10-Q 1 ccf-20220228x10q.htm 10-Q
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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, 2022

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, 2022 was 9,468,888.

CHASE CORPORATION

INDEX TO FORM 10-Q

For the Quarter Ended February 28, 2022

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, 2022 (unaudited) and August 31, 2021

4

Condensed Consolidated Statements of Operations for the three and six months ended February 28, 2022 and 2021 (unaudited)

5

Condensed Consolidated Statements of Comprehensive Income for the three and six months ended February 28, 2022 and 2021 (unaudited)

6

Condensed Consolidated Statements of Equity for the three and six months ended February 28, 2022 and 2021 (unaudited)

7

Condensed Consolidated Statements of Cash Flows for the six months ended February 28, 2022 and 2021 (unaudited)

9

Notes to Unaudited Condensed Consolidated Financial Statements

10

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

31

Item 3 – Quantitative and Qualitative Disclosures About Market Risk

42

Item 4 – Controls and Procedures

43

Part II – OTHER INFORMATION

Item 1 – Legal Proceedings

44

Item 1A – Risk Factors

44

Item 6 – Exhibits

44

SIGNATURES

45

2

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. Readers should refer to the discussions under “Risk Factors” contained in our Annual Report on Form 10-K for the fiscal year ended August 31, 2021 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.

3

Item 1 — Unaudited Condensed Consolidated Financial Statements

CHASE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

In thousands, except share and per share amounts

February 28, 

August 31, 

 

2022

    

2021

 

ASSETS

Current Assets

Cash and cash equivalents

$

116,044

$

119,429

Accounts receivable, less allowances of $529 and $451

46,081

46,212

Inventory

52,996

41,217

Prepaid expenses and other current assets

4,629

2,851

Prepaid income taxes and refunds due

3,280

3,255

Total current assets

223,030

212,964

Property, plant and equipment, less accumulated depreciation of $51,796 and $50,666

24,137

24,267

Other Assets

Goodwill

97,131

97,866

Intangible assets, less accumulated amortization of $97,287 and $91,484

40,305

46,954

Cash surrender value of life insurance

4,450

4,450

Restricted investments

2,323

2,260

Deferred income taxes

4,879

5,265

Operating lease right-of-use asset

9,554

9,312

Other assets

952

821

Total assets

$

406,761

$

404,159

LIABILITIES AND EQUITY

Current Liabilities

Accounts payable

$

17,331

$

19,575

Accrued payroll and other compensation

4,212

7,179

Income taxes payable

761

Accrued expenses

5,250

5,407

Total current liabilities

26,793

32,922

Operating lease long-term liabilities

7,493

7,202

Deferred compensation

2,329

2,267

Accumulated pension obligation

8,811

9,416

Other liabilities

2,692

2,537

Deferred income taxes

3,162

3,301

Accrued income taxes

2,207

2,190

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; 9,468,888 shares at February 28, 2022 and 9,447,905 shares at August 31, 2021 issued and outstanding

948

946

Additional paid-in capital

20,513

18,959

Accumulated other comprehensive loss

(13,209)

(11,210)

Retained earnings

345,022

335,629

Total equity

353,274

344,324

Total liabilities and equity

$

406,761

$

404,159

See accompanying notes to the unaudited condensed consolidated financial statements

4

CHASE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

In thousands, except share and per share amounts

Three Months Ended February 28, 

Six Months Ended February 28, 

    

2022

    

2021

 

2022

    

2021

 

Revenue

Sales

$

73,182

$

67,575

$

147,374

$

133,711

Royalties and commissions

771

872

1,589

1,912

73,953

68,447

148,963

135,623

Costs and Expenses

Cost of products and services sold

46,911

40,915

94,192

80,520

Selling, general and administrative expenses

13,125

12,331

26,500

24,591

Research and product development costs

1,095

1,026

2,088

2,077

Operations optimization costs (Note 15)

589

98

648

98

Acquisition-related costs (Note 17)

128

128

(Gain) loss on contingent consideration (Note 17)

(200)

733

275

733

Operating income

12,433

13,216

25,260

27,476

Interest expense

(86)

(67)

(173)

(136)

Other income (expense)

20

(284)

397

(498)

Income before income taxes

12,367

12,865

25,484

26,842

Income taxes (Note 14)

3,241

3,694

6,631

6,834

Net income

$

9,126

$

9,171

$

18,853

$

20,008

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

Basic

$

0.96

$

0.97

$

1.99

$

2.12

Diluted

$

0.96

$

0.97

$

1.98

$

2.11

Weighted average shares outstanding

Basic

9,399,231

9,381,666

9,398,552

9,378,743

Diluted

9,436,415

9,426,626

9,437,425

9,422,651

Annual cash dividends declared per share

$

1.00

$

0.80

See accompanying notes to the unaudited condensed consolidated financial statements

5

CHASE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

In thousands, except share and per share amounts

Three Months Ended February 28, 

Six Months Ended February 28, 

    

2022

    

2021

 

2022

2021

 

Net income

$

9,126

    

$

9,171

$

18,853

$

20,008

Other comprehensive income (loss):

Net unrealized (loss) gain on restricted investments, net of tax

(135)

48

(165)

118

Change in funded status of pension plans, net of tax

112

125

224

247

Foreign currency translation adjustment

115

1,796

(2,058)

1,887

Total other comprehensive income (loss)

92

1,969

(1,999)

2,252

Comprehensive income

$

9,218

$

11,140

$

16,854

$

22,260

See accompanying notes to the unaudited condensed consolidated financial statements

6

CHASE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

THREE MONTHS ENDED FEBRUARY 28, 2022 AND 2021

(UNAUDITED)

 

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, 2020

9,446,281

$

945

$

17,264

$

(12,809)

$

301,546

$

306,946

Restricted stock grants, net of forfeitures

3,314

1

(1)

Amortization of restricted stock grants

620

620

Amortization of stock option grants

(23)

(23)

Common stock retained to pay statutory minimum withholding taxes on common stock

(1,224)

(139)

(139)

Change in funded status of pension plans, net of tax $40

125

125

Foreign currency translation adjustment

1,796

1,796

Net unrealized gain (loss) on restricted investments, net of tax $15

48

48

Net income

9,171

9,171

Balance at February 28, 2021

9,448,371

$

946

$

17,721

$

(10,840)

$

310,717

$

318,544

Balance at November 30, 2021

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

9,468,888

$

948

$

20,513

$

(13,209)

$

345,022

$

353,274

See accompanying notes to the unaudited condensed consolidated financial statements

7

CHASE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

SIX MONTHS ENDED FEBRUARY 28, 2022 AND 2021

(UNAUDITED)

 

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, 2020

9,439,082

$

944

$

16,674

$

(13,092)

$

298,266

$

302,792

Restricted stock grants, net of forfeitures

10,693

2

(2)

Amortization of restricted stock grants

1,190

1,190

Amortization of stock option grants

225

225

Exercise of stock options

2,532

40

40

Common stock received for payment of stock option exercises

(386)

(40)

(40)

Common stock retained to pay statutory minimum withholding taxes on common stock

(3,550)

(366)

(366)

Cash dividend on common stock, $0.80 per share

(7,557)

(7,557)

Change in funded status of pension plans, net of tax $83

247

247

Foreign currency translation adjustment

1,887

1,887

Net unrealized gain (loss) on restricted investments, net of tax $39

118

118

Net income

20,008

20,008

Balance at February 28, 2021

9,448,371

$

946

$

17,721

$

(10,840)

$

310,717

$

318,544

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

9,468,888

$

948

$

20,513

$

(13,209)

$

345,022

$

353,274

See accompanying notes to the unaudited condensed consolidated financial statements

8

CHASE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

In thousands

Six Months Ended February 28, 

    

2022

    

2021

 

 

CASH FLOWS FROM OPERATING ACTIVITIES

Net income

$

18,853

$

20,008

Adjustments to reconcile net income to net cash provided by operating activities

Loss on contingent consideration

275

Depreciation

1,776

1,952

Amortization

6,167

6,190

Provision for allowance for doubtful accounts

80

7

Stock-based compensation

1,556

1,415

Realized gain on restricted investments

(80)

(49)

Deferred taxes

419

Increase (decrease) from changes in assets and liabilities

Accounts receivable

(197)

(4,712)

Inventory

(11,917)

3,344

Prepaid expenses and other assets

(1,953)

(913)

Accounts payable

(2,100)

1,862

Accrued compensation and other expenses

(3,371)

(1,470)

Accrued income taxes

(751)

(1,248)

Net cash provided by operating activities

8,757

26,386

CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of property, plant and equipment

(1,769)

(1,060)

Payments for acquisitions

(31,238)

Changes in restricted investments

(205)

10

Net cash used in investing activities

(1,974)

(32,288)

CASH FLOWS FROM FINANCING ACTIVITIES

Dividend paid

(9,460)

(7,557)

Payments of taxes on stock options and restricted stock

(366)

Net cash used in financing activities

(9,460)

(7,923)

DECREASE IN CASH & CASH EQUIVALENTS

(2,677)

(13,825)

Effect of foreign exchange rates on cash

(708)