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 November 30, 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 St.
Bridgewater, Massachusetts 02324
(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 December 31, 1999 3,906,344
PART 1: FINANCIAL INFORMATION
<TABLE>
<CAPTION>
CHASE CORPORATION
CONSOLIDATED BALANCE SHEET
ASSETS Nov. 30, Aug.31,
1999 1999
(UNAUDITED) (AUDITED)
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 184,368 $ 185,269
Trade receivables,less allowance
for doubtful accounts of $257,049 and
$237,300 respectively 8,847,617 8,870,786
Note receivable from related party 107,582 107,582
Inventories(Note B)
Finished and in process 2,814,466 2,041,496
Raw materials 4,992,441 5,407,813
_________ _________
7,806,907 7,449,309
Prepaid expenses & other curr assets 355,013 330,710
Deferred taxes 85,294 90,294
__________ _________
TOTAL CURRENT ASSETS 17,386,781 17,033,950
PROPERTY, PLANT AND EQUIPMENT
Land and improvements 324,589 322,423
Buildings 3,597,499 3,587,304
Machinery & equipment 14,851,954 14,609,754
Construction in progress 949,059 835,445
__________ __________
19,723,101 19,354,926
Less allowance for depreciation 12,344,353 12,047,487
__________ __________
7,378,748 7,307,439
OTHER ASSETS
Note receivable from related party
Excess of cost over net assets of
acquired businesses less amortization 9,140,652 9,304,559
Patents, agreements and trademarks
less amortization 922,059 946,193
Cash surrender value of life ins. net 3,063,532 2,931,984
Deferred taxes 81,266 81,266
Investment in joint venture 1,040,338 1,044,797
Other 330,469 333,948
_________ _________
14,578,316 14,642,747
__________ __________
$39,343,845 $38,984,136
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY Nov. 30 Aug.31
1999 1999
(UNAUDITED) (AUDITED)
CURRENT LIABILITIES
<S> <C> <C>
Accounts payable $ 4,637,078 $ 4,387,943
Notes payable 1,549,039 1,576,477
Accrued expenses 1,827,380 2,456,838
Accrued pension expense - current 251,273 251,273
Income taxes 333,208 53,008
Deferred compensation 40,258 41,999
Current portion of L.T. debt 2,522,665 2,540,457
_________ _________
TOTAL CURRENT LIABILITIES 11,160,901 11,307,995
LONG-TERM DEBT, less current portion 5,589,798 6,508,471
Long-term deferred compensation
obligations 326,948 338,582
ACCRUED PENSION EXPENSE 390,050 294,023
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 4,994,928 shares at
Nov. 30, 1999 and 4,994,928 shares at
Aug. 31, 1999 respectively 499,493 499,493
Additional paid-in capital 3,491,459 3,466,834
Treasury Stock, 1,088,584 and 1,088,584
Nov. 30, 1999, and August 31, 1999, respectively. (4,687,565) (4,687,565)
Cum. G/(L) on currency translation (181,942) (188,331)
Retained earnings 22,754,703 21,444,634
__________ __________
21,876,148 20,535,065
__________ __________
$39,343,845 $38,984,136
========== ==========
See accompanying notes to the consolidated financial
statements and accountants' review report.
</TABLE>
<TABLE>
<CAPTION>
CHASE CORPORATION
STATEMENT OF CONSOLIDATED OPERATIONS
(UNAUDITED)
3 Months Ended
Nov.30, Nov.30,
199 1998
<S> <C> <C>
Sales $14,837,683 $11,511,910
Commissions and other income 114,591 84,518
Interest 104 19,980
14,952,378 11,616,408
Cost and Expenses
Cost of products sold(Note B) 10,202,425 7,456,552
Sell.,gen.and admin. Expen. 2,689,396 2,368,038
Bad debt expense 9,000 12,300
Interest expense 189,988 40,228
__________ __________
13,090,809 9,877,118
Income before income taxes and minority
interests and participation 1,861,569 1,739,290
Income taxes 631,500 693,300
Income before minority interests
and participations 1,230,069 1,045,990
Income from minority interest 80,000 60,000
Minority participation in subsidiary 54,818
NET INCOME $ 1,310,069 $ 1,160,808
Net income per share of Common Stock
Basic $ 0.335 $ 0.298
Fully Diluted $ 0.327 $ 0.292
</TABLE>
CHASE CORPORATION
CONSOLATED STAREMENTS OF STOCKHOLKERS' EQUITY
(UNAUDITED)
3 MONTHS ENDED NOVEMBER 30, 1999 AND NOVEMBER 30, 1998
<TABLE>
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, 1998 4,977,650 $497,765 $3,370,066 1,072,084 $(4,535,476) $17,330,039 $(238,728) $16,423,666
Curr. translation adjmt. 16,525 16,525
Exer.of stock options 615 61 (61) -
Compensatory stock issuance 24,62 24,624
Purchase of treasury stock 16,500 (152,089) (152,089)
Net Income for 3 months 1,160,808 1,160,808
_________________________________________________________________________________________________
Balance @ Nov. 30, 1998 4,978,265 497,826 3,394,629 1,088,584 (4,687,565) 18,490,847 (222,203) 17,473,534
Curr. translation adjmt. 33,872 33,872
Exer.of stock options 16,663 1,667 (1,667) -
Compensatory stock issuance 73,872 73,872
Net Income for 9 months 4,047,502 4,047,502
Dividends paid in cash -
$.28 a share on common stock (1,093,715) (1,093,715)
___________________________________________________________________________________________________
Balance @ Aug. 31, 1999 4,994,928 499,493 3,466,834 1,088,584 (4,687,565) 21,444,634 (188,331) 20,535,065
Curr. translation adjmt. 6,389 6,389
Compensatory stock issuance. 24,624 24,624
Net income for 3 months 1,310,069 1,310,069
___________________________________________________________________________________________________
Balance @ Nov. 30, 1999 4,994,928 $499,493 $3,491,458 1,088,584 $(4,687,565) $22,754,703 $(181,942) $21,876,147
</TABLE>
See accompanying notes to the consolidated financial statements
and accountants' review report
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
Three Months Ended
Nov. 30, Nov. 30,
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net Income $ 1,310,069 $ 1,160,808
Adjmts. to reconcile net income to net
cash provided by operating activities:
Income from joint venture (80,000) (60,000)
Minority interest (54,818)
Depreciation 326,534 222,041
Amortization 188,338 45,487
Provision for losses on accts. receivable (19,749) 18,165
Stock issued for compensation 24,624 24,624
Tax effect of cashless option exercise
Deferred taxes 5,000 (14,500)
Change in assets and liabilities
Trade receivables 42,918 754,680
Inventories (357,598) (247,709)
Prepd. expenses & other curr. assets (24,303) (152,415)
Accounts payable 249,135 (65,031)
Accrued expenses (533,431) (866,811)
Income taxes payable 280,200 (297,879)
Deferred compensation (13,375) 98,187
_________ _________
TOTAL ADJUSTMENTS 88,293 (595,979)
NET CASH FROM OPERATIONS 1,398,362 564,829
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (391,750) (844,506)
Investment in trusteed assets 3,479 (109,687)
Purchase of cash surrender value (131,548) (127,033)
Proceeds from note receivable (27,438) 56,538
Dividend received from joint venture 84,459
________ ________
(462,798) (1,024,688)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in long-term debt 1,700,000
Payments of principal on debt (636,465) (185,176)
Net borrowing under line-of-credit (2,000,000)
Purchase of Common Shares for Treasury (152,089)
_________ ________
(936,465) (337,265)
NET CHANGE IN CASH (901) (797,124)
CASH AT BEGINNING OF PERIOD 185,269 2,296,384
_________ _________
CASH AT END OF PERIOD $ 184,368 $ 1,499,260
========= =========
CASH PAID DURING PERIOD FOR:
Income taxes $ 403,250 $ 1,053,685
Interest $ 189,988 $ 40,228
See accompanying notes to the consolidated financial statements
and accountants' review report.
</TABLE>
CHASE CORPORATION SECURITIES AND EXCHANGE COMMISSION
NOTES TO CONSOLIDATED FINANCIAL STATEMENT
January 13, 2000
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
outstanding used in determining basic per share results was 3,906,344 for the
period of three months ended November 30, 1999. Earnings per share on a fully
diluted basis were calculated on 4,005,804 common shares and share equivalents.
Common share equivalents arise from the issuance of certain stock options.
Note D - 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.
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
To the Board of Directors
Chase Corporation
Bridgewater, Massachusetts
We have reviewed the consolidated balance sheet of Chase
Corporation and Subsidiaries as of November 30, 1999, and the
related consolidated statements of operations, stockholders'
equity, and cash flows for the periods of three months ended
November 30, 1999 and 1998, 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 Subsidiaries as of August 31, 1999, and the
related statements of operations, stockholders' equity, and cash
flows for the year then ended (not presented herein); and in our
report dated November 24, 1999, 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, 1999, 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
January 6, 2000
CHASE CORPORATION SECURITIES AND EXCHANGE COMMISSION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Net revenues increased 29% to $14,952,000, an increase of $3,336,000 when
compared to the first quarter of fiscal 1999. While we continue to
experience growth within our Specialty Manufacturing segment, a major portion
of the increase was the result of our investments and acquisitions through
our Electronic Manufacturing Services (EMS) segment. First quarter fiscal
1998 and 1997 revenues were about the same, although 1997 had received the
benefit of a large bridge construction contract.
During fiscal 1999, the Company acquired the remaining interest in its
subsidiary, Sunburst EMS, and in May 1999 acquired RWA, Inc. Both of these
companies participate within the electronic manufacturing services industry.
Therefore, the Company now has two reportable segments, Specialized
Manufacturing and Electronic Manufacturing Services.
Sales and Operating Profit by Segment
($-000) Electronic
Specialized Manufacturing
Manufacturing Services
For the 1st Quarter ended 11/30/99:
Revenues $ 11,115 $ 3,837
Operating Profit $ 2,380 $ 298
During the first quarter of fiscal 1999, the Electronic Manufacturing
Services segment accounted for less than 10% of operating profit and assets
of Chase Corporation.
The cost of products sold increased in the most recent quarter as compared
to the same quarter last year. This increase is volume related to a large
extent. As a percent of sales, cost of products increased 4% to 69% this
year. The increase is largely due to some increase in raw material costs,
some selling price erosion and product mix associated with the increased
volume of sales through the Electronic Manufacturing Services segment. When
comparing fiscals 1999 and 1998, the increase of 1% related to increased raw
material cost which was the result of a change in product mix. The Company's
products associated with the Specialized Manufacturing segment are largely
mature and some are highly competitive which could result in lower margins.
Competitive pressure prevents us from being able to recover all our material
price increases from our customers.
Selling and administrative expenses were higher during the current year,
however as a percent of sales decreased by 2.5%. Expenses associated with
investments in personnel have supported our ability to improve revenue and
profitability. Fiscal 1999 expenses were also lower due to a reduction in
certain warranty and administrative related costs associated with a
large bridge construction contract and the elimination of the need to further
adjust values of certain investments. The Company will continue to be
focused on improving certain costs while continuing to provide quality
products and services to the marketplace.
Interest expense increased to $190,000 during the current quarter as
compared to $40,000 and $77,000 respectively against the prior like periods.
The increase is associated with the borrowing required to complete our
acquisitions. During the prior periods the Company received the benefit 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 financial institutions.
A significant amount of our first quarter improvement was the financial
benefits received from our recently concluded investments. The Company's
core businesses also had an improvement in sales that more than offset the
loss of certain sales associated with our terminated distribution agreement.
The replacement of the sales through distribution with our own value
added products and the improved sales assisted in our profit enhancements.
Management will continue its approach of seeking to maximize and expand its
current businesses, while at the same time seeking future opportunities
through selective acquisitions.
The effective tax rates for the quarter this year as compared to the prior
two years is lower than the applicable tax rate. 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 its losses for
income tax purposes.
The income from minority interest for this year and last year relates to our
equity position ownership in The Stewart Group, Inc., Toronto, Canada.
Minority interest in subsidiary represented the minority shareholder's
interest in the Sunburst EMS subsidiary's losses. In January 1999, the
Company acquired 100% ownership of Sunburst EMS.
Liquidity & Sources of Capital
The ratio of current assets to current liabilities was 1.6 at the end of the
first quarter of fiscal 2000 as compared to 1.5 at the prior year end. The
ratio improvement is associated with the increased sales activity during the
quarter.
Long-term Debt decreased by $600,000 while total liabilities decreased by
almost $1,000,000. This improvement is the result of positive cash flow
related to our asset management program and improved earnings.
The Company had $5,440,000 in available credit at November 30, 1999 under
its credit arrangements with its bank and plans to utilize this means to help
finance its interim needs during the year. Current financial resources and
anticipated funds from operations are expected to be adequate to meet
requirements for funds in the year ahead.
Year 2000
During 1999 the Company completed an upgrade of both hardware and software
in order to be year 2000 compliant.
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.
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
November 30, 1999.
No financial statements were filed during the three months
ended November 30, 1999.
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: January 12, 2000
<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> 3-MOS
<FISCAL-YEAR-END> AUG-31-2000
<PERIOD-END> NOV-30-1999
<CASH> 184,368
<SECURITIES> 0
<RECEIVABLES> 9,084,917
<ALLOWANCES> 237,300
<INVENTORY> 7,806,907
<CURRENT-ASSETS> 17,386,781
<PP&E> 19,723,101
<DEPRECIATION> 12,344,353
<TOTAL-ASSETS> 39,343,845
<CURRENT-LIABILITIES> 11,160,901
<BONDS> 0
0
0
<COMMON> 499,493
<OTHER-SE> 21,376,655
<TOTAL-LIABILITY-AND-EQUITY> 39,343,845
<SALES> 14,837,683
<TOTAL-REVENUES> 14,952,274
<CGS> 10,202,425
<TOTAL-COSTS> 10,202,425
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 9,000
<INTEREST-EXPENSE> 189,988
<INCOME-PRETAX> 1,861,569
<INCOME-TAX> 631,500
<INCOME-CONTINUING> 1,310,069
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,310,069
<EPS-BASIC> 0.34
<EPS-DILUTED> 0.33
</TABLE>
