Revenue of $281.4 Million
Earnings Per Share of $3.46
Approves Dividend of $0.80 Per Share
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, today announced financial results for both the fiscal year
and quarter ended August 31, 2019. The Company also announced a
cash dividend of $0.80 per share to shareholders of record on
November 26, 2019 and payable on December 4, 2019.
FULL YEAR 2019
FOURTH QUARTER 2019
- Revenue decreased 1% to $281.35M
- Revenue decreased 10% to $70.11M
- Operating income decreased 19% to
$45.06M
- Operating income decreased 10% to
$12.57M
- Net income decreased 24% to $32.71M
- Net income decreased 10% to $10.07M
- Diluted EPS decreased 24% to $3.46
- Diluted EPS decreased 9% to $1.07
- Net cash provided by operating activities
increased 8% to $49.54M
- Net cash provided by operating activities
increased 34% to $19.26M
- EBITDA decreased 19% to $61.28M*
- EBITDA decreased 14% to $16.92M*
- Adjusted EBITDA decreased 13% to
$65.19M*
- Adjusted EBITDA decreased 11% to
$17.48M*
- Adjusted Diluted EPS decreased 15% to
$3.76*
- Adjusted Diluted EPS decreased 4% to
$1.10*
- Free cash flow increased 10% to
$47.05M*
- Free cash flow increased 34% to
$18.61M*
* Reconciliations of the non-GAAP financial measures to Chase’s
GAAP financial results are included at the end of this release. See
also “Use of Non-GAAP Financial Measures” below.
Adam P. Chase, President and Chief Executive Officer, commented,
“Fiscal 2019 was characterized by the uncertainty of trade disputes
and headwinds in key international markets, but a relatively solid
domestic sales performance. The year also saw us make progress with
strategic site consolidations and the reorganization of our
operating segments, a reflection of our growth over the last five
years.
“Both full-year and fourth quarter revenue compared unfavorably
to the prior year, with challenges faced in Asian markets and
prolonged construction contraction in the Middle East, that was
only partially tempered by organic sales growth in certain North
American markets. The comparative bump of the full-year
contribution of our superabsorbents business, acquired in the
second quarter of the prior fiscal year, was partially offset by
the loss in sales from our structural composites rod business,
divested in the third quarter of fiscal 2018. Gross margin
performance was similarly contracted compared to fiscal 2018, due
to a less favorable sales mix, as well as increased material costs
and expenses incurred to support service levels immediately
following the consolidation of our Pawtucket, RI location. However,
improving our relative gross margins has been a primary focus, and
the fourth quarter and second half showed improvement over each of
the prior three quarters and the first half of fiscal 2019 due
directly to actions taken to counteract compression.
“As of the fourth quarter, the Company will report across three
segments compared to its historical two-segment structure. The
Corrosion Protection and Waterproofing segment, formerly known as
Construction Materials, is changed in name alone, consisting of our
coating and lining systems, pipeline coatings, building envelope
and bridge and highway product lines. The Industrial Materials
segment, however, has been divided into two segments: Adhesives,
Sealants and Additives and Industrial Tapes. The electronic and
industrial coatings and the specialty chemical intermediates
product lines comprise the Adhesives, Sealants and Additives
segment; while going forward the Industrial Tapes product lines
will include legacy cable materials, specialty products, pulling
and detection and electronic materials. The timing of this fourth
quarter reorganization comes in the context of our continued
integration of recently acquired businesses and changes in senior
leadership, and it positions us well to capitalize on future growth
opportunities.”
Adhesives, Sealants and
Additives:
For the Three Months Ended
August 31,
For the Year Ended August
31,
2019
2018
2019
2018
Revenue
$
25,983
$
27,785
$
104,796
$
101,690
Cost of products and services sold
15,006
16,334
60,345
53,324
Gross Margin
$
10,977
$
11,451
$
44,451
$
48,366
Gross Margin % **
42%
41%
42%
48%
**Adjusted to remove the impact of inventory step up (which was
adjusted downward in the fourth quarter as part of our purchase
price accounting) the GM% would be 40% and 49% for the quarter and
year ended August 31, 2018, respectively.
“Revenue for the Adhesives, Sealants and Additives segment was
favorable compared to fiscal 2018 despite substantial headwinds in
Asian markets that adversely impacted our electronic and industrial
coatings product line which sells into the automotive and appliance
industries in North America, Europe and Asia. Sales were up for our
specialty chemical intermediates product line on predominantly
North American focused sales, which benefitted from a full-year
contribution from our Zappa Stewart business acquired in the prior
year.”
Industrial Tapes:
For the Three Months Ended
August 31,
For the Year Ended August
31,
2019
2018
2019
2018
Revenue
$
31,520
$
33,862
$
129,845
$
130,598
Cost of products and services sold
21,956
23,320
93,299
92,418
Gross Margin
$
9,564
$
10,542
$
36,546
$
38,180
Gross Margin %
30%
31%
28%
29%
“Compared to the prior year, the Industrial Tapes segment
experienced a slight decrease in revenue and a slight increase in
cost of products and services sold. The former was related to the
divestiture of our structural composites product line in fiscal
2018 and soft Asian markets for our electronic materials product
line; while the latter was driven by the impact of tariffs on raw
material costs and increased manufacturing costs incurred in the
first half of the year as part of the consolidation of our cable
materials manufacturing. Increased costs were incurred in the first
half of fiscal 2019 to maintain service levels at our Oxford, MA
and Lenoir, NC wire and cable materials manufacturing facilities,
following the closure of our Pawtucket, RI facility. In the second
half of the year, following the initial period of transition, the
Company began to recognize the long-term cost savings initially
sought by combining the operations. The segment benefitted from
strong contributions from the pulling and detection, cable
materials and specialty products product lines.
“The Company also began a transition of its pulling and
detection manufacturing operations from Granite Falls, NC to our
existing Hickory, NC facility during fiscal 2019. This transition
is on track, and we currently do not anticipate any period of
increased operational costs, beyond our separately disclosed moving
costs, for this project.”
Corrosion Protection and
Waterproofing:
For the Three Months Ended
August 31,
For the Year Ended August
31,
2019
2018
2019
2018
Revenue
$
12,602
$
15,831
$
46,710
$
51,900
Cost of products and services sold
7,007
8,344
26,519
29,394
Gross Margin
$
5,595
$
7,487
$
20,191
$
22,506
Gross Margin %
44%
47%
43%
43%
“For fiscal 2019, the Corrosion Protection and Waterproofing
segment’s revenue was unfavorable compared to the prior year.
Declines were concentrated in the pipeline coatings products—in
Middle East and North American markets—and in our bridge and
highway products. Tight credit markets in the Middle East and the
nonrecurrence of high-profile bridge jobs in the eastern U.S. seen
in the prior year drove these results. Offsetting these decreases
were increased sales of our building envelope and coating and
lining system products. Despite softer sales than the prior year,
the segment’s cost of products and services sold as a percentage of
revenue was consistent with whole-year fiscal 2018.”
Other Matters:
Christian J. Talma, Chief Financial Officer, added, “We continue
to benefit from the favorable tax rates enacted by recent domestic
tax reform. Our recognized effective tax rate for fiscal 2019 was
24.9%, which is within the range we anticipate moving forward,
after factoring out the effects of any significant discrete items
in individual periods.
“During fiscal 2019, our strong domestic operational cash flow
and repatriated cash from our U.K. operations facilitated the
complete payoff of remaining debt related to the 2018 Zappa Stewart
acquisition. Apropos of the strength of our cash flows, net cash
from operations saw year-over-year increases for both the full-year
and the fourth quarter. Coupled with a solid balance sheet, $48
million in cash as of August 31, 2019 and our $150 million credit
facility, we are uniquely positioned with financial flexibility to
execute future opportunities in the market.”
Mr. Chase also commented, “We continue to focus on our core
strategic drivers to generate long-term shareholder value. Organic
growth headwinds have forced us to put more emphasis on leveraging
fixed costs through consolidation, while allowing for enough
management bandwidth to effectively accomplish inorganic
initiatives. Although we were disappointed to have not completed an
acquisition in fiscal 2019, our deliberate and disciplined approach
has us prepared to capitalize on our robust deal pipeline as we
pursue the right fit transactions for long-term success.”
The following table summarizes the Company’s financial results
for the three months and years ended August 31, 2019 and 2018.
For the Three Months Ended
August 31,
For the Year Ended August
31,
All figures in thousands, except per
share figures
2019
2018
2019
2018
Revenue
$
70,105
$
77,478
$
281,351
$
284,188
Costs and Expenses
Cost of products and services sold
43,969
47,998
180,163
175,136
Selling, general and administrative
expenses
13,029
14,230
52,728
51,643
Loss on impairment of goodwill
—
—
2,410
—
Acquisition-related costs
—
—
—
393
Operations optimization costs
533
1,272
986
1,272
Operating income
12,574
13,978
45,064
55,744
Interest expense
(62)
(298)
(519)
(1,172)
Gain on sale of license
—
—
—
1,085
Gain on sale of businesses
—
—
—
1,480
Other income (expense)
113
294
(992)
(172)
Income before income taxes
12,625
13,974
43,553
56,965
Income taxes
2,551
2,811
10,842
13,822
Net income
$
10,074
$
11,163
$
32,711
$
43,143
Net income per diluted share
$
1.07
$
1.18
$
3.46
$
4.56
Weighted average diluted shares
outstanding
9,384
9,373
9,379
9,366
Reconciliation of net income to EBITDA and
adjusted EBITDA
Net income
$
10,074
$
11,163
$
32,711
$
43,143
Interest expense
62
298
519
1,172
Income taxes
2,551
2,811
10,842
13,822
Depreciation expense
1,128
1,947
4,762
5,817
Amortization expense
3,106
3,357
12,445
11,807
EBITDA
$
16,921
$
19,576
$
61,279
$
75,761
Cost of sale of inventory step-up
—
(460)
—
1,070
Acquisition-related costs
—
—
—
393
Gain on sale of license
—
—
—
(1,085)
Gain on sale of businesses
—
—
—
(1,480)
Loss on impairment of goodwill
—
—
2,410
—
Operations optimization costs (excluding
depreciation)
533
590
986
590
Pension settlement costs
27
—
511
—
Adjusted EBITDA
$
17,481
$
19,706
$
65,186
$
75,249
For the Three Months Ended
August 31,
For the Year Ended August
31,
2019
2018
2019
2018
Reconciliation of net income to adjusted
net income
Net income
$
10,074
$
11,163
$
32,711
$
43,143
Transitional impact of the Tax Cuts and
Jobs Act, net
—
84
(140
)
681
Excess tax benefit related to ASU No.
2016-09
(157
)
(944
)
(157
)
(1,921
)
Cost of sale of inventory step-up
—
(460
)
—
1,070
Acquisition-related costs
—
—
—
393
Gain on sale of license
—
—
—
(1,085
)
Gain on sale of businesses
—
—
—
(1,480
)
Loss on impairment of goodwill
—
—
2,410
—
Operations optimization costs
533
1,272
986
1,272
Pension settlement costs
27
—
511
—
Income taxes ***
(118
)
(209
)
(821
)
(44
)
Adjusted net income
$
10,359
$
10,906
$
35,500
$
42,029
Adjusted net income per diluted share
(Adjusted diluted EPS)
$
1.10
$
1.15
$
3.76
$
4.44
For the Three Months Ended
August 31,
For the Year Ended August
31,
2019
2018
2019
2018
Reconciliation of cash provided by
operations to free cash flow
Net cash provided by operating
activities
$
19,260
$
14,421
$
49,535
$
46,071
Purchases of property, plant and
equipment
(647
)
(580
)
(2,488
)
(3,488
)
Free cash flow
$
18,613
$
13,841
$
47,047
$
42,583
*** For the three months and year ended August 31, 2019,
represents the aggregate tax effect assuming a 21% tax rate for the
items impacting pre-tax income, which is our estimated effective
U.S. statutory Federal tax rate for fiscal 2019. For the three
months and year ended August 31, 2018, represents the aggregate tax
effect assuming a 25.7% tax rate for the items impacting pre-tax
income, which was our effective U.S. statutory Federal tax rate for
fiscal year 2018 following the enactment of the Tax Cuts and Jobs
Act in December 2017.
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.
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. 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.
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 such as “believe”; “expect”; “anticipate”; “should”;
“planned”; “estimated” and “potential”, among others. 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; and the highly competitive
environment in which the Company operates. Readers are cautioned
not to place undue reliance on these forward-looking statements,
which speak only as of the date the statement was made.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191113005926/en/
Ruthanne Hawkins Shareholder & Investor Relations Department
Phone: (781) 332-0700 E-mail: investorrelations@chasecorp.com
Website: www.chasecorp.com
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