0001104659-13-001394.txt : 20130109 0001104659-13-001394.hdr.sgml : 20130109 20130109124904 ACCESSION NUMBER: 0001104659-13-001394 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 20121130 FILED AS OF DATE: 20130109 DATE AS OF CHANGE: 20130109 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHASE CORP CENTRAL INDEX KEY: 0000830524 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC LIGHTING & WIRING EQUIPMENT [3640] IRS NUMBER: 111797126 STATE OF INCORPORATION: MA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09852 FILM NUMBER: 13520057 BUSINESS ADDRESS: STREET 1: 26 SUMMER STREET CITY: BRIDGEWATER STATE: MA ZIP: 02324 BUSINESS PHONE: 5082791789 MAIL ADDRESS: STREET 1: 26 SUMMER ST CITY: BRIDGEWATER STATE: MA ZIP: 02324 10-Q 1 a12-28300_110q.htm 10-Q

Table of Contents

 

 

 

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 November 30, 2012

 

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.)

 

26 Summer Street, Bridgewater, Massachusetts 02324

(Address of Principal Executive Offices, Including Zip Code)

 

(508) 819-4200

(Registrant’s Telephone Number, Including Area Code)

 

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 x  NO o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).  YES x  NO o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer o

 

Accelerated filer x

 

 

 

Non-accelerated filer o

 

Smaller reporting company o

(Do not check if a smaller reporting company)

 

 

 

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  YES o  NO x

 

The number of shares of Common Stock outstanding as of December 31, 2012 was 9,065,853.

 

 

 



Table of Contents

 

CHASE CORPORATION

INDEX TO FORM 10-Q

 

For the Quarter Ended November 30, 2012

 

Part I - FINANCIAL INFORMATION

 

 

 

 

 

Item 1 — Unaudited Financial Statements

 

 

 

 

 

Consolidated Balance Sheets as of November 30, 2012 and August 31, 2012

 

3

 

 

 

Consolidated Statements of Operations for the three months ended November 30, 2012 and 2011

 

4

 

 

 

Consolidated Statements of Comprehensive Income for the three months ended November 30, 2012 and 2011

 

5

 

 

 

Consolidated Statement of Equity for the three months ended November 30, 2012

 

6

 

 

 

Consolidated Statements of Cash Flows for the three months ended November 30, 2012 and 2011

 

7

 

 

 

Notes to Consolidated Financial Statements

 

8

 

 

 

Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

17

 

 

 

Item 3 — Quantitative and Qualitative Disclosures About Market Risk

 

24

 

 

 

Item 4 — Controls and Procedures

 

24

 

 

 

Part II — OTHER INFORMATION

 

 

 

 

 

Item 1 — Legal Proceedings

 

26

 

 

 

Item 1A — Risk Factors

 

26

 

 

 

Item 6 — Exhibits

 

26

 

 

 

SIGNATURES

 

27

 

2



Table of Contents

 

Part 1 — FINANCIAL INFORMATION

 

Item 1 — Unaudited Financial Statements

 

CHASE CORPORATION

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

In thousands, except share and per share amounts

 

 

 

November 30,

 

August 31,

 

 

 

2012

 

2012

 

ASSETS

 

 

 

 

 

Current Assets:

 

 

 

 

 

Cash & cash equivalents

 

$

15,373

 

$

15,180

 

Accounts receivable, less allowance for doubtful accounts of $668 and $817

 

30,974

 

31,621

 

Inventories

 

36,628

 

32,323

 

Prepaid expenses and other current assets

 

2,451

 

1,810

 

Deferred income taxes

 

2,821

 

2,855

 

Total current assets

 

88,247

 

83,789

 

 

 

 

 

 

 

Property, plant and equipment, net

 

48,522

 

49,279

 

 

 

 

 

 

 

Other Assets:

 

 

 

 

 

Goodwill

 

38,806

 

38,793

 

Intangible assets, less accumulated amortization of $14,162 and $12,847

 

35,350

 

36,363

 

Cash surrender value of life insurance

 

7,084

 

7,145

 

Restricted investments

 

921

 

874

 

Other assets

 

232

 

244

 

 

 

$

219,162

 

$

216,487

 

LIABILITIES AND EQUITY

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

Accounts payable

 

$

15,333

 

$

11,559

 

Accrued payroll and other compensation

 

2,460

 

5,219

 

Accrued expenses

 

5,312

 

6,005

 

Accrued income taxes

 

1,460

 

1,892

 

Dividends payable

 

3,626

 

 

Current portion of long-term debt

 

5,600

 

5,600

 

Total current liabilities

 

33,791

 

30,275

 

 

 

 

 

 

 

Long-term debt, less current portion

 

63,000

 

64,400

 

Deferred compensation

 

1,810

 

1,775

 

Accumulated pension obligation

 

7,507

 

7,702

 

Other liabilities

 

80

 

92

 

Deferred income taxes

 

12,597

 

12,598

 

 

 

 

 

 

 

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; 9,065,677 shares at November 30, 2012 and 9,001,582 shares at August 31, 2012 issued and outstanding

 

907

 

900

 

Additional paid-in capital

 

12,521

 

12,109

 

Accumulated other comprehensive loss

 

(4,568

)

(5,030

)

Retained earnings

 

90,060

 

90,146

 

Chase Corporation stockholders’ equity

 

98,920

 

98,125

 

Non-controlling interest related to NEPTCO joint venture

 

1,457

 

1,520

 

Total equity

 

100,377

 

99,645

 

Total liabilities and equity

 

$

219,162

 

$

216,487

 

 

See accompanying notes to the consolidated financial statements

 

3



Table of Contents

 

CHASE CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

In thousands, except share and per share amounts

 

 

 

Three Months Ended November 30,

 

 

 

2012

 

2011

 

 

 

 

 

 

 

Revenues

 

 

 

 

 

Sales

 

$

52,976

 

$

31,654

 

Royalties and commissions

 

424

 

476

 

 

 

53,400

 

32,130

 

Costs and Expenses

 

 

 

 

 

Cost of products and services sold

 

37,271

 

21,999

 

Selling, general and administrative expenses

 

10,539

 

6,992

 

 

 

 

 

 

 

Operating income

 

5,590

 

3,139

 

 

 

 

 

 

 

Interest expense

 

(362

)

(36

)

Other income

 

69

 

477

 

 

 

 

 

 

 

Income before income taxes

 

5,297

 

3,580

 

 

 

 

 

 

 

Income taxes

 

1,820

 

1,253

 

 

 

 

 

 

 

Net income

 

$

3,477

 

$

2,327

 

 

 

 

 

 

 

Add: net loss attributable to non-controlling interest, net of tax of $34

 

63

 

 

 

 

 

 

 

 

Net income attributable to Chase Corporation

 

$

3,540

 

$

2,327

 

 

 

 

 

 

 

Net income available to common shareholders, per common and common equivalent share

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.39

 

$

0.26

 

 

 

 

 

 

 

Diluted

 

$

0.39

 

$

0.26

 

 

 

 

 

 

 

Weighted average shares outstanding

 

 

 

 

 

Basic

 

8,851,314

 

8,754,020

 

Diluted

 

8,927,970

 

8,761,058

 

 

 

 

 

 

 

Annual cash dividends declared per share

 

$

0.40

 

$

0.35

 

 

See accompanying notes to the consolidated financial statements

 

4



Table of Contents

 

CHASE CORPORATION

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(UNAUDITED)

 

Dollars in thousands

 

 

 

Three Months Ended November 30,

 

 

 

2012

 

2011

 

Net income

 

$

3,477

 

$

2,327

 

 

 

 

 

 

 

Other comprehensive income:

 

 

 

 

 

Net unrealized loss on restricted investments, net of tax

 

 

(2

)

Change in funded status of pension plans, net of tax

 

58

 

57

 

Foreign currency translation adjustment

 

404

 

(1,337

)

Total other comprehensive income (loss)

 

462

 

(1,282

)

Comprehensive income

 

3,939

 

1,045

 

 

 

 

 

 

 

Comprehensive loss attributable to non-controlling interest, net of tax

 

63

 

 

 

 

 

 

 

 

Comprehensive income attributable to Chase Corporation

 

$

4,002

 

$

1,045

 

 

See accompanying notes to the consolidated financial statements

 

5



Table of Contents

 

CHASE CORPORATION

CONSOLIDATED STATEMENT OF EQUITY

THREE MONTHS ENDED NOVEMBER 30, 2012

(UNAUDITED)

 

In thousands, except share and per share amounts

 

 

 

 

 

 

 

Additional

 

Accumulated Other

 

 

 

Chase

 

 

 

 

 

 

 

Common Stock

 

Paid-In

 

Comprehensive

 

Retained

 

Stockholders’

 

Non-conrolling

 

Total

 

 

 

Shares

 

Amount

 

Capital

 

Income (loss)

 

Earnings

 

Equity

 

Interest

 

Equity

 

Balance at August 31, 2012

 

9,001,582

 

$

900

 

$

12,109

 

$

(5,030

)

$

90,146

 

$

98,125

 

$

1,520

 

$

99,645

 

Restricted stock grants, net of forfeitures

 

64,095

 

7

 

(7

)

 

 

 

 

 

 

 

 

Amortization of restricted stock grants

 

 

 

 

 

309

 

 

 

 

 

309

 

 

 

309

 

Amortization of stock option grants

 

 

 

 

 

110

 

 

 

 

 

110

 

 

 

110

 

Cash dividend accrued, $0.40 per share

 

 

 

 

 

 

 

 

 

(3,626

)

(3,626

)

 

 

(3,626

)

Change in funded status of pension plan, net of tax of $32

 

 

 

 

 

 

 

58

 

 

 

58

 

 

 

58

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

404

 

 

 

404

 

 

 

404

 

Net income (loss)

 

 

 

 

 

 

 

 

 

3,540

 

3,540

 

(63

)

3,477

 

Balance at November 30, 2012

 

9,065,677

 

$

907

 

$

12,521

 

$

(4,568

)

$

90,060

 

$

98,920

 

$

1,457

 

$

100,377

 

 

See accompanying notes to the consolidated financial statements

 

6



Table of Contents

 

CHASE CORPORATION

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

 

Dollars in thousands

 

 

 

Three Months Ended November 30,

 

 

 

2012

 

2011

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

Net income

 

$

3,477

 

$

2,327

 

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

 

 

 

 

 

Gain on sale of assets

 

(4

)

 

Depreciation

 

1,508

 

676

 

Amortization

 

1,217

 

571

 

Cost of sale of inventory step-up

 

564

 

 

Provision for allowance for doubtful accounts

 

(130

)

(2

)

Stock based compensation

 

419

 

498

 

Realized gain on restricted investments

 

(25

)

(3

)

Decrease (increase) in cash surrender value life insurance

 

82

 

(15

)

Pension curtailment and settlement loss

 

(352

)

 

Increase (decrease) from changes in assets and liabilities

 

 

 

 

 

Accounts receivable

 

839

 

769

 

Inventories

 

(4,818

)

(965

)

Prepaid expenses & other assets

 

(623

)

(837

)

Accounts payable

 

3,753

 

1,380

 

Accrued compensation and other expenses

 

(3,427

)

(2,682

)

Accrued income taxes

 

(399

)

(472

)

Deferred compensation

 

35

 

6

 

Net cash provided by operating activities

 

2,116

 

1,251

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

Purchases of property, plant and equipment

 

(544

)

(1,200

)

Cost to acquire intangible assets

 

(101

)

 

Contingent purchase price paid for acquisition

 

84

 

(87

)

Net proceeds from sale of fixed assets

 

11

 

3

 

Net contributions from restricted investments

 

(22

)

(19

)

Payments for cash surrender value life insurance

 

(24

)

(46

)

Net cash used in investing activities

 

(596

)

(1,349

)

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

Borrowings on long-term debt

 

 

4,315

 

Payments of principal on debt

 

(1,400

)

(6,165

)

Net cash used in financing activities

 

(1,400

)

(1,850

)

 

 

 

 

 

 

INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS

 

120

 

(1,948

)

Effect of foreign exchange rates on cash

 

73

 

(261

)

CASH & CASH EQUIVALENTS, BEGINNING OF PERIOD

 

15,180

 

14,982

 

 

 

 

 

 

 

CASH & CASH EQUIVALENTS, END OF PERIOD

 

$

15,373

 

$

12,773

 

 

 

 

 

 

 

Non-cash Investing and Financing Activities

 

 

 

 

 

Property, plant & equipment additions included in accounts payable

 

$

157

 

$

369

 

Annual cash dividend declared

 

$

3,626

 

$

3,165

 

Gain on sale leaseback transaction

 

 

$

425

 

 

See accompanying notes to the consolidated financial statements

 

7



Table of Contents

 

CHASE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

In thousands, except share and per share amounts

 

Note 1 - Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial reporting and instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Therefore, they do not include all information and footnote disclosure necessary for a complete presentation of Chase Corporation’s financial position, results of operations and cash flows, in conformity with generally accepted accounting principles.  Chase Corporation (the “Company,” “Chase,” “we,” or “us”) filed audited consolidated financial statements, which included all information and notes necessary for such presentation for the three years ended August 31, 2012 in conjunction with its 2012 Annual Report on Form 10-K.

 

The results of operations for the interim period ended November 30, 2012 are not necessarily indicative of the results to be expected for any future period or the entire fiscal year.  These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended August 31, 2012, which are contained in the Company’s 2012 Annual Report on Form 10-K.

 

The accompanying unaudited consolidated financial statements contain all adjustments (consisting of normal recurring items) which are, in the opinion of management, necessary for a fair statement of the Company’s financial position as of November 30, 2012, the results of operations, comprehensive income and cash flows for the interim periods ended November 30, 2012 and 2011, and changes in stockholders’ equity for the interim period ended November 30, 2012.

 

The financial statements include the accounts of the Company and its wholly-owned subsidiaries.  All intercompany transactions and balances have been eliminated in consolidation.  The Company uses the US dollar as the reporting currency for financial reporting.  The financial position and results of operations of the Company’s UK based operations are measured using the UK pound sterling as the functional currency and the financial position and results of operations of the Company’s operations based in France are measured using the euro as the functional currency.  Foreign currency translation gains and losses are determined using current exchange rates for monetary items and historical exchange rates for other balance sheet items and are recorded as a change in other comprehensive income.  Translation gains and losses generated from the remeasurement of assets and liabilities denominated in currencies other than the functional currency of our foreign operations are included in other (expense) / income on the consolidated statements of operations.

 

The Company has evaluated events and transactions subsequent to the balance sheet date.  Based on this evaluation, and other than the pension settlement loss as detailed in Note 11, the Company is not aware of any events or transactions that occurred subsequent to the balance sheet date but prior to filing that would require recognition or disclosure in its consolidated financial statements.

 

Note 2 — Recent Accounting Policies

 

Recently Issued Accounting Pronouncements

 

In July 2012, the Financial Accounting Standards Board (“FASB”) issued ASU 2012-02, “Testing Indefinite-Lived Intangible Assets for Impairment.” This ASU amends ASC 350, “Intangibles — Goodwill and Other” to allow entities an option to first assess qualitative factors to determine whether it

 

8



Table of Contents

 

CHASE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

In thousands, except share and per share amounts

 

is necessary to perform the quantitative impairment test. Under that option, an entity no longer would be required to calculate the fair value of the intangible asset unless the entity determines, based on that qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. The amendments in this ASU are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, with early adoption permitted. The adoption of ASU 2012-02 will not have an impact on the Company’s consolidated financial position, results of operations or cash flows.

 

Note 3 — Inventories

 

Inventories consist of the following as of November 30, 2012 and August 31, 2012:

 

 

 

November 30, 2012

 

August 31, 2012

 

Raw materials

 

$

14,853

 

$

12,388

 

Work in process

 

8,557

 

7,384

 

Finished goods

 

13,218

 

12,551

 

Total Inventories

 

$

36,628

 

$

32,323

 

 

Note 4 — Net Income Per Share

 

The Company has unvested share-based payment awards with a right to receive nonforfeitable dividends which are considered participating securities under ASC Topic 260, “Earnings Per Share”.  The Company allocates earnings to participating securities and computes earnings per share using the two class method.  The determination of earnings per share under the two-class method is as follows:

 

 

 

Three Months Ended November 30,

 

 

 

2012

 

2011

 

 

 

 

 

 

 

Basic Earnings per Share

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Chase Corporation

 

$

3,540

 

$

2,327

 

Less: Allocated to participating securities

 

77

 

74

 

Net income available to common shareholders

 

$

3,463

 

$

2,253

 

 

 

 

 

 

 

Basic weighted average shares outstanding

 

8,851,314

 

8,754,020

 

Net income per share - Basic

 

$

0.39

 

$

0.26

 

 

 

 

 

 

 

Diluted Earnings per Share

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Chase Corporation

 

$

3,540

 

$

2,327

 

Less: Allocated to participating securities

 

76

 

74

 

Net income available to common shareholders

 

$

3,464

 

$

2,253

 

 

 

 

 

 

 

Basic weighted average shares outstanding

 

8,851,314

 

8,754,020

 

Additional dilutive common stock equivalents

 

76,656

 

7,038

 

Diluted weighted average shares outstanding

 

8,927,970

 

8,761,058

 

Net income per share - Diluted

 

$

0.39

 

$

0.26

 

 

For the three months ended November 30, 2012 and 2011, stock options to purchase 0 and 408,002 shares of common stock, respectively, were outstanding, but were not included in the calculation of diluted net income per share because the options’ exercise prices were greater than the average market price of the

 

9



Table of Contents

 

CHASE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

In thousands, except share and per share amounts

 

common stock and thus would be anti-dilutive.  Included in the calculation of dilutive common stock equivalents are the unvested portion of restricted stock, restricted stock units and stock options.

 

Note 5 — Stock Based Compensation

 

In August 2011, the Board of Directors of the Company approved the fiscal year 2012 Long Term Incentive Plan (“2012 LTIP”) for the executive officers.  The fiscal 2012 LTIP is an equity based plan with a grant date of September 1, 2011 and contains a performance and service based restricted stock grant of 33,798 shares in the aggregate, subject to adjustment, with a vesting date of August 31, 2014.  Based on the fiscal year 2012 financial results, 33,798 additional shares of restricted stock (total of 67,596 shares) were earned and granted subsequent to the end of fiscal year 2012 in accordance with the performance measurement criteria.  No further performance-based measurements apply to this award.  Compensation expense is being recognized on a ratable basis over the vesting period.

 

In October 2012, the Board of Directors of the Company approved the fiscal year 2013 Long Term Incentive Plan (“2013 LTIP”) for the executive officers and other members of management.  The 2013 LTIP is an equity based plan with a grant date of October 22, 2012 and contains the following equity components:

 

Restricted Shares — (a) performance and service based restricted stock grant of 11,861 shares in the aggregate, subject to adjustment, with a vesting date of August 31, 2015.  Compensation expense is being recognized on a ratable basis over the vesting period based on quarterly probability assessments; (b) time-based restricted stock grant of 16,505 and 1,931 shares in the aggregate, with vesting dates of August 31, 2015 and August 31, 2013, respectively.  Compensation expense is being recognized on a ratable basis over the vesting period.

 

Stock options — options to purchase 43,964 shares of common stock in the aggregate with an exercise price of $16.00 per share.  The options will vest in three equal annual allotments beginning on August 31, 2013 and ending on August 31, 2015. The options will expire on October 22, 2022.  Compensation expense is being recognized over the period of the award on an annual basis consistent with the vesting terms.

 

Note 6 — Segment Data and Foreign Operations

 

The Company is organized into two operating segments, an Industrial Materials segment and a Construction Materials segment.  The basis for this segmentation is distinguished by the nature of the products and how they are delivered to their respective markets.  The Industrial Materials segment reflects specified products that are used in or integrated into another company’s product with demand dependent upon general economic conditions.  Industrial Materials products include insulating and conducting materials for wire and cable manufacturers, moisture protective coatings for electronics and printing services, laminated durable papers, and flexible composites and laminates for the aerospace, packaging and industrial laminate markets.  Effective with its acquisition in fiscal 2012, the full listing of NEPTCO products is included in the Industrial Materials segment.  The Construction Materials segment reflects construction project oriented product offerings that are primarily sold and used as “Chase” branded products.  Construction Materials products include protective coatings for pipeline applications, coating and lining systems for use in liquid storage and containment applications, high performance polymeric asphalt additives, and expansion and control joint systems for use in the transportation and architectural markets.

 

10



Table of Contents

 

CHASE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

In thousands, except share and per share amounts

 

The following tables summarize information about the Company’s reportable segments:

 

 

 

Three Months Ended November 30,

 

 

 

2012

 

2011

 

Revenues from external customers

 

 

 

 

 

Industrial Materials

 

$

39,850

 

$

19,486

 

Construction Materials

 

13,550

 

12,644

 

Total

 

$

53,400

 

$

32,130

 

 

 

 

 

 

 

Income before income taxes

 

 

 

 

 

Industrial Materials

 

$

5,530

(a)

$

3,754

(c)

Construction Materials

 

1,430

(b)

525

 

Total for reportable segments

 

6,960

 

4,279

 

Corporate and Common Costs

 

(1,663

)

(699

)(d)

Total

 

$

5,297

 

$

3,580

 

 


(a)         Includes $564 of costs of products sold related to inventory step up in fair value as part of the NEPTCO acquisition, $267 of pension related settlement costs due to the timing of lump sum distributions, and $150 of Randolph, MA plant closing expenses

(b)         Includes $85 of pension related settlement costs due to the timing of lump sum distributions

(c)          Includes $333 of Webster, MA and Randolph, MA plant closing expenses

(d)         Includes gain of $425 related to Evanston, IL sale leaseback transaction

 

The Company’s products are sold world-wide.  For the three months ended November 30, 2012 and 2011, sales from its operations located in the United Kingdom accounted for 8% and 16%, respectively, of total Company revenues. No other foreign geographic area accounted for more than 10% of consolidated revenues for the three months ended November 30, 2012 and 2011.

 

 

 

November 30, 2012

 

August 31, 2012

 

Total assets

 

 

 

 

 

Industrial Materials

 

$

138,410

 

$

135,322

 

Construction Materials

 

52,554

 

53,509

 

Total for reportable segments

 

190,964

 

188,831

 

Corporate and Common Assets

 

28,198

 

27,656

 

Total

 

$

219,162

 

$

216,487

 

 

As of November 30, 2012 and August 31, 2012, the Company had long-lived assets (defined as tangible assets providing the Company with a future economic benefit beyond the current year or operating period, including buildings, equipment and leasehold improvements) of $4,515 and $4,488, respectively, located in the United Kingdom.  These balances exclude goodwill and intangibles of $11,520 and $11,652, as of November 30, 2012 and August 31, 2012, respectively.

 

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Table of Contents

 

CHASE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

In thousands, except share and per share amounts

 

Note 7 — Goodwill and Other Intangibles

 

The changes in the carrying value of goodwill, by reportable segment, are as follows:

 

 

 

Construction
Materials

 

Industrial
Materials

 

Consolidated

 

Balance at August 31, 2012

 

$

10,740

 

$

28,053

 

$

38,793

 

Acquisition of NEPTCO, Inc. - working capital settlement

 

 

(84

)

(84

)

Foreign currency translation adjustment

 

3

 

94

 

97

 

Balance at November 30, 2012

 

$

10,743

 

$

28,063

 

$

38,806

 

 

The Company’s goodwill is allocated by reporting unit driven by the respective business combinations that originally created the goodwill.  The Company has identified separate reporting units within each of its two reportable segments based on components that have similar economic characteristics.  These reporting units are used to evaluate the possible impairment of goodwill.  Goodwill impairment exists when the carrying amount of goodwill exceeds its implied fair value.  The Company evaluates the possible impairment of goodwill annually each fourth quarter and whenever events or circumstances indicate the carrying value of goodwill may not be recoverable.

 

Intangible assets subject to amortization consist of the following as of November 30, 2012 and August 31, 2012:

 

 

 

Weighted-Average

 

Gross Carrying

 

Accumulated

 

Net Carrying

 

 

 

Amortization Period

 

Value

 

Amortization

 

Value

 

November 30, 2012

 

 

 

 

 

 

 

 

 

Patents and agreements

 

12.1 years

 

$

2,954

 

$

2,186

 

$

768

 

Formulas

 

9.1 years

 

5,808

 

1,846

 

3,962

 

Trade names

 

5.7 years

 

6,373

 

1,290

 

5,083

 

Customer lists and relationships

 

10.2 years

 

34,377

 

8,840

 

25,537

 

 

 

 

 

$

49,512

 

$

14,162

 

$

35,350

 

 

 

 

 

 

 

 

 

 

 

August 31, 2012

 

 

 

 

 

 

 

 

 

Patents and agreements

 

12.1 years

 

$

2,849

 

$

2,177

 

$

672

 

Formulas

 

9.1 years

 

5,791

 

1,683

 

4,108

 

Trade names

 

5.7 years

 

6,360

 

1,022

 

5,338

 

Customer lists and relationships

 

10.2 years

 

34,210

 

7,965

 

26,245

 

 

 

 

 

$

49,210

 

$

12,847

 

$

36,363

 

 

Aggregate amortization expense related to intangible assets for the three months ended November 30, 2012 and 2011 was $1,217 and $571, respectively.  Estimated amortization expense for the remainder of fiscal year 2013 and for each of the five succeeding fiscal years is as follows:

 

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Table of Contents

 

CHASE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

In thousands, except share and per share amounts

 

Years ending August 31,

 

 

 

2013 (remaining 9 months)

 

$

3,722

 

2014

 

4,920

 

2015

 

4,722

 

2016

 

4,660

 

2017

 

4,223

 

2018

 

3,992

 

 

 

$

26,239

 

 

Note 8 — Acquisition of NEPTCO Incorporated

 

On June 27, 2012, Chase acquired 100% of the capital stock of NEPTCO Incorporated (“NEPTCO”), a private company based in Pawtucket, RI, whose core products are sold primarily into the broadband communications and electronics packaging industries.  NEPTCO operates three manufacturing facilities in the United States and one in China, as well as utilizing distribution facilities in Rotterdam, Netherlands and Mississauga, Ontario to assist in supply chain management.  As part of this transaction, the Company also acquired NEPTCO’s 50% ownership stake in a joint venture.

 

Supplemental Pro Forma Data (unaudited)

 

The following table presents the pro forma results of the Company for the three month period ended November 30, 2011, as though the NEPTCO acquisition occurred on September 1, 2011.  The actual revenues and expenses for this NEPTCO acquisition have been included in the consolidated statements of operations since June 27, 2012, the acquisition date, and have been included for the entire three month period ended November 30, 2012.  The pro forma results include adjustments for the estimated amortization of intangibles, estimated interest expense in connection with debt financing of the acquisition, and the income tax impact of the pro forma adjustments at the statutory rate of 38%. The following pro forma information is not necessarily indicative of the results of operations that would have been achieved if the acquisition had been effective on September 1, 2011.

 

 

 

Three Months Ended

 

 

 

November 30, 2011

 

Revenues

 

$

56,261

 

Net income attributable to Chase Corporation

 

$

2,540

 

 

 

 

 

Net income available to common shareholders, per common and common equivalent share

 

 

 

Basic earnings per share

 

$

0.28

 

Diluted earnings per share

 

$

0.28

 

 

Note 9 — Joint Venture

 

As part of the Company’s purchase of NEPTCO, it also acquired NEPTCO’s 50% ownership interest in its financially-controlled joint venture, NEPTCO JV LLC (“JV”). The JV was originally formed in 2003 by NEPTCO and a joint venture partner, an otherwise unrelated party (collectively, the “Members”), whereby each member’s fiber optic strength elements businesses were combined. This venture, which is 50% owned by each member, is managed and operated on a day-to-day basis by NEPTCO. The joint venture operates out of the Company’s Granite Falls, NC facility.

 

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Table of Contents

 

CHASE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

In thousands, except share and per share amounts

 

The Company accounts for the joint venture partner’s non-controlling interest in the JV under ASC Topic 810 “Consolidations” (“ASC 810”).  Based on the criteria in ASC 810, the Company determined that the JV qualifies as a Variable Interest Entity (“VIE”).  Because of the Company’s controlling financial interest, the JV’s assets and liabilities and results of operations have been fully consolidated within the Company’s consolidated balance sheets and consolidated statements of operations since June 27, 2012, the NEPTCO acquisition date.  An offsetting amount equal to 50% of net assets and net loss of the JV has been recorded within the Company’s consolidated financial statements to the non-controlling interest, representing the joint venture partner’s 50% ownership interest and pro rata share in the net loss of the JV.

 

At November 30, 2012 and August 31, 2012, the following amounts were consolidated in the Company’s balance sheets related to the JV:

 

 

 

November 30,

 

August 31,

 

 

 

2012

 

2012

 

Assets

 

 

 

 

 

Cash

 

$

873

 

$

1,008

 

Accounts receivable, net

 

1,445

 

1,540

 

Inventories, net

 

1,826

 

2,394

 

Prepaid expenses and other assets

 

252

 

219

 

Property, plant and equipment, net

 

641

 

630

 

Intangible assets, net

 

662

 

655

 

Total assets

 

$

5,699

 

$

6,446

 

 

 

 

 

 

 

Liabilities and net assets

 

 

 

 

 

Accounts payable and accrued expenses

 

$

863

 

$

1,650

 

Due to Members

 

1,921

 

1,757

 

Total liabilities

 

$

2,784

 

$

3,407

 

 

 

 

 

 

 

Net assets

 

$

2,915

 

$

3,039

 

 

 

 

 

 

 

Non-controlling interest

 

$

1,457

 

$

1,520

 

 

Effective on the date of the JV’s inception, and for four years following the date on which the Members no longer own any membership interest in the JV, non-compete agreements exist between the Members. Each Member retains the right to tender an offer to buy the other Member’s share. Once an offer is tendered, the tendered Member has the option to either sell, or match the initial offer to purchase the tendering Member’s share.

 

Per the JV agreement, the JV is barred from issuing third party debt, other than customary accounts payable, resulting from its normal trade operations. The liabilities of the JV are not guaranteed by any portion of NEPTCO or the Company.

 

The JV agrees to purchase a minimum of 80% of its total glass fiber requirements from the other joint venture partner. Additionally, the JV agrees to purchase private-label products exclusively from an affiliate of the other joint venture partner; however, the JV is not subject to a minimum purchase requirement on private-label products. Purchases from the joint venture partner totaled $463 for the three month period ended November 30, 2012. The JV had amounts due to the other joint venture partner of $232 and $618 at November 30, 2012 and August 31, 2012, respectively.

 

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Table of Contents

 

CHASE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

In thousands, except share and per share amounts

 

Note 10 — Commitments and Contingencies

 

The Company is one of over 100 defendants in a lawsuit pending in Ohio which alleges personal injury from exposure to asbestos contained in certain Chase products.  The case is captioned Marie Lou Scott, Executrix of the Estate of James T. Scott v. A-Best Products, et al., No. 312901 in the Court of Common Pleas for Cuyahoga County, Ohio.  The plaintiff in the case issued discovery requests to Chase in August 2005, to which Chase timely responded in September 2005.  The trial had initially been scheduled to begin on April 30, 2007.  However, that date had been postponed and no new trial date has been set.  As of November 30, 2012, there have been no new developments as this Ohio lawsuit has been inactive with respect to Chase.

 

The Company was named as one of the defendants in a complaint filed on June 25, 2009, in a lawsuit captioned Lois Jansen, Individually and as Special Administrator of the Estate of Thomas Jansen v. Beazer East, Inc., et al., No: 09-CV-6248 in the Milwaukee County (Wisconsin) Circuit Court.  The plaintiff sued a number of alleged manufacturers or distributors of asbestos-containing products, including Royston Laboratories (formerly an independent company and now owned by Chase Corporation), alleging that her husband died from workplace exposure.  The other defendants have either settled or had the complaint against them dismissed.  Chase has filed an answer to the claim denying the material allegations in the complaint.  The parties are currently engaged in discovery and motion practice.

 

In addition to the matters described above, the Company is involved from time to time in litigation incidental to the conduct of its business.  Although the Company does not expect that the outcome in any of these matters, individually or collectively, will have a material adverse effect on its financial condition, results of operations or cash flows, litigation is inherently unpredictable.  Therefore, judgments could be rendered or settlements entered, that could adversely affect the Company’s operating results or cash flows in a particular period.  The Company routinely assesses all of its litigation and threatened litigation as to the probability of ultimately incurring a liability, and records its best estimate of the ultimate loss in situations where the Company assesses the likelihood of loss as probable.

 

Note 11 - Pensions and Other Post Retirement Benefits

 

The components of net periodic benefit cost for the three months ended November 30, 2012 and 2011 are as follows:

 

 

 

Three Months Ended November 30,

 

 

 

2012

 

2011

 

Service cost

 

$

103

 

$

121

 

Interest cost

 

114

 

130

 

Expected return on plan assets

 

(149

)

(131

)

Amortization of prior service cost

 

6

 

18

 

Amortization of unrecognized loss

 

84

 

69

 

Curtailment loss

 

25

 

 

Settlement loss

 

327

 

 

Net periodic benefit cost

 

$

510

 

$

207

 

 

When funding is required, the Company’s policy is to contribute amounts that are deductible for federal income tax purposes.  As of November 30, 2012, the Company has made contributions of $600 in the

 

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Table of Contents

 

CHASE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

In thousands, except share and per share amounts

 

current fiscal year to fund its obligations under its pension plan and will make the necessary contributions over the remainder of fiscal 2013 to ensure the qualified plan continues to be adequately funded given the current market conditions.

 

In December 2012, subsequent to the balance sheet date, the Company incurred additional expense, in the quarter ending February 28, 2013, related to pension settlements of approximately $650 due to lump sum distributions from the defined benefit pension plan. The timing of these lump sum distributions has caused an acceleration of expense into the current year.

 

Note 12 — Fair Value Measurements

 

The Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price).  The Company uses a three-tier fair value hierarchy, which classifies the inputs used in measuring fair values. These tiers include: Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

 

The Company endeavors to utilize the best available information in measuring fair value.  Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.  The financial assets classified as Level 1 as of November 30, 2012 and August 31, 2012 represent investments that are restricted for use in a nonqualified retirement savings plan for certain key employees and directors.

 

The following table sets forth the Company’s financial assets that were accounted for at fair value on a recurring basis as of November 30, 2012 and August 31, 2012:

 

 

 

 

 

 

 

Fair value measurement category

 

 

 

Fair value
measurement date

 

Total

 

Quoted prices
in active
markets
(Level 1)

 

Significant other
observable inputs
(Level 2)

 

Significant
unobservable
inputs
(Level 3)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

Restricted investments

 

November 30, 2012

 

$

921

 

$

921

 

$

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

Restricted investments

 

August 31, 2012

 

$

874

 

$

874

 

$

 

$

 

 

The following table presents the fair value of the Company’s long-term debt as of November 30, 2012 and August 31, 2012, which is recorded at its carrying value:

 

 

 

 

 

 

 

Fair value measurement category

 

 

 

Fair value
measurement date

 

Total

 

Quoted prices
in active
markets
(Level 1)

 

Significant other
observable inputs
(Level 2)

 

Significant
unobservable
inputs
(Level 3)

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

Long-term debt

 

November 30, 2012

 

$

68,600

 

$

 

$

68,600

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt

 

August 31, 2012

 

$

70,000

 

$

 

$

70,000

 

$

 

 

The carrying value of the long-term debt approximates its fair value, as the monthly interest rate is set based on the movement of the underlying market rates.

 

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Table of Contents

 

Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

The following discussion provides an analysis of our financial condition and results of operations and should be read in conjunction with the unaudited Consolidated Financial Statements and notes thereto included in Item 1 of Part I of this Quarterly Report on Form 10-Q and with our Annual Report on Form 10-K filed for the fiscal year ended August 31, 2012.

 

Overview

 

Our results in the first three months of fiscal 2013 reflect both revenue and profit increases over the prior year period.  Revenues in the current quarter benefited from sales generated from our June 2012 acquisition of NEPTCO.  Additionally, favorable product mix and continued efforts to streamline overhead costs and consolidate our production facilities have improved our profitability.  Revenues from the Industrial Materials segment increased over the same period in the prior year primarily due to the inclusion of sales from NEPTCO as well as increased sales from our electronic coatings and laminated durable paper products.  These were partially offset by a reduction in our traditional wire and cable product sales in the current quarter as compared to those realized in the first quarter of the prior year.

 

Our Construction Materials segment benefited from increased demand for our coating and lining system products that resulted in higher sales and profits in the current quarter compared to the prior year period.  This segment also benefitted from greater demand for our bridge and highway related construction products in the first quarter of fiscal 2013.  These increases were partially offset by decreased project demand for our Pipeline Europe and private label products.  Although this segment was positively impacted by some large, non-recurring projects in the first quarter, we observed decreased demand towards the end of the quarter and similar large projects may not occur in the upcoming quarters.

 

The upcoming second fiscal quarter has historically generated lower quarterly revenues for many of our product lines, especially within the Construction Materials segment.  Our key objectives will be continued focus on our marketing and product development efforts, as well as the ongoing integration of the NEPTCO operations.  Our balance sheet remains strong, with cash on hand of $15.4 million and a current ratio of 2.6.  Our $15 million line of credit is fully available, while the balance of our unsecured term debt is $68.6 million.

 

We have two reportable segments as summarized below:

 

Segment

 

Product Lines

 

Manufacturing Focus and Products

Industrial Materials

 

·      Wire and Cable

·      Electronic Coatings

·      Custom Products

·      NEPTCO Products

 

Protective coatings and tape products including insulating and conducting materials for wire and cable manufacturers, moisture protective coatings for electronics and printing services, laminated durable papers, flexible composites and laminates for the aerospace, packaging and industrial laminate markets, pulling and detection tapes used in the installation, measurement and location of fiber optic cables, water and natural gas lines, and cover tapes essential to delivering semiconductor components via tape and reel packaging; a joint venture also produces glass based strength elements designed to allow fiber optic cables to withstand mechanical and environmental strain and stress.

 

 

 

 

 

Construction Materials

 

·      Pipeline

·      Construction Products

·      Private Label

 

Protective coatings and tape products including coating and lining systems for use in liquid storage and containment applications, protective coatings for pipeline and general construction applications, high performance polymeric asphalt additives, and expansion and control joint systems for use in the transportation and architectural markets.

 

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Table of Contents

 

Results of Operations

 

Revenues and Operating Profit by Segment are as follows (Dollars in Thousands):

 

 

 

Three Months Ended
November 30, 2012

 

% of Total
Revenues

 

Three Months Ended
November 30, 2011

 

% of Total
Revenues

 

 

 

 

 

 

 

 

 

 

 

Revenues from external customers

 

 

 

 

 

 

 

 

 

Industrial Materials

 

$

39,850

 

75

%

$

19,486

 

61

%

Construction Materials

 

13,550

 

25

%

12,644

 

39

%

Total

 

$

53,400

 

 

 

$

32,130

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended
November 30, 2012

 

% of Segment
Revenues

 

Three Months Ended
November 30, 2011

 

% of Segment
Revenues

 

Income before income taxes

 

 

 

 

 

 

 

 

 

Industrial Materials

 

$

5,530

(a)

14

%

$

3,754

(c)

19

%

Construction Materials

 

1,430

(b)

11

%

525

 

4

%

Total for reportable segments

 

6,960

 

13

%

4,279

 

13

%

Corporate and Common Costs

 

(1,663

)

 

 

(699

)(d)

 

 

Total

 

$

5,297

 

10

%

$

3,580

 

11

%

 


(a)         Includes $564 of costs of products sold related to inventory step up in fair value as part of the NEPTCO acquisition, $267 of pension related settlement costs due to the timing of lump sum distributions, and $150 of Randolph, MA plant closing expenses

(b)         Includes $85 of pension related settlement costs due to the timing of lump sum distributions

(c)          Includes $333 of Webster, MA and Randolph, MA plant closing expenses

(d)         Includes gain of $425 on Evanston sale leaseback transaction

 

Total Revenues

 

Total revenues increased $21,270,000 or 66% to $53,400,000 for the quarter ended November 30, 2012 compared to $32,130,000 in the same quarter of the prior year.  Revenues in our Industrial Materials segment increased $20,364,000 or 105% to $39,850,000 for the quarter ended November 30, 2012 compared to $19,486,000 in the same quarter of the prior year.  The increase in revenues from our Industrial Materials segment in the current quarter was primarily due to the following: (a) increased sales of $19,036,000 from NEPTCO products, which we acquired in June 2012; (b) increased sales of $1,317,000 from our electronic coatings products; and (c) increased sales of $1,048,000 from laminated durable paper products.  These increases were partially offset by decreased sales of $768,000 from our traditional wire & cable products as we begin to integrate the manufacturing of some of these similar Chase products in with the NEPTCO facilities and production processes.

 

Revenues from our Construction Materials segment increased $906,000 or 7% to $13,550,000 in the current quarter compared to $12,644,000 in the same period last year.  The higher sales from our Construction Materials segment in the current quarter was primarily due to increased sales of $1,391,000 of our coating and lining systems (CIM Industries).  This increase was partially offset by decreased sales of $465,000 in pipeline products produced at our UK facility due to lower demand.

 

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Table of Contents

 

Cost of Products and Services Sold

 

Cost of products and services sold increased $15,272,000 or 69% to $37,271,000 in the quarter ended November 30, 2012 compared to $21,999,000 in the same period in fiscal 2012.

 

The following table summarizes our costs of products and services sold as a percentage of revenues for each of our reporting segments:

 

 

 

Three Months Ended November 30,

 

Cost of products and services sold

 

2012

 

2011

 

 

 

 

 

 

 

Industrial Materials

 

69

%

65

%

Construction Materials

 

71

%

73

%

Total

 

70

%

68

%

 

Cost of products and services sold in our Industrial Materials segment was $27,677,000 for the first three months of fiscal 2013 compared to $12,708,000 for the same period in the prior year.  As a percentage of revenues, cost of products and services sold in the Industrial Materials segment increased primarily due to the inclusion of the recently acquired NEPTCO operations in this segment (from June 2012). This includes the production costs of the NEPTCO JV which has higher cost of products sold as a percentage of revenues.  Additionally, this segment was impacted by incremental cost of products sold of $564,000 due to the sale of inventory which had a stepped up valuation as part of the NEPTCO acquisition.

 

Cost of products and services sold in our Construction Materials segment was $9,594,000 in the current quarter compared to $9,291,000 for the same period last year.  As a percentage of revenues, cost of products and services sold in the Construction Materials segment decreased in the current quarter primarily due to the inclusion of incremental costs of $291,000 in the prior year quarter related to production issues at our Rye, UK plant.  We continue to closely monitor raw material pricing across all product lines in this segment to preserve margins.

 

Selling, General and Administrative Expenses

 

Selling, general and administrative expenses increased $3,547,000 or 51% to $10,539,000 in the quarter ended November 30, 2012 compared to $6,992,000 in the same period in fiscal 2012. As a percentage of revenues, selling, general and administrative expenses decreased to 20% in the first quarter of fiscal 2013 compared to 22% in the prior year period.  The percentage decrease is attributable to our continued emphasis on controlling costs and leveraging fixed overhead.

 

Interest Expense

 

Interest expense increased $326,000 to $362,000 in the quarter ended November 30, 2012, compared to $36,000 in the same period in fiscal 2012.  The increase in interest expense from the prior year period is a direct result of the $70,000,000 long-term debt related to our acquisition of NEPTCO.

 

Other Income (Expense)

 

Other income decreased $408,000 to $69,000 in the quarter ended November 30, 2012 compared to $477,000 in the same period in the prior year.  Other income primarily includes interest income and foreign exchange gains (losses) caused by changes in exchange rates on transactions or balances denominated in currencies other than the functional currency of our subsidiaries.  In the prior year quarter, other income also included a gain of $425,000 recognized on deposit payments previously received on the sale of our Evanston, IL property.

 

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Table of Contents

 

Non-controlling Interest

 

The income (loss) from non-controlling interest relates to a joint venture in which we have, through our NEPTCO subsidiary, a 50% ownership interest.  The joint venture between NEPTCO and its joint venture partner (an otherwise unrelated party) is managed and operated on a day-to-day basis by NEPTCO.  The purpose of this joint venture was to combine the elements of each member’s fiber optic strength businesses.

 

Net Income

 

Net income attributable to Chase Corporation increased $1,213,000 or 52% to $3,540,000 in the quarter ended November 30, 2012 compared to $2,327,000 in the same quarter of the prior year.  The increase in net income in the current quarter is primarily due to the inclusion of NEPTCO for the three month period, as well as favorable product sales mix as discussed previously.  These favorable items were partially offset by expenses of $564,000 in inventory fair value step up related to the NEPTCO acquisition, and the acceleration of defined benefit plan settlement costs of $352,000 resulting from the timing of lump sum distributions to participants.

 

Other Important Performance Measures

 

We believe that adjusted EBITDA is a useful performance measure and is used by our executive management team and board of directors to measure operating performance, to allocate resources to enhance the financial performance of our business, to evaluate the effectiveness of our business strategies and to communicate with our board of directors and investors concerning our financial performance.  Adjusted EBITDA is a non-GAAP financial measure.

 

We define adjusted EBITDA as follows:  net income attributable to Chase Corporation before interest expense from borrowings, income tax expense, depreciation expense from fixed assets, amortization from intangible assets, costs related to our acquisitions, costs of products sold related to inventory step-up to fair value, and settlement (gains) or losses resulting from lump sum distributions to participants from our defined benefit plan.

 

The use of adjusted EBITDA has limitations and this performance measure should not be considered in isolation from, or as an alternative to, U.S. GAAP measures such as net income.  Our measurement of adjusted EBITDA may not be comparable to similarly titled measures used by other companies.

 

The following unaudited table provides a reconciliation of net income attributable to Chase Corporation, the most directly comparable financial measure presented in accordance with U.S. GAAP, to adjusted EBITDA for the periods presented:

 

 

 

Three Months Ended November 30,

 

 

 

2012

 

2011

 

 

 

 

 

 

 

Net income attributable to Chase Corporation

 

$

3,540,000

 

$

2,327,000

 

 

 

 

 

 

 

 

 

Interest expense

 

362,000

 

36,000

 

Income taxes

 

1,820,000

 

1,253,000

 

Depreciation expense

 

1,508,000

 

676,000

 

Amortization expense

 

1,217,000

 

571,000

 

EBITDA

 

$

8,447,000

 

$

4,863,000

 

 

 

 

 

 

 

 

 

Cost of sale of inventory step-up (a)

 

564,000

 

 

Pension curtailment and settlement costs (b)

 

352,000

 

 

Adjusted EBITDA

 

$

9,363,000

 

$

4,863,000

 

 


(a)         Represents costs of product related to the step-up in fair value of inventory through purchase accounting from the June 2012 acquisition of NEPTCO

(b)         Represents pension related settlement costs due to the timing of lump sum distributions

 

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Table of Contents

 

Liquidity and Sources of Capital

 

Our overall cash and cash equivalents balance increased $193,000 to $15,373,000 at November 30, 2012, from $15,180,000 at August 31, 2012.  The increased cash balance is primarily attributable to cash from operations offset by principal payments on outstanding debt and equipment purchases.  A portion of cash held as of November 30, 2012 was subsequently used in December 2012 to pay our annual dividend of $3,626,000.  We will continue to review our current cash balances denominated in foreign currency in light of current tax guidelines, working capital requirements, infrastructure improvements and potential acquisitions.

 

Cash flow provided by operations was $2,116,000 in the first quarter of fiscal 2013 compared to $1,251,000 in the prior year’s first quarter.  Cash provided by operations during the first three months of fiscal 2013 was primarily due to operating income, decreased accounts receivable and increased accounts payable balances offset by increased inventory balances and a decrease in accrued expenses due to the timing of tax payments and payment of our annual incentive compensation.

 

The ratio of current assets to current liabilities was 2.6 as of November 30, 2012, compared to 2.8 as of August 31, 2012.  The decrease in our current ratio at November 30, 2012 was primarily attributable to increased accounts payable as well as an accrual for our fiscal 2012 annual dividend which was declared in the first quarter of fiscal 2013 and paid in December 2012.  This was partially offset by increased inventory resulting from higher sales volume and strategic raw material purchases as well as decreased accrued payroll and other compensation due to the payment of our annual incentive program.

 

Cash flow used in investing activities of $596,000 was primarily due to cash paid for purchases of machinery and equipment at our manufacturing locations during the first quarter of fiscal 2013 as well as $101,000 of professional legal services that have been capitalized as prepaid patent costs.

 

Cash flow used in financing activities of $1,400,000 was due to payments made on the bank loans used to finance our recent acquisition of NEPTCO, described in more detail below.

 

On October 23, 2012, we announced an annual cash dividend of $0.40 per share (totaling $3,626,000), to shareholders of record on November 2, 2012 and payable on December 5, 2012.

 

In June 2012, as part of our acquisition of NEPTCO, we borrowed $70,000,000 under a five year term debt financing arrangement led and arranged by Bank of America, with participation from RBS Citizens (the “Credit Facility”). The applicable interest rate is based on the effective LIBOR plus a range of 1.75% to 2.25%, depending on our consolidated leverage ratio.  At November 30, 2012, the applicable interest rate was 1.96% per annum and the outstanding principal amount was $68,600,000.  We are required to repay the principal amount of the term loan in quarterly installments of $1,400,000 beginning in September 2012 through June 2014, increasing to $1,750,000 per quarter thereafter through June 2015, and to $2,100,000 per quarter thereafter through March 2017.  The Credit Facility matures in June 2017.  Prepayment of the Credit Facility is allowed at any time. In November 2012, we executed an amendment to this Credit Facility, to clarify the definition of the “measurement period” used in the agreement.  All other terms of the Credit Facility remain the same.

 

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Table of Contents

 

As part of the financing for this acquisition, we obtained a new revolving line of credit with Bank of America (the “Revolver”) totaling $15,000,000, which replaced our then existing $10,000,000 line.  The Revolver bears interest at LIBOR plus a range of 1.75% to 2.25%, depending on our consolidated leverage ratio, or, at our option, at the bank’s base lending rate.  As of November 30, 2012 and December 31, 2012, the entire amount of $15,000,000 was available for use.  The Revolver is scheduled to mature in June 2017.  This Revolver allows for increased flexibility for working capital requirements going forward, and we plan to use this availability to help finance our cash needs, including potential acquisitions, in fiscal 2013 and future periods.

 

The Credit Facility with Bank of America contains customary affirmative and negative covenants that, among other things, restrict our ability to incur additional indebtedness.  It also requires us to maintain a ratio of consolidated indebtedness to consolidated EBITDA (each as defined in the facility) of no more than 3.00 to 1.00, and to maintain a consolidated fixed charge coverage ratio (as calculated in the facility) of at least 1.25 to 1.00.  We were in compliance with our debt covenants as of November 30, 2012.

 

We currently have several on-going capital projects that are important to our long term strategic goals.  We continue to renovate our Oxford, MA and Blawnox, PA facilities as part of the relocation of our operations from Randolph, MA, which was completed in December 2012.  Machinery and equipment will also be added as needed to increase capacity or enhance operating efficiencies in our other manufacturing plants.

 

We may consider the acquisition of companies or other assets in fiscal 2013 or in future periods that are complementary to our business.  We believe that our existing resources, including cash on hand and our Revolver, together with cash generated from operations and additional bank borrowings, will be sufficient to fund our cash flow requirements through at least the next twelve months.  However, there can be no assurances that additional financing will be available on favorable terms, if at all.

 

To the extent that interest rates increase in future periods, we will assess the impact of these higher interest rates on the financial and cash flow projections of our potential acquisitions.

 

We have no significant off balance sheet arrangements.

 

Contractual Obligations

 

Please refer to Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section in our Annual Report on Form 10-K for the fiscal year ended August 31, 2012 for a complete discussion of our contractual obligations.

 

Recent Accounting Standards

 

In July 2012, the Financial Accounting Standards Board (“FASB”) issued ASU 2012-02, “Testing Indefinite-Lived Intangible Assets for Impairment.” This ASU amends ASC 350, “Intangibles — Goodwill and Other” to allow entities an option to first assess qualitative factors to determine whether it is necessary to perform the quantitative impairment test. Under that option, an entity no longer would be required to calculate the fair value of the intangible asset unless the entity determines, based on that qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. The amendments in this ASU are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, with early adoption permitted. The adoption of ASU 2012-02 will not have an impact on our consolidated financial position, results of operations or cash flows.

 

22



Table of Contents

 

Critical Accounting Policies and Estimates

 

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States.  To apply these principles, we must make estimates and judgments that affect our reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.  In many instances, we reasonably could have used different accounting estimates and, in other instances, changes in the accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ significantly from our estimates.  To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations will be affected.  We base our estimates and judgments on historical experience and other assumptions that we believe to be reasonable at the time and under the circumstances, and we evaluate these estimates and judgments on an ongoing basis.  We refer to accounting estimates and judgments of this type as critical accounting policies, judgments, and estimates.  Management believes there have been no material changes during the three months ended November 30, 2012 to the critical accounting policies reported in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended August 31, 2012.

 

Forward Looking Information

 

The part of this Quarterly Report on Form 10-Q captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contains certain forward-looking statements, which involve risks and uncertainties.  Forward-looking statements include, without limitation, statements as to our future operating results, plans for manufacturing facilities, future economic conditions and expectations or plans relating to the implementation or realization of our strategic goals and future growth.  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.  Readers should refer to the discussions under “Forward Looking Information” and “Risk Factors” contained in our Annual Report on Form 10-K for the fiscal year ended August 31, 2012 concerning certain factors that could cause our actual results to differ materially from the results anticipated in such forward-looking statements. These discussions and Risk Factors are hereby incorporated by reference into this Quarterly Report.

 

23



Table of Contents

 

Item 3 - Quantitative and Qualitative Disclosures about Market Risk

 

We limit the amount of credit exposure to any one issuer.  At November 30, 2012, other than our restricted investments (which are restricted for use in a non-qualified retirement savings plan for certain key employees and members of the Board of Directors), all of our funds were either in demand deposit accounts or investment instruments that meet high credit quality standards such as money market funds, government securities, or commercial paper.

 

Our domestic operations have limited currency exposure since substantially all transactions are denominated in USD.  However, our European operations are subject to currency exchange fluctuations.  We continue to review our policies and procedures to reduce this exposure while maintaining the benefit from these operations and sales to other European customers.  As of November 30, 2012, the Company had cash balances in the following foreign currencies (with USD equivalents):

 

Currency Code

 

Currency Name

 

USD Equivalent at November 30, 2012

 

GBP

 

British Pound

 

$

5,462,000

 

EUR

 

Euro

 

$

1,009,000

 

CNY

 

Chinese Yuan Renminbi

 

$

91,000

 

CAD

 

Canadian Dollar

 

$

164,000

 

 

We will continue to review our current cash balances denominated in foreign currency in light of current tax guidelines and potential acquisitions.

 

We recognized a foreign currency translation gain for the three months ended November 30, 2012 in the amount of $404,000 related to our European operations, which is recorded in other comprehensive income (loss) within our Statement of Equity and Statement of Comprehensive Income.  We do not have or utilize any derivative financial instruments.

 

Item 4 - Controls and Procedures

 

Evaluation of disclosure controls and procedures

 

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.  In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

 

We carry out a variety of ongoing procedures under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, to evaluate the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of the end of the period covered by this report.

 

24



Table of Contents

 

Changes in internal control over financial reporting

 

There was no change in our internal control over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

25



Table of Contents

 

Part II — OTHER INFORMATION

 

Item 1 — Legal Proceedings

 

We are involved from time to time in litigation incidental to the conduct of our business.  Although we do not expect that the outcome in any of these matters, individually or collectively, will have a material adverse effect on our financial condition, results of operations or cashflows, litigation is inherently unpredictable.  Therefore, judgments could be rendered or settlements entered, that could adversely affect our operating results or cash flows in a particular period.  We routinely assess all of our litigation and threatened litigation as to the probability of ultimately incurring a liability, and record our best estimate of the ultimate loss in situations where we assess the likelihood of loss as probable.  In our Annual Report on Form 10-K for the fiscal year ended August 31, 2012, we reported our material legal proceedings. Since the filing of our Annual Report, there have been no material developments with respect to any material legal proceedings to which we are a party.

 

Item 1A — Risk Factors

 

Please refer to Item 1A in our Annual Report on Form 10-K for the fiscal year ended August 31, 2012 for a complete discussion of the risk factors which could materially affect our business, financial condition or future results.

 

Item 6 - Exhibits

 

Exhibit
Number

 

Description

10.1

 

First Amendment to Credit Agreement, dated as of November 14, 2012, effective as of June 27, 2012, by and among Chase Corporation, NEPTCO Incorporated, Bank of America, N.A. and the Guarantors and Lenders party thereto

31.1

 

Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

 

Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1

 

Certification of principal executive officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2

 

Certification of principal financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS

 

XBRL Instance Document**

101.SCH

 

XBRL Taxonomy Extension Schema Document**

101.CAL

 

XBRL Taxonomy Extension Calculation Linkbase Document**

101.LAB

 

XBRL Taxonomy Extension Label Linkbase Document**

101.PRE

 

XBRL Taxonomy Extension Presentation Linkbase Document**

101.DEF

 

XBRL Taxonomy Extension Definition Linkbase Document**

 


*                                         Identifies management plan or compensatory plan or arrangement.

 

**                                  Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability under those sections.

 

26



Table of Contents

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 

Chase Corporation

 

 

 

 

Dated: January 9, 2013

By:

/s/ Peter R. Chase

 

 

Peter R. Chase,

 

 

Chairman and Chief Executive Officer

 

 

 

 

 

 

Dated: January 9, 2013

By:

/s/ Kenneth L. Dumas

 

 

Kenneth L. Dumas,

 

 

Chief Financial Officer and Treasurer

 

27


EX-10.1 2 a12-28300_1ex10d1.htm EX-10.1

Exhibit 10.1

 

FIRST AMENDMENT TO CREDIT AGREEMENT

 

This First Amendment (this “Amendment”) is made as of November 14, 2012, effective as of June 27, 2012, by and among CHASE CORPORATION, a Massachusetts corporation (a “Borrower”, or the “Chase Borrower”), NEPTCO INCORPORATED, a Rhode Island corporation (a “Borrower”, or the “NEPTCO Borrower”, and together with the Chase Borrower, the “Borrowers”), the Lenders (as defined in the Credit Agreement), and BANK OF AMERICA, N.A., as Administrative Agent, Swingline Lender and L/C Issuer.

 

RECITALS

 

A.                                    The Borrowers, the Guarantors, the Administrative Agent and the Lenders entered into a Credit Agreement dated as of June 27, 2012 (the “Loan Agreement”), providing for revolving loans by the Lenders to the Borrowers and for various term loans by the Lenders to the Borrowers.  Capitalized terms used herein without definition shall have the meanings assigned to them in the Loan Agreement.

 

B.                                    The parties desire to amend the Loan Agreement in certain respects effective as of June 27, 2012.

 

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

 

1.                                      Amendment to Loan Agreement.

 

(a)                                 Effective as of June 27, 2012, the definition of “Measurement Period” in Section 1.01 of the Loan Agreement is amended by deleting such definition and substituting the following therefor:

 

Measurement Period” means, at any date of determination, the most recently completed four (4) fiscal quarters of the Chase Borrower.”

 

2.                                      No Further Amendments.  Except as specifically amended hereby, the Loan Agreement shall remain otherwise unmodified and in full force and effect and is hereby ratified and affirmed in all respects.

 

3.                                      Certain Representations of the Borrower.  As a material inducement to the Lenders to enter into this Amendment, the Borrowers represent and warrants to the Lenders, after giving effect to this Amendment, as follows:

 

(a)              The execution and delivery of this Amendment has been duly authorized by all requisite corporate action on the part of the Borrowers and will not violate any provision of law, any order, judgment or decree of any court or other agency of government, or the articles or by-laws of any Borrower or any indenture, agreement or other instrument to which any Borrower is bound, or be in conflict with, or result in a breach of, or constitute (with due notice or lapse of time or both) a default under, or result in the creation or imposition

 



 

of any lien, charge or encumbrance of any nature whatsoever upon any of the property or assets of any Borrower pursuant to, any such indenture, agreement or instrument.

 

(b)              The representations and warranties contained in the Loan Agreement are true and correct in all material respects on and as of the date of this Amendment as though made at and as of such date (except to the extent that such representations and warranties expressly relate to an earlier date or except to the extent variations therefrom have been permitted under the terms of the Loan Agreement or otherwise permitted in writing by the Lenders).  No material adverse change has occurred in the assets, liabilities, financial condition, business or prospects of the Borrowers from that disclosed in the annual certified financial statements most recently furnished to the Lenders.  No event of default or condition or event that, but for the requirement that time elapse or notice be given or both, would constitute an event of default, has occurred or is continuing.

 

(c)               This Amendment constitutes the legal, valid and binding obligation of the Borrowers, enforceable against the Borrowers in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and similar laws affecting the rights and remedies of creditors generally or the application of principles of equity, whether in any action at law or proceeding in equity, and subject to the availability of the remedy of specific performance or of any other equitable remedy or relief to enforce any right thereunder.

 

4.                                      Conditions.  The willingness of the Lenders to agree to the foregoing is subject to the following conditions:

 

(a)              The Borrowers and the Guarantors shall have executed and delivered to the Lenders (or shall have caused to be executed and delivered to the Lenders by the appropriate persons) the following:

 

(i)  This Amendment and

 

(ii)  Such other supporting documents and certificates as the Lenders or their counsel may reasonably request.

 

(b)              All legal matters incident to the transactions contemplated hereby shall be satisfactory to counsel for the Lenders.

 

5.                   Miscellaneous.

 

(a)              This Amendment shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts.

 

(b)              This Amendment may be executed by the parties hereto in several counterparts hereof and by the different parties hereto on separate

 

2



 

counterparts hereof, all of which counterparts shall together constitute one and the same agreement.

 

IN WITNESS WHEREOF, the Lenders and the Borrowers have caused this Amendment to be duly executed as a sealed instrument by their duly authorized representatives, all as of the date and year first above written.

 

 

CHASE CORPORATION

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

NEPTCO INCORPORATED

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

BANK OF AMERICA, N.A.,

 

as Administrative Agent

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

BANK OF AMERICA, N.A.,

 

as a Lender, L/C Issuer and Swingline Lender

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

:

RBS CITIZENS, N.A., as a Lender

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

3



 

ACKNOWLEDGMENT OF GUARANTORS

 

In connection with the Loan Agreement as amended hereby, the Guarantors each hereby (a) consent and agree to all of the terms and conditions of the Loan Agreement as amended hereby and of the other documents executed in connection therewith, (b) ratifies and reaffirms all of the terms and provisions of Loan Agreement and each of the other Loan Documents to which such Guarantor is a party, and (c) acknowledges and agrees that the indebtedness, liabilities and obligations of the Borrowers to the Lenders which such Guarantor has guaranteed under the Loan Agreement includes, without limitation, all of the indebtedness of the Borrowers to the Lenders under the Loan Agreement as amended hereby.

 

IN WITNESS WHEREOF, the Guarantors have caused this Amendment to be duly executed as a sealed instrument by their duly authorized representatives, all as of the date and year first above written.

 

 

GUARANTORS:

CAPITAL SERVICES OF NEW YORK, INC.

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

C.I.M. INDUSTRIES INC.

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

CHASE FACILE, INC.

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

NEPTCO HOLDINGS, INC.

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

4



 

 

CHASE CORPORATION

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

NEPTCO INCORPORATED

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

5


EX-31.1 3 a12-28300_1ex31d1.htm EX-31.1

Exhibit 31.1

 

CERTIFICATION

 

I, Peter R. Chase, certify that:

 

1.              I have reviewed this Quarterly Report on Form 10-Q of Chase Corporation;

 

2.              Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.              Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.              The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a)             Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b)             Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c)              Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

 

d)             Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.              The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a)             All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b)             Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

 

Date:  January 9, 2013

 

 

 

 

/s/ Peter R. Chase

 

Peter R. Chase

 

Chairman and Chief Executive Officer

 

(Principal Executive Officer)

 


EX-31.2 4 a12-28300_1ex31d2.htm EX-31.2

Exhibit 31.2

 

CERTIFICATION

 

I, Kenneth L. Dumas, certify that:

 

1.              I have reviewed this Quarterly Report on Form 10-Q of Chase Corporation;

 

2.              Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.              Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.              The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a)             Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b)             Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c)              Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

 

d)             Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.              The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a)             All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b)             Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

 

Date:  January 9, 2013

 

 

 

 

/s/ Kenneth L. Dumas

 

Kenneth L. Dumas

 

Chief Financial Officer & Treasurer

 

(Principal Financial and Accounting Officer)

 


EX-32.1 5 a12-28300_1ex32d1.htm EX-32.1

Exhibit 32.1

 

CERTIFICATION

PURSUANT TO

18 U.S.C. 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

The undersigned officer of Chase Corporation (the “Company”) hereby certifies that the Company’s Quarterly Report on Form 10-Q for the period ended November 30, 2012 (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. This certificate is furnished solely pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

Date:  January 9, 2013

 

 

 

/s/ Peter R. Chase

 

 

 

Peter R. Chase

 

Chairman and Chief Executive Officer

 

(Principal Executive Officer)

 

 


EX-32.2 6 a12-28300_1ex32d2.htm EX-32.2

Exhibit 32.2

 

CERTIFICATION

PURSUANT TO

18 U.S.C. 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

The undersigned officer of Chase Corporation (the “Company”) hereby certifies that the Company’s Quarterly Report on Form 10-Q for the period ended November 30, 2012 (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. This certificate is furnished solely pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

Date:  January 9, 2013

 

 

 

/s/ Kenneth L. Dumas

 

 

 

Kenneth L. Dumas

 

Chief Financial Officer & Treasurer

 

(Principal Financial and Accounting Officer)

 

 


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