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, 1996 Commission File Number: 1-9852
CHASE CORPORATION
(Exact name of registrant as specified in its charter)
Massachusetts 11-1797126
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
Suite 220
50 Braintree Hill Park
Braintree, Massachusetts 02184
(Address of principal executive offices) (Zip Code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Common Shares Outstanding as of March 31, 1996 3,589,805
PART 1: FINANCIAL INFORMATION
CHASE CORPORATION
CONSOLIDATED BALANCE SHEET
ASSETS Feb.29 Aug.31
1996 1995
(UNAUDITED) (AUDITED)
CURRENT ASSETS
Cash $ 46,766 $ 108,587
Trade receivables,less allowance
for doubtful accounts of $130,281
$95,500 respectively 5,354,814 5,808,641
Note receivable from related party 207,609 207,166
Inventories(Note B)
Finished and in process 1,916,156 1,647,181
Raw materials 2,604,400 3,145,151
------------ -----------
4,520,556 4,792,332
Prepaid expenses & other curr assets 369,295 402,774
Deferred federal taxes 174,886 179,886
------------ -----------
TOTAL CURRENT ASSETS 10,673,926 11,499,386
PROPERTY, PLANT AND EQUIPMENT
Land and improvements 384,490 384,490
Buildings 2,457,198 2,455,077
Machinery & equipment 9,767,501 9,568,270
Construction in progress 14,746 44,346
------------ -----------
12,623,935 12,452,183
Less allowance for depreciation 8,173,314 7,733,414
------------ -----------
4,450,621 4,718,769
OTHER ASSETS
Note receivable from related party 450,965 517,975
Excess of cost over net assets of
acquired businesses less amortization 82,708 85,337
Patents, agreements and trademarks
less amortization 1,286,647 1,335,822
Cash surrender value of life ins. net 1,531,239 1,397,822
Deferred federal taxes 880 58,205
Investment in joint venture 715,453 382,270
Other 7,000 7,000
------------ -----------
4,074,892 3,784,431
------------ -----------
$ 19,199,439 $ 20,002,586
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY Feb.29 Aug.31
1996 1995
(UNAUDITED) (AUDITED)
CURRENT LIABILITIES
Accounts payable $ 2,282,044 $ 2,911,293
Notes payable 58,368 81,851
Accrued expenses 1,087,084 1,635,060
Accrued pension expense - current 384,556 384,556
Federal income taxes (18,728) (42,510)
Deferred compensation 302,216 302,216
Current portion of L.T. debt 1,203,414 1,208,726
------------ -----------
TOTAL CURRENT LIABILITIES 5,298,954 6,481,192
LONG-TERM DEBT, less current portion 6,249,503 6,464,260
Long-term deferred compensation
obligations 290,328 367,950
ACCRUED PENSION EXPENSE 442,848 284,832
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 3,749,464 shares at
Feb 29, 1996 and 4,459,848 shares at
Aug. 31, 1995 respectively 462,750 445,985
Additional paid-in capital 2,676,882 2,674,897
Treasury Stock, 1,037,693 shares at
February 29, 1996, and August 31, 1995 (3,990,400) (3,990,400)
Cum. G/(L) on currency translation (109,056) (79,030)
Retained earnings 7,877,630 7,352,900
------------ -----------
6,917,806 6,404,352
------------ -----------
$ 19,199,439 $ 20,002,586
============ ===========
See accompanying notes to the consolidated financial
statements and accountants' review report.
CHASE CORPORATION
STATEMENT OF CONSOLIDATED OPERATIONS
(UNAUDITED)
Six Months Ended 3 Months Ended
Feb. 29 Feb. 28 Feb. 29 Feb. 28
1996 1995 1996 1995
Sales $ 15,897,414 $15,123,289 $ 7,664,955 $ 7,289,315
Comm. and other income 171,553 187,656 61,233 107,947
Interest 42,736 24,955 26,834 12,598
----------- ----------- ----------- ----------
16,111,703 15,335,900 7,753,022 7,409,860
Cost and Expenses
Cost of products sold(Note B) 10,930,431 10,185,575 5,301,975 5,023,575
Sell.,gen. and admin. expen. 3,481,191 3,561,209 1,704,948 1,781,697
Bad debt expense 43,000 30,000 30,500 15,000
Interest expense 327,263 166,881 155,221 87,637
----------- ----------- ----------- -----------
14,781,885 13,943,665 7,192,644 6,907,909
Income before income taxes 1,329,818 1,392,235 560,378 501,951
Income taxes 481,000 486,200 199,000 149,300
----------- ----------- ----------- -----------
Income from operations 848,818 906,035 361,378 352,651
Income from minority interest 33,183 13,183
----------- ----------- ----------- -----------
$ 882,001 $ 906,035 $ 374,561 $ 352,651
=========== =========== =========== ===========
Income per share
of Common Stock
Primary $ 0.235 $ 0.197 $ 0.100 $ 0.077
=========== =========== =========== ===========
Fully Diluted $ 0.235 $ 0.197 $ 0.100 $ 0.077
=========== =========== =========== ===========
See accompanying notes to the consolidated financial statements
and accountants' review report.
CHASE CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
6 MONTHS ENDED FEBRUARY 29, 1996 AND FEBRUARY 28, 1995
Cummulative
Common Stock Additional Treasury Effect of Total
Shares Paid-In Stock Retained Currency Shareholders
Issued Amount Capital Shares Amount Earnings Translation Equity
Balance @ Aug. 31, 1994 4,362,848 $ 436,285 $ 2,555,658 $ 5,775,693 $ (116,929) $ 8,650,707
Curr. translation adjmt. (18,435) (18,435)
Exer.of stock options 97,000 9,700 122,250 131,950
Net Income for 6 months 906,035 906,035
Dividends paid in cash
$.08 a share on
common stock (350,628) (350,628)
---------- -------- ---------- ---------- ----------- ---------- ----------- ------------
Balance @ Feb. 28, 1995 4,459,848 445,985 2,677,908 6,331,100 (135,364) 9,319,629
Curr. translation adjmt. 56,334 56,334
Exer.of stock options 88,520 88,520
Purch.of treasury stock 1,302,693 (5,009,431) (5,009,431)
Sale of treasury stock (91,531) (265,000) 1,019,031 927,500
Net Income for 6 months 1,021,800 1,021,800
---------- -------- ---------- ---------- ----------- ---------- ----------- ------------
Balance @ Aug. 31, 1995 4,459,848 445,985 2,674,897 1,037,693 (3,990,400) 7,352,900 (79,030) 6,404,352
Curr. translation adjustment (30,026) (30,026)
Stock issued for compensation 167,650 16,765 658,235 675,000
Unvested stock based comp. (675,000) (675,000)
Amort.of stock based comp. 18,750 18,750
Net Income for 6 months 882,001 882,001
Dividends paid in cash
$.10 a share on
common stock (357,271) (357,271)
---------- -------- ---------- ---------- ----------- ---------- ----------- ------------
Balance @ Feb. 29, 1996 4,627,498 $ 462,750 $ 2,676,882 1,037,693 $ (3,990,400)$ 7,877,630 $ (109,056) $ 6,917,806
========== ======== ========== ========== =========== ========== =========== ============
See accompanying notes to the consolidated financial statements
and accountants' review report.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
Six Months Ended
Feb. 29 Feb. 28
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 882,001 $ 906,035
Adjmts. to reconcile net income to net
cash provided by operating activities:
Depreciation 440,875 403,063
Amortization 51,804 51,805
Provision for losses on accts. receivable 34,781 111,249
Stock issued for compensation 18,750
Deferred federal taxes 62,325 19,400
Change in assets and liabilities
Trade receivables 419,046 (745,057)
Inventories 271,776 (364,370)
Prepd. expenses & other curr. assets 33,479 (114,745)
Accounts payable (629,249) (252,250)
Accrued expenses (389,960) (254,321)
Federal income taxes payable 23,782 (115,238)
Deferred compensation (77,622) (164,710)
Other assets 4,027
------------ ------------
TOTAL ADJUSTMENTS 259,787 (1,421,147)
NET CASH FROM OPERATIONS 1,141,788 (515,112)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (172,727) (156,166)
Purchase of cash surrender value (133,417) (154,049)
Proceeds from note receivable 66,567 65,249
Cum. effect of currency translation (30,026) (18,435)
Investment in joint venture (333,183)
------------ ------------
(602,786) (263,401)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in long-term debt 2,700,000 3,150,000
Payments of principal on debt (2,920,069) (2,463,277)
Net borrowing under line-of-credit (23,483) 104,226
Dividend paid (357,271) (350,628)
Cash received on option exercise 131,950
------------ ------------
(600,823) 572,271
NET CHANGE IN CASH (61,821) (206,242)
CASH AT BEGINNING OF PERIOD 108,587 211,041
------------ ------------
CASH AT END OF PERIOD $ 46,766 $ 4,799
============ ============
CASH PAID DURING PERIOD FOR:
Income taxes $ 355,000 $ 415,647
Interest $ 327,262 $ 166,881
See accompanying notes to the consolidated financial statements
and accountants' review report.
Report of Independent Accountants
To the Board of Directors
Chase Corporation
Braintree, Massachusetts
We have reviewed the consolidated balance sheet of Chase Corporation and
Subsidiary as of February 29, 1996, and the related consolidated statements of
operations, stockholders' equity, and cash flows for the periods of six months
ended February 29, 1996 and February 28, 1995, 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 objectives of which is the expression of an
opinion regarding the financial statements taken as a whole. Accordingly, we do
not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying consolidated financial statements referred to
above for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Chase Corporation and Subsidiary
as of August 31, 1995, 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 9, 1995, 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, 1995, 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 Hills, Massachusetts
March 25, 1996
CHASE CORPORATION SECURITIES AND EXCHANGE COMMISSION
NOTES TO CONSOLIDATED FINANCIAL STATEMENT
April 9, 1996
Note A - Basis of Presentation
The accompanying unaudited Consolidated Financial Statements have been
prepared in accordance with the instructions to Form 10-Q and all adjustments
(consisting of nonrecurring accruals) have been made which are, in the opinion
of Management, necessary to a fair statement of the results for the interim
periods reported. The financial statements of Chase Corporation include the
activities of its divisions and its foreign sales subsidiary.
Note B - Inventories
Certain divisions used estimated gross profit rates to determine the cost
of goods sold. No significant adjustments have resulted from reconciling with
the interim physical inventories as a result of using this method.
Note C - Income per Share of Common Stock
Income per share is based on the average number of shares and share
equivalents outstanding during the period. The average number of shares and
share equivalents outstanding used in determining primary per share results was
3,746,081 for the period of six months ended February 29, 1996. Earnings per
share on a fully diluted basis are calculated on 3,749,464 common shares and
share equivalents. Common share equivalents arise from the issuance of certain
stock options.
Note D - Stock Issued for Compensation
The Company issued 150,000 shares of common stock restricted as to sale to
its president. The fair market value of the stock at time of grant is being
amortized over the nine year vesting period. The restriction on sale is
removed at the end of nine years subject to certain service requirements.
Note E - Review by Independent Public Accountant
The financial information included in this form has been reviewed by an
independent public accountant in accordance with established professional
standards and procedures such review, no adjustments or additional disclosures
were recommended.
Letter from the independent public accountant is included as a part of this
report.
CHASE CORPORATION SECURITIES AND EXCHANGE COMMISSION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Net revenues for the second quarter and first half of 1996 increased
by 5% over the comparable periods in 1995. This increase is primarily the
result of the steady growth in sales by the Webster facility of the Chase
and Sons division. The increase was somewhat offset by the reduction of
sales related to the commercial construction market.
The increase in the cost of products sold for the second quarter and
the first half of the current year over the same periods last year was
largely volume related. This increase was also affected by changes in our
sales mix thereby causing increased raw material costs. For the first half
as a percent of sales, the increase was 1.5%. The Company's products are
largely mature and some are highly competitive which result in low margins.
Competitive pressure prevents us from being able to recover all our
material price increases from our customers.
Selling and administrative expenses during the current year are about
the same as the prior year while as a percent of sales have decreased by
1.6%.
Interest expense increased during the comparable periods as a result
of increased borrowing related to acquisitions and the stock repurchase in
July, 1995.
The interest expense and changes in product mix for the current period
to date, when compared to last year, is the primary reason for the
reduction in income. During the last quarter, the interest cost increase
was more than offset by additional profitability related to an increase in
sales and certain cost reductions within the selling and administrative
expenses.
The effective tax rate for 1996 is somewhat lower as a result of
export sales through our Chase Export Corporation subsidiary. Last year
the rate was lower because of the increased export sales and also tax
benefits received during the second quarter from the exercise of non-
qualified stock options.
Income from minority interest during the current period relates to the
equity position ownership in The Stewart Group, Inc., Toronto, Canada.
Liquidity and Sources of Capital
The ratio of current assets to current liabilities was 2.0 at the end
of the second quarter of 1996, compared to 1.8 at the prior year end. The
improved ratio is largely the result of a reduction to payables that were
associated with increased sales during the last quarter of fiscal 1995.
Long-term debt decreased $214,800 from the prior year end while total
liabilities, inclusive of long-term debt, decreased $1,300,000. This
improvement is primarily the result of improved cash flow from operations.
The Company had $1,440,000 in unused available credit at February 29,
1996 under its credit arrangement 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.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
Reg. S-K
Item 601
Subsection Description of Exhibit State Page Number
Pursuant to reg. S-K item 601
no exhibits are required.
(b) Reports on Form 8-K
No 8-K reports were filed during the three months ended
February 29, 1996.
No financial statements were filed during the three months
ended February 29, 1996.
Pursuant to the requirements ofthe
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 9, 1996