Revenue Increased by 11% to $88.6 Million in Q3
FY22 compared to Q3 FY21
Increased Net Income by 9% to $15.5 million in
Q3 FY22 compared to Q3 FY21
Gross Margin improved sequentially to 38.6% in
Q3 FY22
Chase Corporation (NYSE American: CCF), a global specialty
chemicals company that is a leading manufacturer of protective
materials for high-reliability applications across diverse market
sectors, announced financial results for the third fiscal quarter
ended May 31, 2022.
Fiscal Third Quarter Financial and Recent Operational
Highlights
- Total Revenue grew 11% to $88.6 million, as implemented sales
price increases gained against inflationary cost pressures,
compared to Q3 FY21
- Gross Margin of 38.6%, compared to 41.8% in Q3 FY21 — Inventory
investments, cost controls and sales price adjustments were
utilized to counteract margin compression, with realization of
benefits achieved in the current quarter, which had been lagging in
the first half of the year
- Net Income was $15.5 million, or $1.64 per diluted share,
compared to $14.3 million, or $1.50 per diluted share, for Q3
FY21
- EBITDA was $23.2 million, compared to $22.2 million in Q3 FY21
and Adjusted EBITDA was $22.8 million, compared to $22.4 million in
Q3 FY21
- Free Cash Flow was $13.0 million, compared to Free Cash Flow of
$15.9 million in Q3 FY21 — reduction primarily due to continued
strategic inventory build (approximately $17.8 million
year-to-date) to meet customer demand and address increased
backlog
- Ended the third fiscal quarter of 2022 with a cash balance of
$124.7 million, and a fully available $200 million revolving credit
facility, after having largest ever dividend payout in second
quarter of $9.5 million
- Effective Income Tax Rate of 19.7%, compared to 19.5% in Q3
FY21
- Progress made on the consolidation of operations in its
Pittsburgh, PA facility
Adam P. Chase, President and Chief Executive Officer of Chase
Corporation said, “Sustained elevated demand for our portfolio of
products and our performance in the third fiscal quarter served as
proof points to the resiliency and necessity of our business, as
well as our dedication to our customers. I am pleased to report in
the third quarter, Chase Corporation has delivered year-over-year
revenue growth across each of our operating segments as well as
margin expansion in the face of ongoing challenges in the global
operating environment. We delivered 38.6% gross margin in the
period, which despite the Company’s healthy sales growth, was
impacted by inflationary pressures and a less favorable sales mix.
We remain diligent in our efforts to strengthen our operational
efficiency as well as work to counteract margin compression, and we
expect to realize further benefits in the coming quarters.”
Mr. Chase continued, “The Company’s Industrial Tapes segment
delivered the largest revenue expansion for the second consecutive
quarter as a result of further increased demand within our North
American-focused cable materials and pulling and detection product
lines. The Adhesives, Sealants and Additives business also reported
an increase in revenue, supported by higher demand from our North
American-focused functional additives product line, which
encompasses inorganic growth from our Emerging Technologies Inc
(“ETi”) business that was acquired in the second quarter of fiscal
2021. Lastly, our Corrosion Protection and Waterproofing segment
revenue surpassed the prior year comparable quarter due to
heightened demand within our pipeline coatings and building
envelope product lines.”
“Chase Corporation has continued to encounter headwinds
resulting from global raw material inflationary pressures, labor
shortages, and supply chain constraints, which is anticipated to
persist throughout the remainder of the year. As such, we remain
highly proactive in our efforts to mitigate the effects of these
macro-economic challenges including engaging in close conversations
with our suppliers, as well as implementing appropriate pricing
actions as needed. Our Company remains committed to protecting our
margins as well as serving our customers, shareholders and
employees through appropriate staffing, excellent safety standards,
and achieving optimal business efficiency.”
Mr. Chase concluded, “As Chase Corporation looks to its next era
of efficiency, we have decided to upgrade our ERP system, remaining
within the Oracle ecosystem. This Oracle upgrade will support Chase
Corporation’s business expansion, ERP functionality, and innovation
opportunities as well as modernize our current operational
processes. Additionally, as part of our ongoing consolidation and
optimization initiative, we have completed the relocation of our
corporate office to its new location in Westwood, MA and progressed
further against our consolidation of operations within our O’Hara,
PA facility. This initiative has positioned Chase Corporation to
further streamline business processes, improve future fixed costs,
and minimize our corporate footprint.”
Michael J. Bourque, Chase Corporation’s Treasurer and Chief
Financial Officer stated, “We are encouraged by the sustained
demand and sales levels that are driving growth across each of our
operating segments during the third fiscal quarter. Our balance
sheet remains strong with no debt, a fully available $200 million
revolving credit facility, and a $124.7 million cash balance. We
are both confident and steadfast in our commitment to delivering on
our strategic growth objectives and maximizing our shareholders’
value as we continue to drive organic growth, maximize efficiency,
and pursue inorganic growth opportunities. As such, Chase
Corporation is prepared to support its global channels and
customers through the utilization of our sound balance sheet.
Segment Results
Adhesives, Sealants and Additives
For the Three Months Ended May
31,
For the Nine Months Ended May
31,
2022
2021
2022
2021
Revenue
$
36,771
$
33,861
$
99,600
$
95,507
Cost of products and services sold
21,073
18,850
59,828
52,461
Gross Margin
$
15,698
$
15,011
$
39,772
$
43,046
Gross Margin %
43%
44%
40%
45%
Revenue in the Adhesives, Sealants and Additives segment
increased $2.9 million, or 9% in the third fiscal quarter ended May
31, 2022. The revenue increase for the quarter was primarily due to
increased demand for our North American-focused functional
additives product line, which includes year-to-date inorganic
growth attributable to the ETi superabsorbent polymers business.
The electronic and industrial coatings line negatively impacted
sales for the segment in the quarter largely due to macroeconomic
logistics and raw material supply constraints that impacted
worldwide sales in automotive verticals.
Industrial Tapes
For the Three Months Ended May
31,
For the Nine Months Ended May
31,
2022
2021
2022
2021
Revenue
$
38,329
$
32,249
$
104,420
$
87,085
Cost of products and services sold
25,836
20,043
69,845
55,853
Gross Margin
$
12,493
$
12,206
$
34,575
$
31,232
Gross Margin %
33%
38%
33%
36%
The Industrial Tapes segment’s revenue increased $6.1 million,
or 19% in the third fiscal quarter. The segment’s cable materials,
pulling and detection, and electronic materials product lines sales
drove revenue expansion in the third fiscal quarter. Revenue growth
in the quarter was slightly tapered by a quarter-to-quarter
reduction in sales volume from the specialty products line due to
raw materials supply constraints.
Corrosion Protection and Waterproofing
For the Three Months Ended May
31,
For the Nine Months Ended May
31,
2022
2021
2022
2021
Revenue
$
13,519
$
13,483
$
33,562
$
32,624
Cost of products and services sold
7,529
7,419
18,957
18,518
Gross Margin
$
5,990
$
6,064
$
14,605
$
14,106
Gross Margin %
44%
45%
44%
43%
Revenue from the Corrosion Protection and Waterproofing segment
remained relatively flat with an increase of less than 1% in the
three months ended May 31, 2022. The segment’s increase in revenue
was primarily due to increased sales within the pipeline coating
and building envelope product lines. Negatively impacting the
segment’s sales were decreases in revenue from our bridge and
highway product lines due to delayed project demand and our coating
and linings product lines due to the strong prior year quarter
activity due to the recovery and growth achieved following the
winter weather events which impacted the Houston, TX manufacturing
facility and surrounding regions.
About Chase Corporation
Chase Corporation, a global specialty chemicals company that was
founded in 1946, is a leading manufacturer of protective materials
for high-reliability applications throughout the world. More
information can be found on our website https://chasecorp.com/
Use of Non-GAAP Financial Measures
The Company has used non-GAAP financial measures in this press
release. Adjusted net income, Adjusted diluted EPS, EBITDA,
Adjusted EBITDA and Free cash flow are non-GAAP financial measures.
The Company believes that Adjusted net income, Adjusted diluted
EPS, EBITDA, Adjusted EBITDA and Free cash flow are useful
performance measures as they are used by its executive management
team to measure operating performance, to allocate resources to
enhance the financial performance of its business, to evaluate the
effectiveness of its business strategies and to communicate with
its board of directors and investors concerning its financial
performance. The Company believes Adjusted net income, Adjusted
diluted EPS, EBITDA, Adjusted EBITDA and Free cash flow are
commonly used by financial analysts and others in the industries in
which the Company operates, and thus provide useful information to
investors. However, Chase’s calculation of Adjusted net income,
Adjusted diluted EPS, EBITDA, Adjusted EBITDA and Free cash flow
may not be comparable to similarly-titled measures published by
others. Non-GAAP financial measures should be considered in
addition to, and not as an alternative to, the Company’s reported
results prepared in accordance with GAAP. This press release
provides reconciliations from the most directly comparable
financial measure presented in accordance with U.S. GAAP to each
non-GAAP financial measure.
Cautionary Note Concerning Forward-Looking Statements
Certain statements in this press release are forward-looking.
These may be identified by the use of forward-looking words or
phrases including, but not limited to, “believe,” “expect,”
“anticipate,” “should,” “planned,” “estimated” and “potential.”
These forward-looking statements are based on Chase Corporation’s
current expectations. The Private Securities Litigation Reform Act
of 1995 provides a “safe harbor” for such forward-looking
statements. 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 customer plans and commitments; the pricing and
availability of equipment, materials and inventories; technological
developments; performance issues with suppliers and subcontractors;
economic growth; delays in testing of new products; the Company’s
ability to successfully integrate acquired operations; the
effectiveness of cost-reduction plans; rapid technology changes;
the highly competitive environment in which the Company operates;
as well as expected impact of the coronavirus disease (COVID-19)
pandemic on the Company's businesses. Readers are cautioned not to
place undue reliance on these forward-looking statements, which
speak only as of the date the statement was made. The Company does
not assume any obligation to update or revise any forward-looking
statement made in this release or that may from time to time be
made by or on behalf of the Company. Additional information
regarding the factors that may cause actual results to differ
materially from these forward-looking statements is available in
the Company’s filings with the Securities and Exchange Commission,
including the risks and uncertainties identified in Part I, Item 1A
- Risk Factors of the Company’s Annual Report on Form 10-K for the
year ended August 31, 2021.
The following table summarizes the Company’s unaudited financial
results for the three and nine months ended May 31, 2022 and
2021.
For the Three Months Ended May
31,
For the Nine Months Ended May
31,
All figures in thousands, except per
share figures
2022
2021
2022
2021
Revenue
$
88,619
$
79,593
$
237,582
$
215,216
Costs and Expenses
Cost of products and services sold
54,438
46,312
148,630
126,832
Selling, general and administrative
expenses
13,807
13,969
40,307
38,560
Research and product development costs
1,186
957
3,274
3,034
Operations optimization costs
59
22
707
120
Acquisition-related costs
—
—
—
128
(Gain) loss on contingent
consideration
(474)
262
(199)
995
Operating income
19,603
18,071
44,863
45,547
Interest expense
(89)
(68)
(262)
(204)
Other income (expense)
(166)
(260)
231
(758)
Income before income taxes
19,348
17,743
44,832
44,585
Income taxes
3,803
3,454
10,434
10,288
Net income
$
15,545
$
14,289
$
34,398
$
34,297
Net income per diluted share
$
1.64
$
1.50
$
3.62
$
3.61
Weighted average diluted shares
outstanding
9,431
9,435
9,435
9,427
Reconciliation of net income to EBITDA and
adjusted EBITDA
Net income
$
15,545
$
14,289
$
34,398
$
34,297
Interest expense
89
68
262
204
Income taxes
3,803
3,454
10,434
10,288
Depreciation expense
878
973
2,654
2,925
Amortization expense
2,925
3,376
9,092
9,566
EBITDA
$
23,240
$
22,160
$
56,840
$
57,280
(Gain) loss on contingent
consideration
(474)
262
(199)
995
Operations optimization costs
59
22
707
120
Acquisition-related costs
—
—
—
128
Adjusted EBITDA
$
22,825
$
22,444
$
57,348
$
58,523
For the Three Months Ended May
31,
For the Nine Months Ended May
31,
2022
2021
2022
2021
Reconciliation of net income to adjusted
net income
Net income
$
15,545
$
14,289
$
34,398
$
34,297
Excess tax loss (gain) related to ASU No.
2016-09
—
(15)
10
(161)
(Gain) loss on contingent
consideration
(474)
262
(199)
995
Operations optimization costs
59
22
707
120
Acquisition-related costs
—
—
—
128
Income taxes *
87
(60)
(107)
(261)
Adjusted net income
$
15,217
$
14,498
$
34,809
$
35,118
Adjusted net income per diluted share
(Adjusted diluted EPS)
$
1.60
$
1.53
$
3.66
$
3.70
* For the three and nine months ended May 31, 2022 and 2021,
represents the aggregate tax effect assuming a 21% tax rate for the
items impacting pre-tax income, which is our effective U.S.
statutory Federal tax rate for fiscal 2022 and 2021.
For the Three Months Ended May
31,
For the Nine Months Ended May
31,
2022
2021
2022
2021
Reconciliation of cash provided by
operating activities to free cash flow
Net cash provided by operating
activities
$
14,383
$
16,614
$
20,286
$
43,000
Purchases of property, plant and
equipment
(1,334)
(689)
(3,103)
(1,749)
Free cash flow
$
13,049
$
15,925
$
17,183
$
41,251
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220711005879/en/
Investor & Media Contact: Michael Cummings or Jackie
Marcus Alpha IR Group Phone: (617) 982-0475 E-mail:
CCF@alpha-ir.com or Shareholder & Investor Relations Department
Phone: (781) 332-0700 E-mail: investorrelations@chasecorp.com
Website: www.chasecorp.com
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