Revenue Increased by 8% to $74.0 Million
Continues to Address Global Inflationary
Pressures on Input Costs
Rationalization of Real Estate Continues —
Corporate Headquarters Move Substantially Complete
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 second fiscal quarter
ended February 28, 2022.
Fiscal Second Quarter Financial and Recent Operational
Highlights
- Total Revenue grew 8% to $74.0 million, compared to Q2
FY21
- Gross Margin of 37%, compared to 40% in Q2 FY21 — continued
implementation of customer price adjustments to counteract margin
compression, with benefits lagging in the first half of the fiscal
year
- Net Income was $9.1 million, or $0.96 per diluted share,
compared to $9.2 million, or $0.97 per diluted share, for Q2
FY21
- EBITDA was $16.4 million, compared to $17.0 million in Q2 FY21
and Adjusted EBITDA was $16.8 million, compared to $18.0 million in
Q2 FY21
- Free Cash Flow was $1.6 million, compared to Free Cash Flow of
$11.9 million in Q2 FY21 — reduction primarily due to continued
strategic inventory build (approximately $12 million year-to-date)
to meet customer demand and address increased backlog
- Ended the second fiscal quarter of 2022 with a cash balance of
$116.0 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 26.2%, compared to 28.7% in the
year-ago quarter
- Company substantially completed its move to a new corporate
headquarters located within Westwood, MA — anticipated future cost
savings through footprint consolidation and capitalizing on the
hybrid work model utilized by many of Chase’s corporate and
administrative employees
- Progress also made on the consolidation of operations in both
its O’Hara, PA and Hickory, NC facilities
“This was another strong quarter for Chase Corporation as we
drove higher revenue and continued to meet customer demand despite
the broader macroeconomic logistics and raw material supply
constraints. To ensure we sustain fulfilling customer demand across
our broad product offerings, we continued to temporarily dedicate
further capital to increase our inventory on-hand, resulting in
marginally lower net free cash flow levels in the quarter. By doing
this, we can best guarantee the availability of all necessary input
materials. Additionally, despite the historically unfavorable
seasonal impact on the higher margin Corrosion Protection and
Waterproofing segment, and the aforementioned constrained operating
environment, the Company maintained its overall 37% gross margin
through customer price adjustments and the implementation of
continued operational and cost-efficiency management, during the
first half of the fiscal year,” said Adam P. Chase, President and
Chief Executive Officer of Chase Corporation.
Mr. Chase continued, “The Industrial Tapes segment led revenue
expansion in the quarter, driven by increased demand within North
America for our cable materials, pulling and detection, and
specialty products. Despite the global chip shortages negatively
impacting automotive related demand during the second quarter and
first half of the year, Chase’s Adhesives, Sealants and Additives
segment experienced an increase in revenue compared to the year ago
period due to higher demand for functional additives products as
well as the integration of our Emerging Technologies, Inc. (“ETi”)
acquisition. Our Corrosion Protection and Waterproofing segment
also surpassed the prior year’s quarter, with increased demand
levels in our coating and lining systems and building envelope
product lines.”
“As part of Chase’s ongoing consolidation and optimization
initiative, we substantially completed the relocation of our
corporate headquarters to its new location in Westwood, MA. We
decreased our office footprint and gained future fixed cost savings
by capitalizing on the hybrid work model utilized by many of
Chase’s corporate and administrative employees. Additionally, our
previously separate Massachusetts-based research and development
operations are now operating jointly in the Westwood location.”
“Global raw material inflationary pressures, labor shortages and
supply chain constraints will continue to be an operational hurdle
impacting margins in 2022. We are diligently working to mitigate
the impact of these inflationary pressures and continue
implementing needed price adjustments across our product lines and
expect to see the full benefit from these actions in the coming
months. Our team remains committed in managing these challenges,
including strengthening relationships within our supply chain and
our customer base, remaining appropriately staffed and ensuring the
highest standard of safety for our employees, while driving further
shareholder value.”
Michael J. Bourque, Chase Corporation’s Treasurer and Chief
Financial Officer remarked, “We are pleased to see sustained demand
and sales growth across product offerings in the quarter,
testifying to the reliability and stickiness of Chase’s products.
Our balance sheet remains strong and we are presently debt free
with a fully available $200.0 million credit facility and an
overall cash balance of $116.0 million. We are well prepared to
support our global operations and investments as well as embark on
additional organic and inorganic growth opportunities with the
additional flexibility of our credit facility.”
Segment Results
Adhesives, Sealants and
Additives
For the Three Months Ended
February 28,
For the Six Months Ended
February 28,
2022
2021
2022
2021
Revenue
$
31,780
$
31,575
$
62,829
$
61,646
Cost of products and services sold
19,838
16,998
38,755
33,611
Gross Margin
$
11,942
$
14,577
$
24,074
$
28,035
Gross Margin %
38%
46%
38%
45%
Revenue in the Adhesives, Sealants and Additives segment
increased $0.2 million or 1% in the second fiscal quarter ended
February 28, 2022. The revenue increase for the quarter was
primarily due to increased demand for our North American-focused
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 largely
due to macroeconomic logistics and raw material supply constraints
impacting worldwide sales in automotive verticals.
Industrial Tapes
For the Three Months Ended
February 28,
For the Six Months Ended
February 28,
2022
2021
2022
2021
Revenue
$
33,330
$
28,345
$
66,091
$
54,836
Cost of products and services sold
21,790
18,693
44,009
35,810
Gross Margin
$
11,540
$
9,652
$
22,082
$
19,026
Gross Margin %
35%
34%
33%
35%
The Industrial Tapes segment’s revenue increased $5.0 million or
18% in the second fiscal quarter. The segment’s cable materials,
pulling and detection, and specialty products product lines sales
into North American markets drove revenue expansion in the second
fiscal quarter. Revenue growth in the quarter was slightly tapered
by a quarter-to-quarter reduction in sales volume from the
electronic materials products line, due to decreased demand in the
Asian end-market.
Corrosion Protection and
Waterproofing
For the Three Months Ended
February 28,
For the Six Months Ended
February 28,
2022
2021
2022
2021
Revenue
$
8,843
$
8,527
$
20,043
$
19,141
Cost of products and services sold
5,283
5,224
11,428
11,099
Gross Margin
$
3,560
$
3,303
$
8,615
$
8,042
Gross Margin %
40%
39%
43%
42%
Revenue from the Corrosion Protection and Waterproofing segment
increased $0.3 million or 4% in the three months ended February 28,
2022. The segment’s increase in revenue was primarily due to
increased sales within the coating and lining systems and building
envelope product lines. Negatively impacting the segment’s sales
were decreases in revenue from our highly seasonal bridge and
highway product line and our pipeline coatings product line — which
was further impacted by COVID-19 overhang delays in products sold
into the Middle Eastern and Asian markets outpacing North American
sales gains in oil and gas pipeline repair and construction
markets.
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 six months ended February 28, 2022 and
2021.
For the Three Months Ended
February 28,
For the Six Months Ended
February 28,
All figures in thousands, except per
share figures
2022
2021
2022
2021
Revenue
$
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
589
98
648
98
Acquisition-related costs
—
128
—
128
(Gain) loss on contingent
consideration
(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
3,241
3,694
6,631
6,834
Net income
$
9,126
$
9,171
$
18,853
$
20,008
Net income per diluted share
$
0.96
$
0.97
$
1.98
$
2.11
Weighted average diluted shares
outstanding
9,436
9,427
9,437
9,423
Reconciliation of net income to EBITDA and
adjusted EBITDA
Net income
$
9,126
$
9,171
$
18,853
$
20,008
Interest expense
86
67
173
136
Income taxes
3,241
3,694
6,631
6,834
Depreciation expense
899
949
1,776
1,952
Amortization expense
3,042
3,119
6,167
6,190
EBITDA
$
16,394
$
17,000
$
33,600
$
35,120
(Gain) loss on contingent
consideration
(200
)
733
275
733
Operations optimization costs
589
98
648
98
Acquisition-related costs
—
128
—
128
Adjusted EBITDA
$
16,783
$
17,959
$
34,523
$
36,079
For the Three Months Ended
February 28,
For the Six Months Ended
February 28,
2022
2021
2022
2021
Reconciliation of net income to adjusted
net income
Net income
$
9,126
$
9,171
$
18,853
$
20,008
Excess tax loss (gain) related to ASU No.
2016-09
10
(146
)
10
(146
)
(Gain) loss on contingent
consideration
(200
)
733
275
733
Operations optimization costs
589
98
648
98
Acquisition-related costs
—
128
—
128
Income taxes *
(82
)
(201
)
(194
)
(201
)
Adjusted net income
$
9,443
$
9,783
$
19,592
$
20,620
Adjusted net income per diluted share
(Adjusted diluted EPS)
$
0.99
$
1.03
$
2.06
$
2.17
* For the three and six months ended February 28, 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
February 28,
For the Six Months Ended
February 28,
2022
2021
2022
2021
Reconciliation of cash provided by
operating activities to free cash flow
Net cash provided by operating
activities
$
2,854
$
12,334
$
8,757
$
26,386
Purchases of property, plant and
equipment
(1,273
)
(400
)
(1,769
)
(1,060
)
Free cash flow
$
1,581
$
11,934
$
6,988
$
25,326
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220407006014/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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