CHASE CORP [CCF] Filings

10-Q 1 ccf-20230228x10q.htm 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended February 28, 2023

Commission File Number: 1-9852

CHASE CORPORATION

(Exact name of registrant as specified in its charter)


Massachusetts		11-1797126
(State or other jurisdiction of incorporation of organization)		(I.R.S. Employer Identification No.)

375 University Avenue, Westwood, Massachusetts 02090

(Address of Principal Executive Offices) (Zip Code)

(781) 332-0700

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Common stock, $.10 par value

Trading Symbol(s)

CCF

Name of each exchange on which registered

NYSE American

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 ⌧ NO ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YES ⌧ NO ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ◻	Accelerated filer ⌧
Non-accelerated filer ◻	Smaller reporting company ☐
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ⌧

The number of shares of Common Stock outstanding as of March 31, 2023 was 9,505,215.

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CHASE CORPORATION

INDEX TO FORM 10-Q

For the Quarter Ended February 28, 2023

Ca
Cautionary Note Concerning Forward-Looking Statements		3

Part I - FINANCIAL INFORMATION

Item 1 – Unaudited Condensed Consolidated Financial Statements

Condensed Consolidated Balance Sheets as of February 28, 2023 and August 31, 2022		4

Condensed Consolidated Statements of Operations for the three and six months ended February 28, 2023 and 2022		5

Condensed Consolidated Statements of Comprehensive Income for the three and six months ended February 28, 2023 and 2022		6

Condensed Consolidated Statements of Equity for the three and six months ended February 28, 2023 and 2022		7

Condensed Consolidated Statements of Cash Flows for the six months ended February 28, 2023 and 2022		9

Notes to Unaudited Condensed Consolidated Financial Statements		10

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations		32

Item 3 – Quantitative and Qualitative Disclosures About Market Risk		41

Item 4 – Controls and Procedures		42

Part II – OTHER INFORMATION

Item 1 – Legal Proceedings		43

Item 1A – Risk Factors		43

Item 6 – Exhibits		43

SIGNATURES		44

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Cautionary Note Concerning Forward-Looking Statements

This Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements, including without limitation forward-looking statements made under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” involve risks and uncertainties. Any statements contained in this Quarterly Report that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking statements include, without limitation, statements as to future operating results; seasonality expectations; plans for the development, utilization or disposal of manufacturing facilities; future economic conditions; our expectations as to legal proceedings; the effect of our market and product development efforts; and expectations or plans relating to the implementation or realization of our strategic goals and future growth, including through potential future acquisitions. Forward-looking statements may also include, among other things, statements relating to future sales, earnings, cash flow, results of operations, use of cash and other measures of financial performance, statements relating to future dividend payments, as well as the expected impact of the coronavirus disease 2019 (COVID-19) pandemic on the Company's businesses. Forward-looking statements may be identified through the use of words such as “believes,” “anticipates,” “may,” “should,” “will,” “plans,” “projects,” “expects,” “expectations,” “estimates,” “predicts,” “targets,” “forecasts,” “strategy,” and other words of similar meaning in connection with the discussion of future operating or financial performance. These statements are based on current expectations, estimates and projections about the industries in which we operate, and the beliefs and assumptions made by management. Because forward-looking statements relate to the future, they are subject to inherent risks, uncertainties and changes in circumstances that are difficult to predict. Accordingly, the Company’s actual results may differ materially from those contemplated by the forward-looking statements. Investors, therefore, are cautioned against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. Investors should refer to the discussions under “Risk Factors” contained in our Annual Report on Form 10-K for the fiscal year ended August 31, 2022, concerning certain factors that could cause our actual results to differ materially from the results anticipated in such forward-looking statements. These Risk Factors are hereby incorporated by reference into this Quarterly Report.

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Item 1 — Unaudited Condensed Consolidated Financial Statements

CHASE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

In thousands, except share and per share amounts


	February 28,		August 31,
	2023		2022
	(unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$	36,370	$	315,495
Accounts receivable, less allowances of $693 and $610		57,989		51,540
Inventory		84,278		63,039
Prepaid expenses and other current assets		11,795		4,374
Prepaid income taxes and refunds due		7,711		2,329
Total current assets		198,143		436,777

Property, plant and equipment, less accumulated depreciation of $57,111 and $52,503		63,357		24,248

Other Assets
Goodwill		176,950		95,160
Intangible assets, less accumulated amortization of $115,413 and $101,237		168,690		33,661
Cash surrender value of life insurance		4,450		4,450
Restricted investments		2,487		2,367
Deferred income taxes		121		5,763
Operating lease right-of-use assets		7,085		8,596
Other assets		757		558
Total assets	$	622,040	$	611,580

LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	22,570	$	20,122
Accrued payroll and other compensation		6,009		6,381
Income taxes payable		1,804		554
Accrued expenses		10,720		8,271
Total current liabilities		41,103		35,328

Long-term debt		145,000		180,000
Operating lease long-term liabilities		5,197		6,618
Deferred compensation		2,500		2,375
Accumulated pension obligation		6,936		7,431
Other liabilities		3,485		2,897
Deferred income taxes		32,503		2,282
Accrued income taxes		1,956		1,820
Total liabilities	$	238,680	$	238,751

Commitments and contingencies (Note 10)

Equity
First Serial Preferred Stock, $1.00 par value: Authorized 100,000 shares; none issued		—		—
Common stock, $.10 par value: Authorized 20,000,000 shares; 9,506,127 shares at February 28, 2023 and 9,462,765 shares at August 31, 2022 issued and outstanding		952		947
Additional paid-in capital		23,111		21,409
Accumulated other comprehensive loss		(17,270)		(20,367)
Retained earnings		376,567		370,840
Total equity		383,360		372,829
Total liabilities and equity	$	622,040	$	611,580

See accompanying notes to the unaudited condensed consolidated financial statements

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CHASE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

In thousands, except share and per share amounts


	Three Months Ended February 28,				Six Months Ended February 28,
	2023		2022		2023		2022

	(unaudited)				(unaudited)
Revenue
Sales	$	93,517	$	73,182	$	195,638	$	147,374
Royalties and commissions		763		771		1,535		1,589
		94,280		73,953		197,173		148,963
Costs and Expenses
Cost of products and services sold		59,621		46,911		126,621		94,192
Selling, general and administrative expenses		18,436		13,125		40,043		26,500
Research and product development costs		1,463		1,095		2,954		2,088
Operations optimization costs (Note 15)		638		589		1,291		648
Acquisition-related costs (Note 17)		—		—		29		—
Loss on impairment/write-off of right-of-use lease asset (Note 8, 15)		314		—		862		—
Loss (Gain) on contingent consideration (Note 12)		128		(200)		434		275

Operating income		13,680		12,433		24,939		25,260

Interest expense		(2,387)		(86)		(4,525)		(173)
Other income (expense)		(301)		20		(822)		397

Income before income taxes		10,992		12,367		19,592		25,484

Income taxes (Note 14)		2,489		3,241		4,365		6,631

Net income	$	8,503	$	9,126	$	15,227	$	18,853


Net income available to common shareholders, per common and common equivalent share (Note 4)

Basic	$	0.90	$	0.96	$	1.60	$	1.99

Diluted	$	0.89	$	0.96	$	1.60	$	1.98

Weighted average shares outstanding
Basic		9,420,865		9,399,231		9,419,142		9,398,552
Diluted		9,444,525		9,436,415		9,444,325		9,437,425

Annual cash dividends declared per share	$	—	$	—	$	1.00	$	1.00

See accompanying notes to the unaudited condensed consolidated financial statements

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CHASE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

In thousands, except share and per share amounts


	Three Months Ended February 28,				Six Months Ended February 28,
	2023		2022		2023		2022

	(unaudited)				(unaudited)
Net income	$	8,503	$	9,126	$	15,227	$	18,853

Other comprehensive income (loss):
Net unrealized (loss) gain on restricted investments, net of tax		(70)		(135)		(32)		(165)
Change in funded status of pension plans, net of tax		102		112		214		224
Pension settlement loss, net of tax		76		—		226		—
Foreign currency translation adjustment		746		115		2,689		(2,058)
Total other comprehensive income (loss)		854		92		3,097		(1,999)

Comprehensive income	$	9,357	$	9,218	$	18,324	$	16,854

See accompanying notes to the unaudited condensed consolidated financial statements

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CHASE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

THREE MONTHS ENDED FEBRUARY 28, 2023 AND 2022

In thousands, except share and per share amounts


				Additional		Accumulated Other				Total
	Common Stock			Paid-In		Comprehensive		Retained		Stockholders'
	Shares	Amount		Capital		Income (Loss)		Earnings		Equity
Balance at November 30, 2021 (unaudited)	9,459,685	$	947	$	19,733	$	(13,301)	$	335,896	$	343,275
Restricted stock grants, net of forfeitures	9,203		1		(1)		—		—		—
Amortization of restricted stock grants			—		552		—		—		552
Amortization of stock option grants			—		229		—		—		229
Change in funded status of pension plans, net of tax $37			—		—		112		—		112
Foreign currency translation adjustment			—		—		115		—		115
Net unrealized gain (loss) on restricted investments, net of tax ($46)			—		—		(135)		—		(135)
Net income			—		—		—		9,126		9,126
Balance at February 28, 2022 (unaudited)	9,468,888	$	948	$	20,513	$	(13,209)	$	345,022	$	353,274

Balance at November 30, 2022 (unaudited)	9,499,704	$	951	$	22,134	$	(18,124)	$	368,064	$	373,025
Restricted stock grants, net of forfeitures	6,652		1		(1)		—		—		—
Amortization of restricted stock grants			—		776		—		—		776
Amortization of stock option grants			—		222		—		—		222
Common stock retained to pay statutory minimum withholding taxes on common stock	(229)		—		(20)		—		—		(20)
Change in funded status of pension plans, net of tax $34			—		—		102		—		102
Pension settlement loss, net of tax $20			—		—		76		—		76
Foreign currency translation adjustment			—		—		746		—		746
Net unrealized gain (loss) on restricted investments, net of tax ($25)			—		—		(70)		—		(70)
Net income			—		—		—		8,503		8,503
Balance at February 28, 2023 (unaudited)	9,506,127	$	952	$	23,111	$	(17,270)	$	376,567	$	383,360

See accompanying notes to the unaudited condensed consolidated financial statements

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CHASE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

SIX MONTHS ENDED FEBRUARY 28, 2023 AND 2022

In thousands, except share and per share amounts


				Additional		Accumulated Other				Total
	Common Stock			Paid-In		Comprehensive		Retained		Stockholders'
	Shares	Amount		Capital		Income (Loss)		Earnings		Equity
Balance at August 31, 2021	9,447,905	$	946	$	18,959	$	(11,210)	$	335,629	$	344,324
Restricted stock grants, net of forfeitures	20,983		2		(2)		—		—		—
Amortization of restricted stock grants			—		1,108		—		—		1,108
Amortization of stock option grants			—		448		—		—		448
Cash dividend on common stock, $1.00 per share			—		—		—		(9,460)		(9,460)
Change in funded status of pension plans, net of tax $74			—		—		224		—		224
Foreign currency translation adjustment			—		—		(2,058)		—		(2,058)
Net unrealized gain (loss) on restricted investments, net of tax ($57)			—		—		(165)		—		(165)
Net income			—		—		—		18,853		18,853
Balance at February 28, 2022 (unaudited)	9,468,888	$	948	$	20,513	$	(13,209)	$	345,022	$	353,274

Balance at August 31, 2022	9,462,765	$	947	$	21,409	$	(20,367)	$	370,840	$	372,829
Restricted stock grants, net of forfeitures	36,959		4		(4)		—		—		—
Amortization of restricted stock grants			—		1,608		—		—		1,608
Amortization of stock option grants			—		348		—		—		348
Exercise of stock options	15,152		2		555		—		—		557
Common stock received for payment of stock option exercises	(6,140)		(1)		(556)		—		—		(557)
Common stock retained to pay statutory minimum withholding taxes on common stock	(2,609)		—		(249)		—		—		(249)
Cash dividend on common stock, $1.00 per share			—		—		—		(9,500)		(9,500)
Change in funded status of pension plans, net of tax $71			—		—		214		—		214
Pension settlement loss, net of tax $75			—		—		226		—		226
Foreign currency translation adjustment			—		—		2,689		—		2,689
Net unrealized gain (loss) on restricted investments, net of tax ($11)			—		—		(32)		—		(32)
Net income									15,227		15,227
Balance at February 28, 2023 (unaudited)	9,506,127	$	952	$	23,111	$	(17,270)	$	376,567	$	383,360

See accompanying notes to the unaudited condensed consolidated financial statements

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CHASE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

In thousands


	Six Months Ended February 28,
	2023		2022

	(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	15,227	$	18,853
Adjustments to reconcile net income to net cash provided by operating activities
Loss on impairment/write-off of right-of-use lease asset		862		—
Loss on contingent consideration		434		275
Depreciation		4,536		1,776
Amortization		13,780		6,167
Provision for allowance for doubtful accounts		81		80
Stock-based compensation		1,956		1,556
Realized gain on restricted investments		(90)		(80)
Pension curtailment and settlement loss		226
Deferred taxes		(2,219)		419
Increase (decrease) from changes in assets and liabilities
Accounts receivable		4,231		(197)
Inventory		(4,890)