutions, Inc.
("Sunburst EMS") (formerly DC Scientific, Inc.) and RWA, Inc. subsidiaries
provide 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.
- 5 -
CHASE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR EACH YEAR IN THE THREE YEAR PERIOD ENDED AUGUST 31, 1999
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.
- 6 -
CHASE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR EACH YEAR IN THE THREE YEAR PERIOD ENDED AUGUST 31, 1999
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. The
amounts of gains and losses were immaterial in 1999, 1998 and 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.
- 7 -
CHASE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR EACH YEAR IN THE THREE YEAR PERIOD ENDED AUGUST 31, 1999
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 stock options. The number of shares used in
the computation of basic income per share was 3,898,735 at August 31, 1999,
3,874,896 at August 31, 1998 and 3,938,123 at August 31, 1997. Fully diluted
income per share was computed based upon 3,994,472 shares at August 31, 1999,
3,935,919 shares at August 31, 1998 and 3,955,509 shares at August 31, 1997.
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.
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, Metropolitan Life Insurance and other carriers of
$351,527; $1,556,347; $190,881; $497,575 and $493,703, respectively. Subject
to periodic review, the Company intends to maintain these policies through
the lives of the insureds.
NOTE D - LONG-TERM DEBT
Long-term debt consists of the following at August 31, 1999 and 1998:
1999 1998
Note payable to bank. $ 700,000 $ -
Capitalized lease obligation with monthly
payments of $15,418, including interest
at 7.514% through May 1999. - 119,940
Term note payable to bank in 60 quarterly
payments of $250,000 through May 2004
with interest at the Eurodollar rate
plus 1.5% 3,700,00 -
- 8 -
CHASE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR EACH YEAR IN THE THREE YEAR PERIOD ENDED AUGUST 31, 1999
NOTE D - LONG-TERM DEBT (Continued)
1999 1998
Term note payable to bank in 60 quarterly
payments of $34,500 commencing February 23,
1999 with interest at the Eurodollar
rate plus 1.5%. $ 621,000 $ 200,000
Term note payable to an individual in
connection with the acquisition of
RWA, Inc. with quarterly payments of
$250,000 including interest at 7.5%
through August 2002 2,700,000 -
Term notes payable to bank with principal
payments of $12,267 per month with
interest at the bank's base rate plus
1/2 percent secured by all assets of
Sunburst EMS, Inc. 396,267 559,967
Equipment notes with monthly payments of
$7,943 with interest averaging 9.11%
secured by manufacturing equipment 283,036 -
Equipment notes with monthly payments of
$1,624 with interest at 9.75% secured
by printing equipment 22,833 -
Equipment note with monthly payments of
$2,942 with interest at 7.43% secured
by manufacturing equipment 134,708 -
Equipment note with monthly payments of
$11,138 with interest at 7.05% secured
by data processing equipment 491,084 -
Mortgage note payable to a bank secured
by land and building of DC Scientific,
Inc. - 89,986
9,048,928 969,893
Less portion payable within one year
classified as a current liability. 2,540,457 287,317
$6,508,471 $ 682,576
========== ==========
- 9 -
CHASE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR EACH YEAR IN THE THREE YEAR PERIOD ENDED AUGUST 31, 1999
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 1.5
percent. The line of credit is secured by all assets and is limited to 50% of
inventory and 85% of current receivables. The unused available long-term
credit amounted to $5,140,000 at August 31, 1999.
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 subsidiaries have revolving lines of credit, secured by
the assets of the subsidiaries.
The weighted average interest rate on short-term borrowings was 7.22%
and 7.75% at August 31, 1999 and 1998, respectively.
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>
Year Ended August 31,
1999 1998 1997
Federal income taxes at applicable
<S> <C> <C> <C>
rates $2,614,649 $2,260,405 $1,627,249
Adjustments resulting from the tax
effect of:
Increase in cash surrender value
of life insurance (172,765) (191,722) (143,100)
Benefit plans not qualified for
deduction from federal tax 146,905 231,374 154,038
Net loss of subsidiary not
consolidated for tax (140,231) 43,034 146,671
State and local taxes net of
federal tax effect 413,531 408,144 289,172
Foreign dividend received net
of foreign tax credit - (172,878) -
Other (42,140) (27,757) (99,463)
INCOME TAXES $2,819,949 $2,550,600 $1,974,567
========== ========== ==========
- 10 -
</TABLE>
CHASE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR EACH YEAR IN THE THREE YEAR PERIOD ENDED AUGUST 31, 1999
NOTE F - INCOME TAXES (Continued)
<TABLE>
Year Ended August 31,
1999 1998 1997
<S> <C> <C> <C>
Current $2,828,949 $2,655,595 $2,010,423
Deferred (benefit):
Pension expense 26,185 (19,425) 19,078
Depreciation (32,668) (21,910) 5,480
Allowance for doubtful accounts 32,365 19,455 -
Market valuation of investments (120,000) 188,000 110,000
Deferred compensation 77,287 (73,267) 39,294
Deferred state taxes 7,831 (120,668) 119,707
Reserve - - (32,000)
Total Deferred (9,000) (27,815) 261,559
(Benefit) of option exercises
credited to shareholders' equity - (77,180) (297,415)
$2,819,949 $2,550,600 $1,974,567
========== ========== ==========
</TABLE>
The timing differences that give rise to the components of net tax
assets are as follows at August 31, 1999 and 1998:
1999 1998
Assets:
Reserve for bad debt $ 102,820 $ 70,455
Patents and agreements 35,200 35,200
Pension accrual 117,610 91,425
State tax accrual 27,670 19,839
Deferred compensation 117,833 40,546
Investments marked to market 178,000 298,000
579,133 555,465
Less valuation allowance 12,000 12,000
567,133 543,465
Liabilities:
Depreciation 413,573 380,905
Net Assets $ 153,560 $ 162,560
========== ==========
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, 1999:
Year Ending August 31, Buildings
2000 $ 293,324
2001 293,324
2002 247,810
2003 225,300
2004 123,225
$1,182,983
==========
- 11 -
CHASE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR EACH YEAR IN THE THREE YEAR PERIOD ENDED AUGUST 31, 1999
NOTE G - OPERATING LEASES (Continued)
Total rental expense for all operating leases amounted to $519,293,
$563,375, and $494,435 for the years ended August 31, 1999, 1998 and 1997,
respectively.
NOTE H - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected unaudited quarterly financial data for 1999, 1998 and 1997, is
as follows:
Quarter
1999 First Second Third Fourth Year
Net sales $11,551,910 $10,414,55 $12,928,890 $14,352,560 $49,247,915
Gross profit $4,055,358 $3,329,280 $4,212,522 $4,955,741 $16,552,901
Net income $1,160,808 $833,635 $1,279,970 $1,933,897 $5,208,310
Net income per
common share $.30 $.21 $.33 $.50 $1.34
==== ==== ==== ==== =====
Quarter
1998 First Second Third Fourth Year
Net sales $11,557,583 $10,166,586 $11,830,508 $12,674,141 $46,228,818
Gross profit $4,212,072 $3,253,702 $4,006,118 $4,753,583 $16,225,475
Net income $2,676,264* $720,565 $1,080,714 $1,645,110 $6,122,653*
Net income per
common share $.68* $.18 $.28 $.44 $1.58*
==== ==== ==== ==== =====
* Includes gain on sales of assets by a non-consolidated subsidiary of
$1,718,425 ($0.44 per share)
Quarter
1997 First Second Third Fourth Year
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
==== ==== ==== ==== ====
- 12 -
CHASE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR EACH YEAR IN THE THREE YEAR PERIOD ENDED AUGUST 31, 1999
NOTE I - EXPORT SALES AND FOREIGN OPERATIONS
Export sales from continuing domestic operations to unaffiliated third
parties were $4,459,743, $5,207,413 and $4,591,695 for the years ended August
31, 1999, 1998 and 1997, 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 7.3 percent of consolidated sales and 3.6 percent
of assets.
Prior to fiscal year 1999, no domestic customer accounted for more than
ten percent of sales. During fiscal year 1999 one customer accounted for
approximately fifteen percent of total sales.
NOTE J - RESEARCH AND DEVELOPMENT EXPENSE
Research and development expense amounted to approximately $617,789,
$573,978, and $540,467 for the years ended August 31, 1999, 1998 and 1997,
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. The Company's contribution expense was $91,219,
$112,418 and $102,302 for the years ended August 31, 1999, 1998 and 1997,
respectively.
Non-Qualified Deferred Savings Plan
The Company has a non-qualified deferred savings plan covering directors
and selected employees. Participants may elect to defer a portion of their
compensation for future payment. The plan is funded by trusteed assets that
are restricted to the payment of deferred compensation or satisfaction of the
Company's general creditors. The Company's liability under the plan was
$326,948 at August 31, 1999.
Pension Plan
The Company has non-contributory defined benefit pension plans covering
substantially all employees. Net periodic pension cost was $327,266, $268,149
and $311,447 for the years ended August 31, 1999, 1998 and 1997, 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. The plans provide for pension benefits determined by a
participant's years of service and final average compensation. The qualified
plan assets consist of separate pooled investment accounts with an insurance
company.
- 13 -
CHASE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR EACH YEAR IN THE THREE YEAR PERIOD ENDED AUGUST 31, 1999
NOTE K - BENEFITS (Continued)
Net pension expense components: Year Ended August 31,
1999 1998 1997
Service cost of benefits earned
during the period $283,651 $237,130 $220,639
Interest cost on projected benefit
obligations 355,789 321,667 295,285
Return on plan assets (334,303) (94,718) (506,142)
Net amortization and deferral 22,129 (195,930) 301,665
Net periodic pension cost $327,266 $268,149 $311,447
======== ======== ========
The following table sets forth the actuarial present value of benefit
obligations and funded status:
August 31,
1999 1998 1997
Accumulated benefit obligations,
including vested benefits of
$2,738,122, $2,843,506 and
$2,410,404 at August 31, 1999,
1998 and 1997, respectively $ 2,706,803 $ 2,874,059 $ 2,483,200
=========== =========== ===========
Projected benefit obligations $(4,701,105) $(4,502,041) $(4,142,846)
Plan assets at fair value,
including prefunded amounts 3,761,924 3,273,542 3,096,643
Funded status (939,181) (1,228,499) (1,046,203)
Unrecognized net loss 186,130 496,164 264,888
Unrecognized prior service cost 214,752 255,484 262,894
Unamortized net transition assets (6,997) (13,996) (20,995)
(Accrued) pension expense $ (545,296) $ (490,847) $ (539,416)
=========== =========== ===========
- 14 -
CHASE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR EACH YEAR IN THE THREE YEAR PERIOD ENDED AUGUST 31, 1999
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
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 28,000 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. 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 and non-employee directors of the Company. The plans reserve
600,000 shares of Common Stock for grant.
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. Compensation expense of $98,437
per year is being recognized over nine years. 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.
- 15 -
CHASE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR EACH YEAR IN THE THREE YEAR PERIOD ENDED AUGUST 31, 1999
NOTE K - BENEFITS (Continued)
Stock Option Plans (Continued)
Options at August 31, 1999:
<TABLE>
<CAPTION>
Weighted Weighted
Average Average
Exercise Exercise Remaining Exercise
Outstanding Prices Price Life Exercisable Price
<C> <C> <C> <C> <C> <C>
14,000 $ 1.24 $1.24 2 years 14,000 $1.24
368,474 3.375-4.625 3.49 6 years 107,774 3.63
21,500 5.09-5.625 5.31 7 years 13,000 5.21
15,000 8.75-9.09 8.98 8 years 9,500 9.02
5,000 11.83 11.83 9 years - -
</TABLE>
Stock option plan activity was as follows:
<TABLE>
<CAPTION>
Weighted Weighted
Average Officers Average
Exercise and Exercise
Directors Price Employees Price
<S> <C> <C> <C> <C>
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
Excerisable 71,500 96,920
Grants at market price - - 5,000 8.75
Exercises (16,500) 1.43 (86,526) 3.68
Exercises (30,000) 4.63 (2,000) 5.63
Outstanding August 31, 1998 70,500 4.00 370,47 3.59
Exercisable 40,500 2.92 57,573 3.43
Grants at market price - - 5,000 11.83
Exercises (19,000) 4.63 (3,000) 5.63
Outstanding August 31, 1999 51,500 3.76 372,474 3.68
Exercisable 36,500 3.59 107,774 3.73
</TABLE>
- 16 -
CHASE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR EACH YEAR IN THE THREE YEAR PERIOD ENDED AUGUST 31, 1999
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%, a dividend yield of 4% and an expected life of 5 years, had
Financial Accounting Standards Board Statement No. 123 been applied, are as
follows:
August 31,
1999 1998 1997
Net income $5,121,614 $6,043,212 $3,257,837
Basic net income per share $1.31 $1.56 $ .83
NOTE L - SEGMENT DATA
Chase Corporation operates in two business segments, a specialized
manufacturing segment consisting of protective coatings and tapes and an
electronic manufacturing services segment. Specialized manufacturing products
include insulating and conducting materials for wire and cable manufacturers,
protective coatings for pipeline applications and moisture protective coatings
for electronics and printing services. Electronic manufacturing services
include printed circuit board and electro-mechanical assembly services for the
electronics industry. Prior to the year ended August 31, 1999, the electronic
manufacturing services segment accounted for less than 10% of operations and
assets.
<TABLE>
<CAPTION>
Electronic
Specialized Manufacturing
Manufacturing Services
<S> <C> <C>
Revenues $43,032,905 $6,536,525
Operating profit $ 9,182,016 $ 164,278
Identifiable assets $24,441,128 $8,067,407
</TABLE>
- 17 -
CHASE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR EACH YEAR IN THE THREE YEAR PERIOD ENDED AUGUST 31, 1999
NOTE M - CONTINGENCIES
Legal
In 1992, the Company was named as a third party defendant by USX
Corporation, General Cable Corporation and G.K. Technologies, Inc. in eighteen
personal injury lawsuits filed in Jackson County, Mississippi alleging asbestos
exposure at the Ingalls Shipyard. The Company is alleged to have sold tape
products containing asbestos which were incorporated into wire and cable
products used in ships manufactured at that shipyard. Many of the primary
cases have been resolved, but some remain pending. Nothing has been done to
pursue the third-party claims against the Company. The Company's insurer has
assumed defense of these claims subject to reservation of its rights as to
coverage for any underlying liability assessed. In addition, the Company
received notice from General Cable and G.K. in July 1994 of the pendency of 14
additional asbestos personal injury lawsuits, but no claims have been filed
against the Company in any of those cases. Although the Company cannot
predict whether any of these claims or potential claims will be pursued,
management believes that such claims will not have any material financial
impact on the Company.
NOTE N - SUPPLEMENTAL CASH FLOW DATA
Cash paid during the year for:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Income taxes $2,817,685 $2,163,812 $1,509,125
Interest $ 340,591 $ 258,476 $ 477,768
</TABLE>
NOTE O - 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
optic cable market. Chase Corporation owns a 42% interest in the joint venture
at August 31, 1999.
- 18 -
CHASE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR EACH YEAR IN THE THREE YEAR PERIOD ENDED AUGUST 31, 1999
NOTE P - ACQUISITIONS
Effective April 30, 1999, the Company acquired RWA, Inc., an electronic
manufacturing services company. The Company purchased the stock of RWA, Inc.
for cash of $5,000,000 and a note for $2,700,000, discounted at 7.5%. An
additional amount may be paid contingent upon the future performance based
upon fifty percent of the amount by which average annual earnings before
interest, taxes, depreciation and amortization multiplied by four exceeds
eight million dollars and a performance consideration based upon net income
for the thirty-six months ended May 31, 2002.
Any amounts due under contingent agreements will be recorded as
additions to goodwill. Goodwill is being amortized ratably over fifteen years,
subject to period review of anticipated future cash flows from the acquired
business.
Additionally, effective August 1, 1999, the Company acquired Northeast
Quality Products, Inc. ("NEQP"), a printer of high quality pressure sensitive
materials.
Pro-forma results (unaudited) for the years ended August 31, 1999 and
1998 based on the acquisitions occurring September 1, 1997 and 1998,
respectively, are as follows:
(Unaudited)
Year Ended August 31,
1999 1998
Revenue $58,182,333 $58,044,624
Net income $ 5,587,090 $ 6,588,737*
Basic earnings per share $1.43 $1.70*
Diluted earnings per share $1.40 $1.67*
* Includes a non-recurring gain of $1,718,425 ($0.44 per share) related to the
sale of certain unconsolidated assets by The Stewart Group, Inc. joint venture.
Effective January 27, 1999, Chase Corporation acquired the outstanding
shares of D.C. Scientific, Inc., that it did not previously own. In connection
with the acquisition, D.C. Scientific, Inc. changed its name to Sunburst
Electronic Manufacturing Solutions, Inc.
- 19 -
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
CHASE CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
BALANCE AT (1) (2) BALANCE AT
BEGINNING CHARGED TO COSTS CHARGED TO END OF
DESCRIPTION OF PERIOD AND EXPENSES OTHER ACCOUNTS DEDUCTIONS PERIOD
<S> <C> <C> <C> <C> <C>
Year ended August 31, 1998:
Allowance for doubtful
accounts $201,135 $(88,940) $146,458 $ 1,604 $257,049
Year ended August 31, 1998:
Allowance for doubtful
accounts $152,500 $ (5,807) $ 57,860 $ 3,418 $201,135
Year ended August 31, 1997:
Allowance for doubtful
accounts $127,500 $ 68,544 $ 25,000 $68,544 $152,500
</TABLE>
(1) Deductions are charged to accounts receivable when specific accounts are
judged to be uncollectible. Reserves are adjusted based on reviews of the
risk associated with specific accounts and with the overall collectibility
expectations of the total receivables.
(2) $146,458 reserve acquired with purchase of RWA, Inc., $57,860 adjustment
to insurance adjustment receivable recorded as prepaid insurance and $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-31-1999
<PERIOD-END> AUG-31-1999
<CASH> 185,269
<SECURITIES> 0
<RECEIVABLES> 9,127,835
<ALLOWANCES> 257,049
<INVENTORY> 7,449,309
<CURRENT-ASSETS> 17,033,950
<PP&E> 19,354,926
<DEPRECIATION> 12,047,487
<TOTAL-ASSETS> 38,984,136
<CURRENT-LIABILITIES> 11,307,995
<BONDS> 0
0
0
<COMMON> 499,493
<OTHER-SE> 20,035,572
<TOTAL-LIABILITY-AND-EQUITY> 38,984,136
<SALES> 49,247,915
<TOTAL-REVENUES> 49,520,235
<CGS> 32,695,014
<TOTAL-COSTS> 32,695,014
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 88,940
<INTEREST-EXPENSE> 340,977
<INCOME-PRETAX> 7,690,626
<INCOME-TAX> 2,819,949
<INCOME-CONTINUING> 5,208,310
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,208,310
<EPS-BASIC> 1.34
<EPS-DILUTED> 1.30
</TABLE>
