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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 May 31, 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 June 30, 2023 was 9,506,344.

CHASE CORPORATION

INDEX TO FORM 10-Q

For the Quarter Ended May 31, 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 May 31, 2023 and August 31, 2022

4

Condensed Consolidated Statements of Operations for the three and nine months ended May 31, 2023 and 2022

5

Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended May 31, 2023 and 2022

6

Condensed Consolidated Statements of Equity for the three and nine months ended May 31, 2023 and 2022

7

Condensed Consolidated Statements of Cash Flows for the nine months ended May 31, 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

34

Item 3 – Quantitative and Qualitative Disclosures About Market Risk

44

Item 4 – Controls and Procedures

45

Part II – OTHER INFORMATION

Item 1 – Legal Proceedings

46

Item 1A – Risk Factors

46

Item 6 – Exhibits

46

SIGNATURES

47

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, and 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.

3

Item 1 — Unaudited Condensed Consolidated Financial Statements

CHASE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

In thousands, except share and per share amounts

May 31, 

August 31, 

 

2023

    

2022

 

(unaudited)

ASSETS

Current Assets

Cash and cash equivalents

$

43,071

$

315,495

Accounts receivable, less allowances of $840 and $610

61,112

51,540

Inventory

77,485

63,039

Prepaid expenses and other current assets

9,720

4,374

Prepaid income taxes and refunds due

4,988

2,329

Total current assets

196,376

436,777

Property, plant and equipment, less accumulated depreciation of $59,433 and $52,503

61,918

24,248

Other Assets

Goodwill

177,736

95,160

Intangible assets, less accumulated amortization of $120,706 and $101,237

163,954

33,661

Cash surrender value of life insurance

4,450

4,450

Restricted investments

2,672

2,367

Deferred income taxes

10

5,763

Operating lease right-of-use assets

7,341

8,596

Other assets

2,839

558

Total assets

$

617,296

$

611,580

LIABILITIES AND EQUITY

Current Liabilities

Accounts payable

$

20,662

$

20,122

Accrued payroll and other compensation

5,822

6,381

Income taxes payable

466

554

Accrued expenses

11,132

8,271

Total current liabilities

38,082

35,328

Long-term debt

130,000

180,000

Operating lease long-term liabilities

5,449

6,618

Deferred compensation

2,683

2,375

Accumulated pension obligation

6,655

7,431

Other liabilities

3,655

2,897

Deferred income taxes

31,221

2,282

Accrued income taxes

1,982

1,820

Total liabilities

$

219,727

$

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; 9,506,344 shares at May 31, 2023 and 9,462,765 shares at August 31, 2022 issued and outstanding

952

947

Additional paid-in capital

23,820

21,409

Accumulated other comprehensive loss

(15,862)

(20,367)

Retained earnings

388,659

370,840

Total equity

397,569

372,829

Total liabilities and equity

$

617,296

$

611,580

See accompanying notes to the unaudited condensed consolidated financial statements

4

CHASE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

In thousands, except share and per share amounts

Three Months Ended May 31, 

Nine Months Ended May 31, 

    

2023

    

2022

 

2023

    

2022

 

(unaudited)

(unaudited)

Revenue

Sales

$

105,821

$

87,724

$

301,459

$

235,098

Royalties and commissions

824

895

2,359

2,484

106,645

88,619

303,818

237,582

Costs and Expenses

Cost of products and services sold

66,437

54,438

193,058

148,630

Selling, general and administrative expenses

19,189

13,807

59,232

40,307

Research and product development costs

1,527

1,186

4,481

3,274

Operations optimization costs (Note 15)

215

59

1,506

707

Acquisition-related costs (Note 17)

29

Loss on impairment/write-off of long-term assets (Note 8, 15)

331

1,193

Loss (Gain) on contingent consideration (Note 12)

129

(474)

563

(199)

Operating income

18,817

19,603

43,756

44,863

Interest expense

(2,361)

(89)

(6,886)

(262)

Other (expense) income

(308)

(166)

(1,130)

231

Income before income taxes

16,148

19,348

35,740

44,832

Income taxes (Note 14)

4,056

3,803

8,421

10,434

Net income

$

12,092

$

15,545

$

27,319

$

34,398

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

Basic

$

1.27

$

1.64

$

2.88

$

3.64

Diluted

$

1.27

$

1.64

$

2.87

$

3.62

Weighted average shares outstanding

Basic

9,430,065

9,399,231

9,422,783

9,398,778

Diluted

9,463,355

9,431,259

9,450,668

9,435,369

Annual cash dividends declared per share

$

$

$

1.00

$

1.00

See accompanying notes to the unaudited condensed consolidated financial statements

5

CHASE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

In thousands, except share and per share amounts

Three Months Ended May 31, 

Nine Months Ended May 31, 

    

2023

    

2022

 

2023

2022

 

(unaudited)

(unaudited)

Net income

$

12,092

    

$

15,545

$

27,319

$

34,398

Other comprehensive income (loss):

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

36

(112)

4

(277)

Change in funded status of pension plans, net of tax

65

112

279

336

Pension settlement loss (gain), net of tax

(68)

158

Foreign currency translation adjustment

1,375

(3,116)

4,064

(5,174)

Total other comprehensive income (loss)

1,408

(3,116)

4,505

(5,115)

Comprehensive income

$

13,500

$

12,429

$

31,824

$

29,283

See accompanying notes to the unaudited condensed consolidated financial statements

6

CHASE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

THREE MONTHS ENDED MAY 31, 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 February 28, 2022 (unaudited)

9,468,888

$

948

$

20,513

$

(13,209)

$

345,022

$

353,274

Restricted stock grants, net of forfeitures

(298)

Amortization of restricted stock grants

613

613

Amortization of stock option grants

249

249

Change in funded status of pension plans, net of tax $37

112

112

Foreign currency translation adjustment

(3,116)

(3,116)

Net unrealized gain (loss) on restricted investments, net of tax ($37)

(112)

(112)

Net income

15,545

15,545

Balance at May 31, 2022 (unaudited)

9,468,590

$

948

$

21,375

$

(16,325)

$

360,567

$

366,565

Balance at February 28, 2023 (unaudited)

9,506,127

$

952

$

23,111

$

(17,270)

$

376,567

$

383,360

Restricted stock grants, net of forfeitures

963

Amortization of restricted stock grants

556

556

Amortization of stock option grants

227

227

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

(746)

(74)

(74)

Change in funded status of pension plans, net of tax $21

65

65

Pension settlement loss (gain), net of tax ($23)

(68)

(68)

Foreign currency translation adjustment

1,375

1,375

Net unrealized gain (loss) on restricted investments, net of tax $13

36

36

Net income

12,092

12,092

Balance at May 31, 2023 (unaudited)

9,506,344

$

952

$

23,820

$

(15,862)

$

388,659

$

397,569

See accompanying notes to the unaudited condensed consolidated financial statements

7

CHASE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

NINE MONTHS ENDED MAY 31, 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

20,685

2

(2)

Amortization of restricted stock grants

1,721

1,721

Amortization of stock option grants

697

697

Cash dividend on common stock, $1.00 per share

(9,460)

(9,460)

Change in funded status of pension plans, net of tax $111

336

336

Foreign currency translation adjustment

(5,174)

(5,174)

Net unrealized gain (loss) on restricted investments, net of tax ($92)

(277)

(277)

Net income

34,398

34,398

Balance at May 31, 2022 (unaudited)

9,468,590

$

948

$

21,375

$

(16,325)

$

360,567

$

366,565

Balance at August 31, 2022

9,462,765

$

947

$

21,409

$

(20,367)

$

370,840

$

372,829

Restricted stock grants, net of forfeitures

37,922

4

(4)

Amortization of restricted stock grants

2,164

2,164

Amortization of stock option grants

575

575

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

(3,355)

(323)

(323)

Cash dividend on common stock, $1.00 per share

(9,500)

(9,500)

Change in funded status of pension plans, net of tax $92

279

279

Pension settlement loss, net of tax $53

158

158

Foreign currency translation adjustment

4,064

4,064

Net unrealized gain (loss) on restricted investments, net of tax $2

4

4

Net income

27,319

27,319

Balance at May 31, 2023 (unaudited)

9,506,344

$

952

$

23,820

$

(15,862)

$

388,659

$

397,569

See accompanying notes to the unaudited condensed consolidated financial statements

8

CHASE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

In thousands

Nine Months Ended May 31, 

    

2023

    

2022

 

 

(unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES

Net income

$

27,319

$

34,398

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

Loss on impairment/write-off of long-term assets

1,193

Loss on contingent consideration

563

(199)

Depreciation

6,708

2,654

Amortization

18,721

9,092

Provision for allowance for doubtful accounts

224

91

Stock-based compensation

2,739

2,418

Realized gain on restricted investments

(100)

(86)

Pension curtailment and settlement loss