SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended February 29, 2000 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 March 31, 2000 3,972,502
PART 1: FINANCIAL INFORMATION
<TABLE>
<CAPTION>
CHASE CORPORATION
CONSOLIDATED BALANCE SHEET
ASSETS Feb. 29, Aug.31,
2000 1999
(UNAUDITED) (AUDITED)
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $244,143 $185,269
Trade receivables,less allowance
for doubtful accounts of $203,200 and
$257,049 respectively 8,892,334 8,870,786
Note receivable from related party 107,582 107,582
Inventories(Note B)
Finished and in process 3,571,066 2,041,496
Raw materials 4,980,131 5,407,813
8,551,197 7,449,309
Prepaid expenses & other curr assets 359,066 330,710
Deferred taxes 139,950 90,294
TOTAL CURRENT ASSETS 18,294,272 17,033,950
PROPERTY, PLANT AND EQUIPMENT
Land and improvements 324,589 322,423
Buildings 3,520,234 3,587,304
Machinery & equipment 15,530,204 14,609,754
Construction in progress 1,257,327 835,445
20,632,354 19,354,926
Less allowance for depreciation 12,675,330 12,047,487
7,957,024 7,307,439
OTHER ASSETS
Note receivable from related party
Excess of cost over net assets of
acquired businesses less amortization 8,976,744 9,304,559
Patents, agreements and trademarks
less amortization 897,333 946,193
Cash surrender value of life ins. net 3,186,177 2,931,984
Deferred taxes 81,266 81,266
Investment in joint venture 1,085,026 1,044,797
Other 615,991 333,948
14,842,537 14,642,747
----------- -----------
$41,093,833 $38,984,136
=========== ===========
</TABLE>
<TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY Feb. 29, Aug.31
2000 1999
(UNAUDITED) (AUDITED)
CURRENT LIABILITIES
<S> <C> <C>
Accounts payable $5,431,718 $4,387,943
Notes payable 1,849,264 1,576,477
Accrued expenses 1,882,895 2,456,838
Accrued pension expense - current 251,273 251,273
Income taxes (438,09) 53,008
Deferred compensation 31,717 41,999
Current portion of L.T. debt 2,553,501 2,540,457
--------- ----------
TOTAL CURRENT LIABILITIES 11,562,276 11,307,995
LONG-TERM DEBT, less current portion 6,722,409 6,508,471
Long-term deferred compensation
obligations 612,470 338,582
ACCRUED PENSION EXPENSE 486,080 294,023
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 5,011,673 shares at
Feb. 29, 2000 and 4,994,928 shares at
Aug. 31, 1999 respectively 501,167 499,493
Additional paid-in capital 3,569,065 3,466,834
Treasury Stock, 1,088,584 and 1,088,584
Feb. 29, 2000, and August 31, 1999,
respectively. (4,687,565) (4,687,565)
Cum. G/(L) on currency translation (167,746) (188,331)
Retained earnings 22,495,677 21,444,634
---------- ----------
21,710,598 20,535,065
---------- ----------
$41,093,833 $38,984,136
=========== ===========
</TABLE>
See accompanying notes to the consolidated financial
statements and accountants' review report.
<TABLE>
<CAPTION>
CHASE CORPORATION
STATEMENT OF CONSOLIDATED OPERATIONS
(UNAUDITED)
Six Months Ended Three Months Ended
Feb.29, Feb.28, Feb.29, Feb.28,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Sales $29,755,161 $21,926,465 $14,917,478 $10,414,555
Commissions and other inc. 260,349 153,488 145,758 68,970
Interest 329 30,132 225 10,152
---------- ---------- ----------- ----------
30,015,839 22,110,085 15,063,461 10,493,677
Cost and Expenses
Cost of products sold
(Note B) 20,852,507 14,541,827 10,650,082 7,085,275
Sell.,gen. and admin.
expen. 5,541,804 4,573,283 2,852,408 2,205,245
Bad debt expense (11,327) 21,200 (20,327) 8,900
Interest expense 410,604 81,465 220,616 41,237
---------- ---------- ---------- ---------
26,793,588 19,217,775 13,702,779 9,340,657
---------- ---------- ---------- ---------
Income before income taxes and
minority interests and
participations 3,222,251 2,892,310 1,360,682 1,153,020
Income taxes 1,087,000 1,122,500 455,500 429,200
--------- --------- --------- ---------
Income before minority
interests and
participations 2,135,251 1,769,810 905,182 723,820
Income from minority
interest 166,000 125,000 86,000 65,000
Minority participation in
subsidary 99,633 44,815
---------- --------- -------- ---------
NET INCOME $2,301,251 $1,994,443 $ 991,182 $ 833,635
========== ========== ========= =========
Net income per share of Common Stock
Basic $ 0.589 $ 0.512 $ 0.253 $ 0.214
========== ========= ========= =========
Fully Diluted $ 0.574 $ 0.502 $ 0.247 $ 0.210
========== ========= ========= =========
</TABLE>
See accompanying notes to the consolidated financial statements
and accountants' review report.
<TABLE>
<CAPTION>
CHASE CORPORATION
CONSOLATED STAREMENTS OF STOCKHOLKERS' EQUITY
(UNAUDITED)
6 MONTHS ENDED FEBRUARY 29, 2000 AND FEBRUARY 28, 1999
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. 33,980 33,980
Exer.of stock options 16,216 1,621 (1,621) -
Compensatory stock issuan 49,248 49,248
Purchase of treasury stock 16,500 (152,089) (152,089)
Net Income for 6 months 1,994,443 1,994,443
Dividends paid in cash
$.28 a share on common stock (1,093,715) (1,093,715)
------------------------------------------------------------------------------------------------------
Balance @ Feb. 28, 1999 4,993,866 499,386 3,417,693 1,088,584 (4,687,565) 18,230,767 (204,748) 17,255,533
Curr. translation adjmt. 16,417 16,417
Exer.of stock options 1,062 107 (107) -
Compensatory stock issuan 49,248 49,248
Net Income for 6 months 3,213,867 3,213,867
-------------------------------------------------------------------------------------------------------
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. 20,585 20,585
Tax effect of non ISO stock issued 54,656 54,656
Exer. Of stock options 16,745 1,674 (1,674)
Compensatory stock issuance. 49,249 49,249
Net income for 6 months 2,301,251 2,301,251
Dividends paid in cash
$.32 a share on common stock (1,250,208) (1,250,208)
--------------------------------------------------------------------------------------------------------
Balance @ Feb. 29, 2000 5,011,673 $ 501,167 $ 3,569,065 1,088,584 $ (4,687,565) $ 22,495,677 $ (167,746) $21,710,598
</TABLE>
See accompanying notes to the consolidated financial starements
and accountants' review report
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
Six Months Ended
Feb. 29, Feb. 28,
CASH FLOWS FROM OPERATING ACTIVITIES 2000 1999
<S> <C> <C>
Net Income $2,301,251 $1,994,443
Adjmts. to reconcile net income to net
cash provided by operating activities:
Income from joint venture (166,000) (145,002)
Minority interest 0 (99,633)
Depreciation 657,511 440,003
Amortization 376,676 95,447
Provision for losses on accts. receivable (53,849) 24,665
Stock issued for compensation 49,249 49,248
Tax effect of cashless option exercise 54,656
Deferred taxes (49,656) (14,500)
Change in assets and liabilities
Trade receivables 32,301 741,865
Inventories (1,101,888) (335,830)
Prepd. expenses & other curr. assets (28,356) (3,783)
Accounts payable 1,043,775 (58,090)
Accrued expenses (381,886) (807,363)
Income taxes payable (491,100) (486,966)
Deferred compensation 263,606 111,475
---------- -----------
TOTAL ADJUSTMENTS 205,039 (488,464)
NET CASH FROM OPERATIONS 2,506,290 1,505,979
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (1,286,512) (1,991,238)
Cash paid for investment (30,000)
Investment in trusteed assets (282,043) (134,475)
Purchase of cash surrender value (254,193) (254,066)
Proceeds from note receivable 272,787 59,792
Dividend received from joint venture 155,771
---------- -----------
(1,424,190) (2,319,987)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in long-term debt 5,900,000 0
Payments of principal on debt (1,173,018) (328,571)
Net borrowing under line-of-credit (4,500,000) 1,002,932
Dividend paid (1,250,208) (1,093,714)
Purchase of Common Shares for Treasury 0 (152,089)
---------- -----------
(1,023,226) (571,442)
NET CHANGE IN CASH 58,874 (1,385,450)
CASH AT BEGINNING OF PERIOD 185,269 2,296,384
---------- -----------
CASH AT END OF PERIOD $244,143 $910,934
========== ===========
CASH PAID DURING PERIOD FOR:
Income taxes $1,583,548 $1,709,978
Interest $318,420 $81,465
</TABLE>
See accompanying notes to the consolidated financial statements
and accountants' review report.
CHASE CORPORATION SECURITIES AND EXCHANGE COMMISSION
NOTES TO CONSOLIDATED FINANCIAL STATEMENT
April 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 3,914,104 for the
period of three months ended February 29, 2000. Earnings per share on a fully
diluted basis were calculated on 4,014,104 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 February 29, 2000, and the
related consolidated statements of operations, stockholders'
equity, and cash flows for the periods of three and six months
ended February 29, 2000, and February 28, 1999, in accordance with
Statements on Standards for Accounting and Review Services issued
by the American Institute of Certified Public Accountants. All
information included in these financial statements is the representation
of the management of Chase Corporation.
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
April 13, 2000
CHASE CORPORATION SECURITIES AND EXCHANGE COMMISSION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Net revenues for the second quarter and first half of fiscal 2000 increased by
44% and 36% respectively over comparable periods in fiscal 1999. While we
continue to experience some growth within our Specialty Manufacturing
segments, the majority of the increase was the result of our investments and
acquisitions through the Electronic Manufacturing Services (EMS) segment.
When comparing fiscal 1999 to the previous year, the revenues were about the
same although the second quarter of fiscal 1999 was negatively affected by
the loss of revenue from a terminated distribution agreement.
During fiscal 1999, the Company acquired the remaining interest in its
subsidiary, Sunburst EMS, and in May 1999 acquired RWA, Inc. Effective
February 1, 2000 the Company acquired the assets of Netco Automation. 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 6 Months ended 2/29/00:
Sales $ 21,806 $ 7,929
Operating Profit $ 4,465 $ 475
During the first six months of fiscal 1999, the Electronic Manufacturing
Services segment accounted for less than 10% of operating profit and of the
assets of Chase Corporation.
Cost of products sold increased in both the current quarter and year to date
when compared to the previous period. To a large extent, this amount is
volume related. For the first half as a percent of sales, there was an
increase of 4%. This increase was largely due to some increases in raw
materials, some selling price erosion associated with new contracts and
product mix related to the continued increase in volume through our
Electronic Manufacturing Services segment. When comparing the
comparable period of fiscals 1999 and 1998, there was an increase of only 1%,
which related mostly to raw material cost associated with 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 are higher during the current year and
are largely the result of acquisitions and volume increases. However, as a
percent of sales, these expenses decreased by 2.2%. Our investments in
personnel continue to support our ability to improve revenue and
profitability. For the comparable six months during fiscal 1999, the
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 $411,000 as compared to $81,000 and $139,000
respectively against the 1999 and 1998 fiscal years. The increase is
associated with the borrowing required to complete our investments and
acquisitions. During the prior periods the Company received the benefit of a
large 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 improvement this fiscal period as compared to last
year were related to the financial benefits received from the investments
concluded during the end of fiscal 1999. The Converting group performed well
during the current period as sales to the wire and cable market continued
strong. During the first six months, the Company was able to replace sales
lost through a terminated distribution agreement with sales of our own value
added products and these sales also added to our improved profitability.
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.
When comparing fiscal 1999 vs. 1998, while revenue remained somewhat constant,
reduction in certain costs associated with a large bridge construction project
and the demonstration of the need to further adjust the value of certain
investments assisted in our profit improvements.
The effective tax rates for the periods to date are lower than the effective
tax rates.
In both years the Company received 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 relates to our equity position ownership
in The Stewart Group, Inc., Toronto, Canada.
Minority participation in subsidiary during the prior year represented the
Company's 49.9% equity in the losses of Sunburst EMS. 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
second quarter of fiscal 2000 as compared to 1.5 at the prior year-end.
Long-term Debt increased by $200,000 while total liabilities increased by
$900,000. Most of the increase is associated with the increase to inventory
related to our improving sales along with our recent acquisition of Netco
Automation as of February 1, 2000.
The Company had $3,540,000 in available credit at February 29, 2000 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.
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-Q (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 six months ended
February 29, 2000.
No financial statements were filed during the six months
ended February 29, 2000.
Pursuant to the requirements of the
Securities Exchange Act of 1934, the
registrant has duly caused this report to
be signed on its behalf by the undersigned
thereunto duly authorized.
CHASE CORPORATION
/s/ Peter R. Chase
Peter R. Chase, President & CEO
Dated: April 13, 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> 6-MOS
<FISCAL-YEAR-END> AUG-31-2000
<PERIOD-END> FEB-29-2000
<CASH> 244,143
<SECURITIES> 0
<RECEIVABLES> 9,095,534
<ALLOWANCES> 203,200
<INVENTORY> 8,551,197
<CURRENT-ASSETS> 18,294,272
<PP&E> 20,632,354
<DEPRECIATION> 12,675,330
<TOTAL-ASSETS> 41,093,833
<CURRENT-LIABILITIES> 11,562,276
<BONDS> 0
0
0
<COMMON> 501,167
<OTHER-SE> 21,209,431
<TOTAL-LIABILITY-AND-EQUITY> 41,093,833
<SALES> 29,755,161
<TOTAL-REVENUES> 30,015,510
<CGS> 20,852,507
<TOTAL-COSTS> 20,852,507
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (11,327)
<INTEREST-EXPENSE> 410,604
<INCOME-PRETAX> 3,222,251
<INCOME-TAX> 1,087,000
<INCOME-CONTINUING> 2,301,251
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,301,251
<EPS-BASIC> 0.59
<EPS-DILUTED> 0.57
</TABLE>
