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, 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 December 31,2000 3,992,666
PART 1: FINANCIAL INFORMATION
CHASE CORPORATION
CONSOLIDATED BALANCE SHEET
ASSETS Nov. 30, Aug.31,
2000 2000
(UNAUDITED) (AUDITED)
CURRENT ASSETS
Cash and cash equivalents $104,317 $65,289
Trade receivables,less allowance
for doubtful accounts of $274,600 and
$292,443 respectively 11,237,742 11,880,228
Note receivable from related party 147,000 147,000
Inventories(Note B)
Finished and in process 4,775,612 1,321,210
Raw materials 5,421,087 7,621,750
---------- ----------
10,196,699 8,942,960
Prepaid expenses & other curr assets 541,452 376,694
Deferred taxes 109,977 116,977
---------- ----------
TOTAL CURRENT ASSETS 22,337,187 21,529,148
PROPERTY, PLANT AND EQUIPMENT
Land and improvements 514,423 514,423
Buildings 4,625,054 4,625,764
Machinery & equipment 17,352,150 16,688,701
Construction in progress 389,394 559,188
---------- ----------
22,881,021 22,388,076
Less allowance for depreciation 13,567,285 13,272,188
---------- ----------
9,313,736 9,115,888
OTHER ASSETS
Note receivable from related party
Excess of cost over net assets of
acquired businesses less amortization 8,589,815 8,731,486
Patents, agreements and trademarks
less amortization 824,080 848,510
Cash surrender value of life ins. net 3,590,582 3,473,091
Deferred taxes 170,483 172,483
Investment in joint venture 1,288,797 1,208,797
Other 648,547 643,849
---------- ----------
15,112,304 15,078,216
---------- ----------
$46,763,227 $45,723,252
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY Nov. 30, Aug.31
2000 2000
(UNAUDITED) (AUDITED)
CURRENT LIABILITIES
Accounts payable $5,744,907 $5,790,018
Notes payable 1,937,104 2,050,726
Accrued expenses 2,334,375 2,327,014
Accrued pension expense - current 231,504 231,507
Income taxes 32,000 (68,452)
Deferred compensation
Current portion of L.T. debt 2,838,085 2,605,284
---------- ----------
TOTAL CURRENT LIABILITIES 13,117,975 12,936,097
LONG-TERM DEBT, less current portion 5,828,791 6,569,352
Long-term deferred compensation
obligations 637,326 636,849
ACCRUED PENSION EXPENSE 446,339 351,859
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 5,078,187 shares at
Nov. 30, 2000 and 5,073,613 shares at
Aug. 31, 2000 respectively 507,819 507,361
Additional paid-in capital 3,649,189 3,625,023
Treasury Stock, 1,088,584 and 1,088,584
Nov. 30, 2000, and August 31, 2000, respectively (4,682,371) (4,687,565)
Cum. G/(L) on currency translation (207,260) (180,073)
Retained earnings 27,465,419 25,964,349
---------- ----------
26,732,796 25,229,095
---------- ----------
$46,763,227 $45,723,252
========== ==========
See accompanying notes to the consolidated financial
statements and accountants' review report.
CHASE CORPORATION
STATEMENT OF CONSOLIDATED OPERATIONS
(UNAUDITED)
3 Months Ended
Nov.30, Nov.30,
2000 1999
---------- ----------
Sales $17,784,472 $14,837,683
Commissions and other income 141,453 114,591
Interest 44 104
---------- -----------
17,925,969 14,952,378
Cost and Expenses
Cost of products sold(Note B) 12,281,476 10,202,425
Sell.,gen.and admin. Expen. 3,222,872 2,689,396
Bad debt expense 9,000 9,000
Interest expense 235,551 189,988
---------- ----------
15,748,899 13,090,809
---------- ----------
Income before income taxes and minority
interests and participations 2,177,070 1,861,569
Income taxes 736,000 631,500
--------- ---------
Income before minority interests and
Participations 1,441,070 1,230,069
Income from minority interest 60,000 80,000
--------- ---------
NET INCOME $1,501,070 $1,310,069
Net income per share of Common Stock
Basic $ 0.376 0.335
Fully Diluted $ 0.371 0.327
CHASE CORPORATION
CONSOLATED STATEMENTS OF STOCKHOLKERS' EQUITY
(UNAUDITED)
3 MONTHS ENDED NOVEMBER 30, 2000 AND NOVEMBER 30, 1999
Common Stock Additional
Shares Paid-In Treasury Stock
Issued Amount Capital Shares Amount
Balance @ Aug. 31, 1999 4,994,928 $499,493 $3,466,834 1,088,584 $(4,687,565)
Curr. translation adjmt.
Compensatory stock issuance 24,624
Net Income for 3 months
--------------------------------------------------------
Balance @ Nov. 30, 1999 4,994,928 499,493 3,491,458 1,088,584 (4,687,565)
Curr. translation adjmt.
Exer.of stock options 78,685 7,868 46,788
Compensatory stock issuance 73,872
Gain on stock sales 12,905
Net Income for 9 months
Dividends paid in cash
$.32 a share on common stock
-------------------------------------------------------
Balance @ Aug. 31, 2000 5,073,613 507,361 3,625,023 1,088,584 (4,687,565)
Curr. translation adjmt.
Treasury stock dividend 5,194
Exer. of stock options 4,574 458 (458)
Compensatory stock issuance. 24,624
Net income for 3 months
------------------------------------------------------
Balance @ Nov. 30, 2000 5,078,187 $507,819 $3,649,189 1,088,584 $(4,682,371)
======================================================
See accompanying notes to the consolidated financial statements
and accountants' review report
CHASE CORPORATION
CONSOLATED STATEMENTS OF STOCKHOLKERS' EQUITY
(UNAUDITED)
3 MONTHS ENDED NOVEMBER 30, 2000 AND NOVEMBER 30, 1999
Cumulative
Effect of Total
Retained Currency Shareholders'
Earnings Translation Equity
Balance @ Aug. 31, 1999 $21,444,634 $(188,331) $20,535,065
Curr. translation adjmt. 6,389 6,389
Compensatory stock issuance 24,624
Net Income for 3 months 1,310,069 1,310,069
-----------------------------------------
Balance @ Nov. 30, 1999 22,754,703 (181,942) 21,876,147
Curr. translation adjmt. 1,869 1,869
Exer.of stock options 54,656
Compensatory stock issuance 73,872
Gain on stock sales 12,905
Net Income for 9 months 4,459,854 4,459,854
Dividends paid in cash -
$.32 a share on common stock (1,250,208) (1,250,208)
----------------------------------------
Balance @ Aug. 31, 2000 25,964,349 (180,073) 25,229,095
Curr. translation adjmt. (27,187) (27,187)
Treasury stock dividend 5,194
Exer. of stock options -
Compensatory stock issuance. 24,624
Net income for 3 months 1,501,070 1,501,070
----------------------------------------
Balance @ Nov. 30, 2000 $27,465,419 $(207,260) $26,732,796
========================================
See accompanying notes to the consolidated financial statements
and accountants' review report
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
Three Months Ended
Nov. 30, Nov. 30,
2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 1,501,070 $ 1,310,069
Adjmts. to reconcile net income to net
cash provided by operating activities:
Income from joint venture (60,000) (80,000)
Depreciation 340,416 326,534
Amortization 189,448 188,338
Provision for losses on accts. receivable (17,843) (19,749)
Stock issued for compensation 24,624 24,624
Tax effect of cashless option exercise
Deferred taxes 9,000 5,000
Change in assets and liabilities
Trade receivables 660,329 42,918
Inventories (1,253,739) (357,598)
Prepd. expenses & other curr. assets (164,758) (24,303)
Accounts payable (45,111) 249,135
Accrued expenses 101,838 (533,431)
Income taxes payable 100,452 280,200
Deferred compensation 477 (13,375)
--------- ---------
TOTAL ADJUSTMENTS (114,867) 88,293
NET CASH FROM OPERATIONS 1,386,203 1,398,362
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (565,451) (391,750)
Investment in trusteed assets (4,698) 3,479
Purchase of cash surrender value (117,491) (131,548)
Proceeds from note payable (113,622) (27,438)
Investment in subsidiaries (23,347)
Cash paid for investments (20,000)
Dividend received from joint venture 0 84,459
-------- ---------
(844,609) (462,798)
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in long-term debt 1,800,000 1,700,000
Payments of principal on debt (407,760) (636,465)
Net borrowing under line-of-credit (1,900,000) (2,000,000)
Return of dividends for treasury stock 5,194
--------- ---------
(502,566) (936,465)
NET CHANGE IN CASH 39,028 (901)
CASH AT BEGINNING OF PERIOD 65,289 185,269
--------- ---------
CASH AT END OF PERIOD $ 104,317 $ 184,368
========= =========
CASH PAID DURING PERIOD FOR:
Income taxes $ 345,016 $ 403,250
Interest $ 235,551 $ 189,988
See accompanying notes to the consolidated financial statements
and accountants' review report.
CHASE CORPORATION SECURITIES AND EXCHANGE COMMISSION
NOTES TO CONSOLIDATED FINANCIAL STATEMENT
January 11, 2001
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 3,988,577for the
period of three months ended November 30, 2000. Earnings per share on a fully
diluted basis were calculated on 4,044,235 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, 2000, and the
related consolidated statements of operations, stockholders'
equity, and cash flows for the periods of three months ended
November 30, 2000 and 1999, 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, 2000, 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 16, 2000, 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, 2000, 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 5, 2001
Results of Operations
Net revenues during fiscal 2001 increased 20% to $17,926,000, an increase
of $2,974,000 when compared to the first quarter of fiscal 2000. The Company
continues to experience growth within our Specialty Manufacturing segment,
which improved 8% when compared to the prior period. The Electronic
Manufacturing Services (EMS) segment revenue increased by 55% when comparing
these revenues to the same period last year. First quarter fiscal 2000 net
revenues had increased 29% to $14,952,000, an increase of $3,336,000 when
compared to the first quarter of fiscal 1999. A major portion of that increase
was the result of the Company's investments and acquisitions concluded during
fiscal 1999, which had a full impact during the first quarter of fiscal 2000.
During fiscal 1999, the Company acquired the remaining interest in it's
subsidiary, Sunburst EMS, and in May 1999 acquired RWA, Inc. NETCO Automation
was acquired effective February 1, 2000. These companies participate with the
electronic manufacturing services industry. Therefore, the Company has two
reportable segments, Specialized Manufacturing and Electronic Manufacturing
Services.
Sales and Operating Profit by Segment
($ - 000)
For the first quarter ended:
Operating
Sales Profit %
November 30, 2000
Specialized Manufacturing $11,837 $2,556 21.6
Electronic Manufacturing Services $ 5,947 $ 703 11.8
$17,784 $3,259 18.3
November 30, 1999
Specialized Manufacturing $11,001 $2,380 21.6
Electronic Manufacturing Services $ 3,837 $ 298 7.8
$14,838 $2,678 18.0
During the first quarter of fiscal 1999, the Electronic Manufacturing
Services segment accounted for less than 10% of the 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, there is no change. While the Company had some
increase in raw materials, manufacturing costs remained somewhat constant in
spite of the increased volume. The continued improvement in productivity
helped to off set lost margin related to some selling price erosion within our
traditional markets. When comparing fiscals 2000 and 1999, the increase as a
percent of sales is associated mostly to the Electronic Manufacturing Services
segment and to a large degree a change in business philosophy. Most EMS
customers require that the Company provide a full service operation. This
meant complete ownership and control of inventory, which while improving
revenue and margin dollars, increased the Company's cost of products as a
percent of sales. The 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 remained the same. Expenses associated with
investment in personnel and certain organizational changes have supported our
ability to improve revenue and profitability. As a percent of sales fiscal
year 2000 expense were lower than those of fiscal 1999. The Company continues
to be focused on cost containment while continuing to provide quality products
and services to the market place.
Interest expense increased to $236,000 during the first quarter as
compared to $190,000 and $40,000 respectively against the prior like periods.
The increase during the last two years is associated with the borrowing
required to complete our acquisitions. During 1998, the Company received the
benefit of the cash dividend declared and paid by our joint venture partners,
The Stewart Group, Inc. The Company continues to benefit from solid earnings
and low borrowing rates from its financial institutions.
As can be determined by a review of the Sales and Operating Profit data, a
significant amount of our improvement over the past few years is associated
with the benefits received from the Company's investments in the Electronic
Manufacturing Services segment. However, the traditional Specialized
Manufacturing segment continues to remain quite solid in spite of a recent
economic downturn. Management will continue its approach of seeking to
maximize and expand its current business, while at the same time seeking future
opportunities through selective acquisitions.
The effective tax rate over the past three years is lower than the
applicable tax rate. The Company continues to receive the benefit of solid
export sales through its 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.
Liquidity and Sources of Capital
The ratio of current assets to current liabilities was 1.7 at the end of
the first quarter of fiscal 2001 and at the prior year-end.
Long-term debt decreased by $741,000 and total liabilities decreased by
$464,000 where compared to the end of fiscal 2000. This improvement generally
relates to the earnings improvement.
The Company had $3,040,000 in available credit at November 30, 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 three months ended
November 30, 2000.
No financial statements were filed during the three months ended
November 30, 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: January 11, 2001