SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
Amendment 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act Of 1934
Date of Report (Date of Earliest Event Reported) May 25, 1999
CHASE CORPORATION
(Exact Name of Registrant as Specified in Charter)
Massachusetts 1-5408 11-1797126
05-0420158
(State or Other
Jurisdiction of (Commission File Number) (IRS Employer
Incorporation) Identification No.)
26 Summer Street, Bridgewater, MA 02324
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (508) 279-1789
Not Applicable
(Former Name or Former Address, If Changed Since Last Report.)
Item 2. Aquisition and disposition of Assets
Chase Corporation (the "Company") has purchased all of the stock of
RWA, Inc.("RWA") from its sole shareholder, Richard W. Aho, for cash of five
million dollars and a promissary note , payable over three, of three million
dollars. An additional amount may be paid contingent upon future performance
of RWA based upon fifty percent of the amount by which average annual earnings
for the thiry six months ended May 31, 2002 before interest, tax, depreciation
and amortization multiplied by four exceed eight million dollars and a
performance consideration based upon thiry percent of the amount by which net
income before taxes exceeds certain base amounts. Mr. Aho has no material
relationship to Chase Corporation, its affiliates, its officers and directors
or their associates. The transaction is being financed through available cash,
borrowing from BankBoston and from future operations.
RWA is engaged in electronic manufacturing services to the electronics industry
and will continue its current operations.
Item 7. Financial Statements and Exhibits
(a) The audited financial statements of RWA, Inc.as of August 31, 1998
required by Section 210-3.05(b).
RWA, INC.
MELROSE, MASSACHUSETTS
FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS' REPORT
DECEMBER 31, 1998
CONTENTS
PAGE
FINANCIAL STATEMENTS
INDEPENDENT AUDITORS' REPORT........................................ 1
BALANCE SHEET....................................................... 2
STATEMENT OF INCOME AND RETAINED EARNINGS........................... 3
STATEMENT OF CASH FLOWS............................................. 4
NOTES TO FINANCIAL STATEMENTS....................................... 5-9
INDEPENDENT AUDITORS' REPORT
Board of Directors
RWA, Inc.
Melrose, Massachusetts
We have audited the accompanying balance sheet of RWA, Inc. as of
December 31, 1998, and the related statements of income and retained earnings
and cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of RWA, Inc. as of
December 31, 1998, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
/S/LIVINGSTON & HAYNES, P.C.
Livingston & Haynes, P.C.
Wellesley, Massachusetts
August 9, 1999
- 1 -
RWA, INC.
BALANCE SHEET
DECEMBER 31, 1998
ASSETS
Current assets:
Cash and cash equivalents $ 84,143
Accounts receivable 1,320,256
Inventory 969,610
Prepaid expenses 10,182
Note receivable 15,000
---------
TOTAL CURRENT ASSETS 2,399,191
Machinery and equipment:
Factory equipment 942,101
Office equipment 38,460
Computer equipment 89,163
Leasehold improvements 9,059
Motor vehicles 51,355
---------
1,130,138
Less accumulated depreciation 478,165
---------
651,973
----------
$3,051,164
=========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Current portion of long-term debt $ 95,847
Accounts payable and accrued expenses 816,133
Accrued payroll and payroll taxes 191,419
Dividends payable 150,000
Income taxes payable 888
---------
TOTAL CURRENT LIABILITIES 1,254,287
Long-term debt, net of current portion 250,896
Commitments -
Shareholder's equity
Common stock, .01 par; authorized 300,000 shares;
issued and outstanding 60,000 shares 600
Additional paid-in capital 130,155
Retained earnings 1,415,226
1,545,981
---------
$3,051,164
=========
See accompanying notes to financial statements
- 2 -
RWA, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1998
Net sales $9,480,369
Cost of sales:
Inventory, beginning of year 581,161
Purchases 5,505,307
Freight 10,603
Direct labor 1,361,548
Contract labor 118,329
Manufacturing overhead 974,750
8,551,698
Less inventory, end of year 969,610
---------
7,582,088
---------
GROSS PROFIT 1,898,281
Operating expenses (income):
Selling expenses 169,851
Administrative and general expenses 965,132
Interest expense 31,886
Interest income (18,195)
Loss on disposal of fixed assets 107
---------
TOTAL OPERATING EXPENSES (INCOME) 1,148,781
---------
TOTAL INCOME BEFORE INCOME TAXES 749,500
Income taxes 42,641
--------
NET INCOME 706,859
Retained earnings at beginning of year 1,315,300
Dividends paid 606,933
---------
RETAINED EARNINGS AT END OF YEAR $1,415,226
See accompanying notes to financial statements
- 3 -
RWA, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998
Cash flows from operating activities:
Net income $ 706,859
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 155,530
Loss on disposal of fixed assets 107
(Increase) decrease in assets:
Accounts receivable (202,334)
Inventory (388,449)
Other assets 2,219
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 119,844
Income taxes (2,591)
-------
TOTAL ADJUSTMENTS (315,674)
-------
NET CASH PROVIDED BY OPERATING ACTIVITIES 391,185
Cash flows from investing activities:
Note receivable (15,000)
Purchase of equipment (263,194)
-------
NET CASH USED BY INVESTING ACTIVITIES (278,194)
Cash flows from financing activities:
Proceeds received from long-term debt 166,173
Repayment of long term debt (141,610)
Dividends paid (456,933)
-------
NET CASH USED BY FINANCING ACTIVITIES (432,370)
-------
NET DECREASE IN CASH AND CASH EQUIVALENTS (319,379)
Cash and cash equivalents at beginning of year 403,522
-------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 84,143
=======
Supplemental cash flow information:
Cash paid during the year for:
Interest expense $ 32,947
Income taxes $ 45,232
See accompanying notes to financial statements
- 4 -
RWA, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business activities
The principal business activities of RWA, Inc. ("the Company) are the
contract assembly of printed circuit boards using thru hole and surface
technology and the testing and repair of printed circuit boards.
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 amounts could differ from those estimates.
Inventory
Inventory is stated at the lower of cost (first-in, first-out method) or
market. Inventory at December 31, 1998 consists of:
Work in progress $443,045
Raw materials and supplies 526,565
-------
$969,610
=======
Machinery and equipment
Machinery and equipment are stated at cost. Depreciation is being
provided over the estimated useful lives of the related assets, principally on
the straight-line method.
Pension costs
The company has a defined contribution profit sharing plan that covers
substantially all employees meeting certain eligibility requirements. Pension
costs are funded as accrued.
Cash and cash equivalents
For reporting cash flows, cash and cash equivalents include cash on hand,
amounts on deposit at banks, and other short-term investments with initial
maturities of 90 days or less.
- 5 -
RWA, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income taxes
The Company has elected to report income under the S Corporation
provisions of the Internal Revenue Code. Accordingly, no provision has been
made for federal income taxes. Under the S Corporation provision, the Company
has elected not to be taxed as a corporation and the shareholders have consented
to include the income, losses and credits of the corporation in their individual
income tax returns. The Company is also responsible for the payment of income
taxes in the Commonwealth of Massachusetts. Under Massachusetts tax
regulations, an S Corporation is subject to a corporate level income tax when
their gross revenues are in excess of six million dollars, otherwise all income
and losses of the corporation are included in the individual income tax returns
of the shareholders. Consequently, a provision has been made for state income
taxes during 1998. All Massachusetts investment tax credits are utilized at the
corporate level and are accounted for as a reduction of income taxes in the year
they are utilized. The subsequent acquisition of the Company by Chase
Corporation (See Note H) will require the conversion of the Company to a C
Corporation status for future years.
NOTE B - BORROWING ARRANGEMENTS
The company has established a line of credit with a bank up to $500,000
that is due on demand. Interest is computed at the bank's prime lending rate
plus 1% on outstanding balances and is secured by substantially all the assets
of the Company. Covenants related to this loan require that certain financial
ratios are met and that the banks receive certain financial information
regarding the financial condition of the Company.
NOTE C - LONG-TERM DEBT
Capital lease obligation due in 60 monthly
installments of $708, including interest
imputed at 9.46% to January 2002 with
a final installment of $3,628 due then,
collateralized by factory equipment. $ 25,345
Capital lease obligation due in 60 monthly
installments of $1,665, including interest
imputed at 9.6% to February 2002 with a
final installment of $8,500 due then,
collateralized by factory equipment. 60,607
- 6 -
RWA, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
NOTE C - LONG-TERM DEBT (Continued)
Capital lease obligation due in 60 monthly
installments of $4,562, including interest
imputed at 10.1% to October 2000 with a final
installment of $21,900 due November 2000,
collateralized by factory equipment. $109,344
Capital lease obligation due in 60 monthly
installments of $3,381, including interest
imputed at 8.45% to June 2003 with a final
installment of $1 due in July 2003,
collateralized by factory equipment.
The lessor must be notified by the lessee
between March 14, 2003 and May 13, 2003, to
exercise the $1 purchase option. 151,447
346,743
Less current portion 95,847
-------
$250,896
=======
Principal payments due on long term debt as of December 31, 1998 are as
follows:
Year ending December 31,
1999 $ 95,847
2000 118,261
2001 59,794
2002 53,052
2003 19,789
-------
$346,743
=======
NOTE D - COMMITMENTS
Operating leases
The Company leases its primary facilities on a month-to -month basis.
Rent expense includes monthly rental charge plus utilities and real estate
taxes. Rent expense for 1998 amounted to $84,042. The Company also leases an
automobile, with the leases expiring in May 1999.
- 7 -
RWA, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
NOTE D - COMMITMENTS (Continued)
Capital lease obligations (See Note C)
Capital lease obligations relate to certain equipment acquired under
leases that have been accounted for as capital leases.
Machinery and equipment includes the following capital leases:
Factory equipment $508,036
Less accumulated depreciation 165,251
-------
$342,785
=======
Future minimum annual rental payments under the above leases are as
follows:
Capital
Operating lease Total
Year ending leases obligations leases
1999 $3,974 $123,802 $127,776
2000 136,577 136,577
2001 69,055 69,055
2002 56,743 56,743
2003 20,289 20,289
----- ------- -------
Total $3,974 $406,466 410,420
Less imputed interest 59,724
-------
Present value of net minimum
lease payments $346,742
NOTE E - FINANCIAL STATEMENTS
Concentrations of credit risks
Financial instruments that potentially subject the Company to significant
credit risk consist primarily of cash and cash equivalents and trade accounts
receivable. The Company places its cash and temporary investments in savings
accounts and money market accounts with a single financial institution. At
times such investments may be in excess of the FDIC insurance limit, or when
invested in money market accounts, are not insured at all. The Company
generally does not require collateral from its customers and routinely assesses
their financial strengths and, as a consequence, believes that its trade
accounts receivable credit risk exposure is limited.
- 8 -
RWA, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
NOTE F - NOTE RECEIVABLE
On August 1, 1998 the company loaned $15,000 to an employee. The terms
of the loan are no interest for the first year and then 60 monthly payments of
$293 including interest at 6.5% through August 1, 2004. Subsequent to
December 31, 1998 the loan was offset by annual bonus payments.
NOTE G - INCOME TAXES
Income tax expense consists of the following:
State income tax expense before giving effect
to tax credits $50,537
Utilization of investment tax credit 7,896
------
$42,641
======
NOTE H - SUBSEQUENT EVENTS
During May 1999 all of the Company's outstanding shares were acquired by
Chase Corporation of Bridgewater, Massachusetts, a diversified advanced
manufacturing company. The acquisition is being accounted for as a purchase.
(b) The pro forma financial information required pursuant to
Article 11 of Regulation S-X.
Chase Corporation
-------------------
Pro-Forma Condensed Consolidated Balance Sheet As of August 31, 1998
-----------------------------------------------------------------------------
(Unaudited)
-----------
RWA, Inc. Chase Corp. Pro Forma Pro Forma
Adjustments Consolidation
8/31/98 8/31/98 8/31/98 8/31/98
Cash and Cash Items $24,678 $2,296,384(1)-$1,000,000 $1,321,062
Accounts and Notes Receivable 1,206,040 7,521,157 8,727,197
Allowance for Doubtful Accounts -201,135 -201,135
Inventories 1,058,770 4,736,454 5,795,224
Prepaid Expenses 12,175 352,652 364,827
Indebtedness of Related Parties 46,406 46,406
Other Current Assets 16,719 117,704 134,423
------------------------------ -------------
Total Current Assets 2,318,382 14,869,622 16,188,004
Indebtedness of Related Parties
Property, Plant, and Equipment 1,150,725 15,014,132 16,164,857
Accumulated Depreciation -450,342 -9,904,243 -10,354,585
Intangible Assets 2,880,954(1) 5,835,312 8,716,266
Accumulated Amortization -730,088 -730,088
Other Assets 3,131,409 3,131,409
------------------------------------ --------------------
Total Assets $3,018,765 $25,261,786 $33,115,863
==================================== ====================
Accounts and Notes Payable $656,556 $3,984,199 $4,640,755
Other Current Liabilities 92,710 3,711,922 3,804,632
------------------------------------ ---------------------
Total Current Liabilities 749,266 7,696,121 8,445,387
Bonds, Mortgages, LT Debt 404,811 682,576(1) 6,700,000 7,787,387
Other Liabilities 400,500 400,500
Commitments and Contingent Liabilities
Minority Interest in Cons. Subs 58,923 58,923
Shareholder Equity:
Preferred Stock
Common Stock 600 497,765(1) -600 497,765
Additional Paid in Capital 130,155 3,370,066(1) -130,155 3,370,066
Treasury Stock -4,535,476 -4,535,476
Cumulative Gain/(Loss) on currency translation -238,728 -238,728
Retained Earnings 1,733,933 17,330,039(1) -1,733,933 17,330,039
------------------------------------ -------------
Total Equity and Liabilities $3,018,765 $25,261,786 $33,115,863
==================================== =============
Chase Corporation
Pro-Forma Condensed Consolidated Statement of Operations
------------------------------------------------------------------
For the Year Ended August 31, 1998
-----------------------------------------
(Unaudited)
-----------
RWA, Inc. Chase Corp. Pro Forma Pro Forma
Adjustments Consolidation
12 Months Ended 12 Months Ended Year Ended Year Ended
8/31/98 8/31/98 8/31/98 8/31/98
Net Sales and Gross Revenues $9,629,913 $46,560,172 $56,190,085
Costs and Expenses Applicable to Sales 7,580,401 30,003,343 37,583,744
Selling, General and Admin. 1,315,495 9,731,083(2) -708,480 10,727,118
(5) 389,020
Provision for Doubtful Accounts -5,807 -5,807
Non-Operating Income 24,866 79,166 104,032
Interest Expense 37,429 258,476(4) 360,000 655,905
------------------------------------ ------------------------------------------
Income before Taxes 721,454 6,652,243 -40,540 7,333,157
Income Tax Expense 45,041 2,550,600(3) 236,000 2,815,641
(6) -16,000
------------------------------------ ------------------------------------------
Income before Minority Interests 676,413 4,101,643 -260,540 4,517,516
Minority Interest in (Income) Loss 107,585 107,585
Equity in Earnings of Unconsolidated Subs 195,000 195,000
Gain on Asset Sale by Unconsolidated Subsidiary 1,718,425 1,718,425
------------------------------------ ------------------------------------------
Income form Continuing Operations 676,413 6,122,653 -260,540 6,538,526
Discontinued Operations
------------------------------------ ------------------------------------------
Income before extraordinary items 676,413 6,122,653 -260,540 6,538,526
------------------------------------ ------------------------------------------
Net Income $676,413 $6,122,653 -$260,540 $6,538,526
==================================== ==========================================
Shares Outstanding 3,874,896 3,874,896
Basic Earnings per Share 1.58 1.69
Shares and Equivalents Outstanding 3,935,919 3,935,919
Fully Diluted Earnings per Share 1.56 1.66
The pro-forma condensed consolidated balance sheet at August 31,
1998 present the pro-forma effects on the historical combined balance sheets
as if the combination of the combined entity were consummated as of
August 31, 1998. The pro-forma statement of operations for the year ended August
31, 1998 presents the pro-forma effects on the historical combined operating
results as if the combination of the combined entity were consummated as of
September 1, 1997.
The pro-forma adjustments include:
(1) Record purchase of RWA, Inc.
(2) Adjust RWA, Inc. compensation to current contractual rates
(3) Adjust RWA, Inc. taxes to Chase Corporation marginal rate
(4) Adjust interest on acquisition indebtedness
(5) Adjust amortization of intangible assets
(6) Adjust for tax effect of pro forma adjustments
Quadrax Corporation
Pro-Forma Combining Condensed Consolidated Statement of Operations
------------------------------------------------------------------
For the Nine Months Ended May 31, 1999
-----------------------------------------
(Unaudited)
-----------
RWA, Inc. Chase Corporation Pro Forma Pro Forma
Adjustments Consolidation
9 Months Ended 9 Months Ended 9 Months Ended 9 Months Ended
5/31/98 5/31/98 5/31/98 5/31/98
Net Sales and Gross Revenues $7,491,989 $35,075,518(1) -$718,804 $41,848,703
Costs and Expenses Applicable to Sales 6,083,883 23,258,195(1) -457,083 28,884,995
Selling, General and Admin. 1,080,548 6,913,575(1) -110,192 7,629,931
(2) -520,000
(5) 266,000
Provision for Doubtful Accounts 120,000 30,300 150,300
Non-Operating Income 12,453 42,600(1) -1,746 53,307
Interest Expense 25,337 139,368(1) -2,390 432,315
(4) 270,000
------------------------------------------------------------------------------
Income before Taxes 194,674 4,776,680 -166,885 4,804,469
Income Tax Expense 37,089 1,781,900(3) 38,800 1,792,789
-65,000
-------------------------------------------------------------------------------
Income before Minority Interests 157,585 2,994,780 -140,685 3,011,680
Minority Interest in (Income) Loss 99,633 99,633
Equity in Earnings of Unconsolidated Subs 180,000 180,000
Gain on Asset Sale by Unconsolidated Subsidiary
-------------------------------------------------------------------------------
Income form Continuing Operations 157,585 3,274,413 -140,685 3,291,313
Discontinued Operations
-------------------------------------------------------------------------------
Income before extraordinary items 157,585 3,274,413 -140,685 3,291,313
-------------------------------------------------------------------------------
Net Income 157,585 3,274,413 -140,685 3,291,313
Shares Outstanding 3,896,408 3,896,408
Basic Earnings per Share 0.840 0.845
Shares and Equivalents Outstanding 3,979,401 3,979,401
Fully Diluted Earnings per Share 0.823 0.778
The pro-forma condensed statement of operations for the nine months ended
May 31, 1999 present the pro-forma effects on the historical combined operating
results as if the combination of the combined entity were consummated as of
September 1, 1998.
The pro-forma adjustments include:
(1) Eliminate one month, May 1999, of RWA, Inc. data
included in Chase Corporation historical data.
(2) Adjust RWA, Inc. compensation to current contractual rates
(3) Adjust RWA, Inc. taxes to Chase Corporation marginal rate
(4) Adjust interest on acquisition indebtedness
(5) Adjust amortization of intangible assets
(6) Adjust for tax effect of pro forma adjustments
The balance sheet presented in May 31, 1999 Form 10-Q filing of Chase
Corporation contains the assets and liabilities of RWA, Inc.
on a consolidated basis.
(c) Exhibits.
2.1 Stock Purchase Agreement
10.1 Employment Agreement
99.1 Press Release
Signatures
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
August 10,1999 /s/ Peter R. Chase
(Date) Peter R. Chase
Chief Executive Officer
August 10, 1999 /s/ Everett Chadwick, Jr.
(Date) Everett Chadwick, Jr.
Chief Financial Officer and
Principal Accounting Officer