Revenue increased by 12% to $75.0 Million
Continues to Address Global Inflationary
Pressures on Input Costs
Rationalization of Real Estate Continues —
Corporate Headquarters Move Underway
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 first fiscal quarter
ended November 30, 2021.
Fiscal First Quarter Financial and Recent Operational
Highlights
- Total Revenue grew 12% to $75.0 million, compared to Q1
FY21
- Gross Margin of 37%, compared to 41% in Q1 FY21 — results
tempered by inflationary impacts on material, logistics and labor
costs and an unfavorable sales mix, with benefits from increased
selling prices lagging
- Net Income was $9.7 million, or $1.02 per diluted share,
compared to $10.8 million, or $1.14 per diluted share, for Q1
FY21
- Adjusted EBITDA was $17.7 million, compared to $18.1 million in
Q1 FY21
- Free Cash Flow was $5.4 million, compared to Free Cash Flow of
$13.4 million in Q1 FY21 — primarily driven by the Company’s
continued strategic inventory build (approximately $6.0 million
increase in inventory balance during the quarter) to meet customer
demand and address our supply chain-impacted elevated backlog
- Ended the first fiscal quarter of 2022 with a cash balance of
$124.2 million, and a fully available $200 million revolving credit
facility
- Effective Income Tax Rate of 25.8%, compared to 22.5% in the
year-ago period — with the prior year first quarter benefiting from
a discrete item that did not repeat in the current fiscal year
first quarter
- Recognized $0.5 million in contingent consideration costs to
increase the estimated accrual owed to the seller of ABchimie —
with the increase in the performance-based earn-out representing
our currently more favorable forecast for the future operations of
the September 2020 acquired business
- Commenced plans to move Corporate Headquarters to another
location within Westwood, MA — anticipated future savings through
footprint consolidation and embracing a work from home hybrid model
for its corporate employees
“The continued healthy demand across our broad consumer base is
a testament to the value Chase brings to its customers through our
industry-leading product lines and allows us to make further
progress against our strategic growth initiatives. Despite the
reduced demand experienced in international markets in the quarter
given pandemic-related headwinds, overall elevated demand yielded
sales growth and increased order backlog within each of our
operating segments, with the Company surpassing sales volumes
compared to the same period last year,” said Adam P. Chase,
President and Chief Executive Officer. “The Industrial Tapes
segment led revenue growth in the quarter, driven by robust demand
for our cable materials, pulling and detection, and electronic
materials product lines, over the COVID-19 impacted prior year
quarter. Revenue from our Adhesives, Sealants and Additives, and
our Corrosion Protection and Waterproofing segments also increased
due the heightened demand for our North American focused functional
additives product line, which benefitted from our 2021 acquisition
of Emerging Technologies, Inc. (“ETi”), as well a greater interest
in our coating and lining systems, bridge and highway products and
domestic pipeline products.”
“While we continue to meet customers’ needs and growing demands,
we did experience margin and operational cost pressure in the
quarter due to increased input, logistical and labor costs as a
result of current macro-environmental challenges. Additionally,
company-wide relative margins were affected by an unfavorable sales
mix, given the lower margin Industrial Tapes segment accounting for
the majority of the period-over-period growth — further, our
Adhesives, Sealants and Additives and Industrial Tapes segments
experienced less favorable sales mixes within the segments
themselves, with historically lower margin products constituting a
comparatively larger part of total segment sales. To counteract
margin compression, we have enacted, and as needed will continue to
enact, pricing adjustments across our product lines, with future
benefits anticipated given the current lag.”
Mr. Chase added, “We further progressed our plans to optimize
and drive greater efficiency within our operational portfolio
during the first quarter, most notably the upcoming relocation of
Chase’s corporate headquarters to a new, better suited location
within Westwood, MA. The relocation and reduced footprint will
drive cost savings and is made possible given our work from home
hybrid model. Our new facility will also house the research and
development operations which are currently located across both our
Westwood and Woburn, MA facilities. The corporate relocation is
anticipated to be completed in the second fiscal quarter of
2022.”
“We are continuing to take proactive measures to navigate
current global raw material inflationary pressures, labor
shortages, and supply chain constraints all while emphasizing the
safety of our employees. While we predict these challenges will
persist through at least the first half of fiscal year 2022, we
continue to prioritize implementing proactive measures to ensure
that we meet our customers’ needs. We will further leverage our
global network, operational efficiency plans, strong supplier
partnerships and cost saving strategies in conjunction with pricing
adjustments as necessary, and remain steadfast in our work to
unlock further shareholder value.”
“We are encouraged by our ability to execute on growing demand
trends as well as deliver a strong balance sheet and generate free
cash flow given the current challenging global manufacturing
environment,” said Michael J. Bourque, the Company’s Treasurer and
Chief Financial Officer. “We remain debt free, with a fully
available credit facility, and an overall cash balance of $124.2
million. In the previous fiscal quarter, we amended and restated
our revolving credit facility to support future growth initiatives
and accretive activities. The new facility increased our borrowing
capacity to $200 million from $150 million (and includes an
accordion option that could allow us access to an additional $100
million in borrowing capacity) and its maturity date is now
extended through July 2026.”
Segment Results
Adhesives, Sealants and Additives
For the Three Months Ended
November 30,
2021
2020
Revenue
$
31,049
$
30,071
Cost of products and services sold
18,905
16,613
Gross Margin
$
12,144
$
13,458
Gross Margin %
39%
45%
Revenue in the Company’s Adhesives, Sealants and Additives
segment increased $1.0 million or 3% for the quarter ended November
30, 2021. The revenue increase for the quarter was primarily due to
increased North American demand for the functional additives
product line, which benefited in the quarter from inorganic growth
attributable to the ETi superabsorbent polymers business. The
electronic and industrial coatings line negatively impacted sales
for the segment in the quarter due to logistics and raw material
supply constraints impacting sales into automotive verticals.
Industrial Tapes
For the Three Months Ended
November 30,
2021
2020
Revenue
$
32,761
$
26,491
Cost of products and services sold
22,231
17,117
Gross Margin
$
10,530
$
9,374
Gross Margin %
32%
35%
Revenue in the Industrial Tapes segment increased $6.3 million
or 24% for the quarter ended November 30, 2021. In the first fiscal
quarter, the segment’s cable materials, pulling and detection, and
electronic materials product lines drove the revenue expansion.
Revenue growth in the quarter was slightly tapered by a
quarter-to-quarter reduction in sales volume from the specialty
products line.
Corrosion Protection and Waterproofing
For the Three Months Ended
November 30,
2021
2020
Revenue
$
11,200
$
10,614
Cost of products and services sold
6,145
5,875
Gross Margin
$
5,055
$
4,739
Gross Margin %
45%
45%
Revenue from the Corrosion Protection and Waterproofing segment
increased $0.6 million or 6% for the quarter ended November 30,
2021. The segment’s increase in revenue was primarily due to
increased sales within the coating and lining systems and bridge
and highway segment product lines. Negatively impacting the
segment’s sales were decreases in revenue from the building
envelope and pipeline coatings product lines — with sales delays in
Rye U.K.-produced pipeline coatings outpacing domestic gains.
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 months ended November 30, 2021 and 2020.
For the Three Months Ended
November 30,
All figures in thousands, except per
share figures
2021
2020
Revenue
$
75,010
$
67,176
Costs and Expenses
Cost of products and services sold
47,281
39,605
Selling, general and administrative
expenses
13,375
12,260
Research and product development costs
993
1,051
Operations optimization costs
59
—
Loss on contingent consideration
475
—
Operating income
12,827
14,260
Interest expense
(87)
(69)
Other income (expense)
377
(214)
Income before income taxes
13,117
13,977
Income taxes
3,390
3,140
Net income
$
9,727
$
10,837
Net income per diluted share
$
1.02
$
1.14
Weighted average diluted shares
outstanding
9,438
9,419
Reconciliation of net income to EBITDA and
adjusted EBITDA
Net income
$
9,727
$
10,837
Interest expense
87
69
Income taxes
3,390
3,140
Depreciation expense
877
1,003
Amortization expense
3,125
3,071
EBITDA
$
17,206
$
18,120
Loss on contingent consideration
475
—
Operations optimization costs
59
—
Adjusted EBITDA
$
17,740
$
18,120
For the Three Months Ended
November 30,
2021
2020
Reconciliation of net income to adjusted
net income
Net income
$
9,727
$
10,837
Loss on contingent consideration
475
—
Operations optimization costs
59
—
Income taxes *
(112
)
—
Adjusted net income
$
10,149
$
10,837
Adjusted net income per diluted share
(Adjusted diluted EPS)
$
1.07
$
1.14
* For the three months ended November 30,
2021 and 2020, 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
November 30,
2021
2020
Reconciliation of cash provided by
operating activities to free cash flow
Net cash provided by operating
activities
$
5,903
$
14,052
Purchases of property, plant and
equipment
(496
)
(660
)
Free cash flow
$
5,407
$
13,392
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220106005924/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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