Revenue of $64.9 Million; Earnings Per Share of
$1.04
Continues Relative Gross Margin, Cash Flow and
Cash Balance Improvement
Expands on Actions Taken Related to
COVID-19
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 the quarter ended
May 31, 2020, the third quarter of its fiscal 2020.
Fiscal Third Quarter Key Highlights
• Total Revenue of $64.9 million, compared to $72.1 million in
the year-ago period
• Gross Margin of 39%, compared to 36% in the year-ago
period
• Net Income of $9.9 million, compared to $8.5 million in the
year-ago period
• Adjusted EBITDA of $16.0 million, compared to $16.7 million in
the year-ago period
• Ended period with cash balance of $83.3 million
• Free Cash Flow of $15.0 million, compared to $12.4 million in
the year-ago period
• Completed sale of Pawtucket, RI facility
• Proactively managed cost structure to address coronavirus
(COVID-19) impacts
“Employee safety and well-being remains our top priority during
the COVID-19 pandemic, as all of our global facilities continue to
exemplify our value proposition by reliably servicing our customers
and essential industries. I want to thank our employees during this
challenging time for their service and unwavering commitment to
supporting our customers,” said Adam P. Chase, President and Chief
Executive Officer of Chase Corporation.
“We continued to exhibit operational and financial discipline in
addressing the changing realities in our end markets. Despite a
decline in sales in the quarter due to broader macro disruptions
related to COVID-19, we took proactive initiatives to support
relative margin expansion, including the institution of a temporary
20% reduction in the base salaries of our named executive officers
and select members of senior management, as well as the cash
compensation of the non-employee members of our Board of
Directors.
“We remain committed to our core strategic drivers, a principled
approach to organic and inorganic growth, and operational
consolidation, while maintaining financial flexibility with a focus
on margins, cash flow and a strong balance sheet. These tenets have
benefited the Company over the years and even more so now during
the COVID-19 pandemic.
“Our organization will continue driving further optimization
initiatives and responding to the dynamic environment with our
disciplined approach that balances short-term requirements with
long-term growth objectives to create value for our
shareholders.”
Financial Highlights
- Total Revenue fell 10% to $64.9 million, compared to Q3
FY19.
- Gross Margin of 39%, compared to 36% in Q3 FY19, due in part to
operational efficiencies and sales mix.
- Selling, General and Administrative expenses declined 4% to
$12.8 million from the year-ago period.
- Interest expense of $67,000 declined 26% from the year-ago
period, as the Company currently has no outstanding debt.
- Income Tax expense of $2.6 million, compared to $3.6 million in
the year-ago period.
- Other expense totaled $307,000, compared to other income of
$17,000 in the year-ago period.
- Net Income for the third fiscal quarter of 2020 was $9.9
million, or $1.04 per diluted share, compared to a Net Income of
$8.5 million, or $0.90 per diluted share, for the third fiscal
quarter of 2019. Adjusted EPS for the quarter was $0.99 per diluted
share.
- Adjusted EBITDA for the third fiscal quarter of 2020 was $16.0
million, compared to Adjusted EBITDA of $16.7 million in the
prior-year quarter. The reconciliation of Net Income to Adjusted
EBITDA is included at the end of this news release.
- Free Cash Flow in the third fiscal quarter of 2020 was $15.0
million, compared to Free Cash Flow of $12.4 million in the
prior-year quarter.
“In these unprecedented times, we undertook difficult decisions
to contain expenses, including a 4.5% reduction in our global
workforce. This was an action contemplated pre-pandemic but
catalyzed by COVID-19, and was taken along with additional
administrative expense reductions,” said Christian J. Talma,
Treasurer and Chief Financial Officer of Chase Corporation. “This
is consistent with our strategic approach to prudently deploy
capital to enhance our portfolio of products and pursue inorganic
growth to drive shareholder return. Additionally, and to reiterate,
financial flexibility is a core component of our strategy and we
remain in a position of strength at the height of the coronavirus
pandemic, with no debt, $83.3 million cash on hand and a $150
million credit facility fully available to support our global
operations and investments in growth opportunities. This provides
the Company continued agility to operate in this period of COVID-19
related uncertainty.”
Adhesives, Sealants and Additives
For the Three Months Ended May
31,
For the Nine Months Ended May
31,
2020
2019
2020
2019
Revenue
$
22,922
$
26,009
$
73,184
$
78,814
Cost of products and services sold
13,044
15,016
41,831
45,339
Gross Margin
$
9,878
$
10,993
$
31,353
$
33,475
Gross Margin %
43%
42%
43%
42%
Our Adhesives, Sealants and Additives segment’s revenue declined
12% to $22.9 million compared to Q3 FY19 primarily due to
demand-driven declines in the Company’s electronic and industrial
coatings product line, on worldwide automotive and industrial
demand reduction, further exacerbated by COVID-19, and lower
revenue from the specialty chemical intermediates product line
across North American markets. The cost of products and services
sold declined 13% to $13.0 million compared to the year-ago period,
as our cost containment and margin improvement activities partially
offset the sales reductions.
Industrial Tapes
For the Three Months Ended May
31,
For the Nine Months Ended May
31,
2020
2019
2020
2019
Revenue
$
31,752
$
33,704
$
91,931
$
98,324
Cost of products and services sold
21,118
24,499
62,640
71,343
Gross Margin
$
10,634
$
9,205
$
29,291
$
26,981
Gross Margin %
33%
27%
32%
27%
Our Industrial Tapes segment’s top-line of $31.8 million was 6%
lower than the year-ago period as a result of reduced demand for
our cable materials and specialty products product lines, including
the conclusion of our low-margin transitional toll manufacturing
services in the second fiscal quarter of 2020. These were partially
offset by the improved sales in both the electronic materials
product line in Asia, and the pulling and detection tapes product
line to North American telecommunications and utility industries.
The cost of products and services sold declined 14% to $21.1
million compared to the year-ago period, which is a milestone in
our goal to reduce fixed costs in this segment.
Corrosion Protection and Waterproofing
For the Three Months Ended May
31,
For the Nine Months Ended May
31,
2020
2019
2020
2019
Revenue
$
10,197
$
12,399
$
32,140
$
34,108
Cost of products and services sold
5,527
6,891
17,667
19,512
Gross Margin
$
4,670
$
5,508
$
14,473
$
14,596
Gross Margin %
46%
44%
45%
43%
Sales from our Corrosion Protection and Waterproofing segment
declined 18% to $10.2 million compared to the year-ago period,
largely as a result of declining sales in the coating and lining
systems, pipeline coatings and building envelope product lines. The
net decrease in worldwide oil and gas prices experienced during the
third fiscal quarter of 2020 contributed to the overall decline in
demand seen during the current period. Partially offsetting these
declines was revenue growth from our bridge and highway product
line as we entered the start of the outdoor construction season
across much of North America. The cost of products and services
sold declined 20% to $5.5 million compared to the year-ago
period.
More information on COVID-19 updates can be found at the Company
website: www.chasecorp.com
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 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; 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 following table summarizes the Company’s unaudited financial
results for the three and nine months ended May 31, 2020 and
2019.
For the Three Months Ended May
31,
For the Nine Months Ended May
31,
All figures in thousands, except per
share figures
2020
2019
2020
2019
Revenue
$
64,871
$
72,112
$
197,255
$
211,246
Costs and Expenses
Cost of products and services sold
39,689
46,406
122,138
136,194
Selling, general and administrative
expenses
12,773
13,251
40,223
39,699
Operations optimization costs
268
193
977
453
Loss on impairment of goodwill
—
—
—
2,410
Operating income
12,141
12,262
33,917
32,490
Interest expense
(67
)
(91
)
(178
)
(457
)
Gain on sale of real estate
760
—
760
—
Other income (expense)
(307
)
17
(1,096
)
(1,105
)
Income before income taxes
12,527
12,188
33,403
30,928
Income taxes
2,619
3,647
8,254
8,291
Net income
$
9,908
$
8,541
$
25,149
$
22,637
Net income per diluted share
$
1.04
$
0.90
$
2.64
$
2.39
Weighted average diluted shares
outstanding
9,429
9,379
9,436
9,378
Reconciliation of net income to EBITDA and
adjusted EBITDA
Net income
$
9,908
$
8,541
$
25,149
$
22,637
Interest expense
67
91
178
457
Income taxes
2,619
3,647
8,254
8,291
Depreciation expense
948
1,143
2,989
3,634
Amortization expense
2,898
3,114
8,724
9,339
EBITDA
$
16,440
$
16,536
$
45,294
$
44,358
Operations optimization costs
268
193
977
453
Gain on sale of real estate
(760
)
—
(760
)
—
Loss on impairment of goodwill
—
—
—
2,410
Pension settlement costs
75
11
75
484
Adjusted EBITDA
$
16,023
$
16,740
$
45,586
$
47,705
For the Three Months Ended May
31,
For the Nine Months Ended May
31,
2020
2019
2020
2019
Reconciliation of net income to adjusted
net income
Net income
$
9,908
$
8,541
$
25,149
$
22,637
Transitional impact of the Tax Cuts and
Jobs Act, net
—
—
—
(140
)
Excess tax benefit related to ASU No.
2016-09
(148
)
—
(148
)
—
Operations optimization costs
268
193
977
453
Gain on sale of real estate
(760
)
—
(760
)
—
Loss on impairment of goodwill
—
—
—
2,410
Pension settlement costs
75
11
75
484
Income taxes *
88
(43
)
(61
)
(703
)
Adjusted net income
$
9,431
$
8,702
$
25,232
$
25,141
Adjusted net income per diluted share
(Adjusted diluted EPS)
$
0.99
$
0.92
$
2.65
$
2.66
* For the three and nine months ended May 31, 2020 and 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 2020 and which was our
effective U.S. statutory Federal tax rate for fiscal year 2019
.
For the Three Months Ended May
31,
For the Nine Months Ended May
31,
2020
2019
2020
2019
Reconciliation of cash provided by
operations to free cash flow
Net cash provided by operating
activities
$
15,204
$
12,972
$
42,665
$
30,275
Purchases of property, plant and
equipment
(217
)
(537
)
(1,044
)
(1,841
)
Free cash flow
$
14,987
$
12,435
$
41,621
$
28,434
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200708005852/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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