Market Overview

Chase Corporation Announces First Quarter Results

Share:

Revenue of $72.5 Million

Earnings Per Share of $0.93

CFO Succession Plan Announced

Chase
Corporation
(NYSE:CCF), a global specialty chemicals
company that is a leading manufacturer of protective materials for
high-reliability applications, today announced financial results for the
quarter ended November 30, 2018, the first quarter of its fiscal 2019.

HIGHLIGHTS – Q1 2019 vs. Q1 2018

GAAP Financials

  • Revenue of $72.50 million, up $10.59 million, or 17%, from $61.92
    million
  • Operating income of $12.31 million, down $0.82 million, or 6%, from
    $13.13 million
  • Net income of $8.82 million, up $0.51 million, or 6%, from $8.32
    million
  • EPS of $0.93, up $0.05 or 6%, from $0.88

Non-GAAP Financial Measures *

  • EBITDA of $16.36 million, up $0.15 million, or 1%, from $16.21 million
  • Adjusted EBITDA of $16.82 million, up $0.61 million, or 4%, from
    $16.21 million
  • Adjusted diluted EPS of $0.97 up $0.09, or 10%, from $0.88

* Reconciliations of the non-GAAP financial measures to Chase's
GAAP financial results are included at the end of this release.
See also "Use of Non-GAAP Financial Measures" below.

Adam P. Chase, President and Chief Executive Officer, commented,
"Revenue growth over the prior year resulted from ongoing organic growth
through both increases in volume and price along with the inorganic
comparative boost from the Zappa Stewart superabsorbent polymers
acquisition.

"We experienced lower than desired operational efficiencies in the first
quarter as we worked to integrate the Pawtucket, RI product lines into
other facilities following our fourth quarter plant consolidation
announcement. This combined with a less favorable product mix and
continued raw material cost increases, despite steady progress being
made in passing them along in the marketplace, proved to be a drag on
our gross margins. The Company has also made certain opportunistic
purchases of products anticipated to further increase in price over the
short-term, working to create a natural hedge against inflationary
pressures. This investment in working capital is planned to be
short-term until supply chain and tariff issues are resolved.

"Additionally, we had an increase in our lower-margin custom
manufacturing services business during the quarter. This tolling work is
performed for the purchaser of both our fiber optic cable components and
our structural composites rod businesses. Heading into the second
quarter, the purchaser has begun to take on more of the manufacturing
themselves, and we anticipate less margin strain from this moving
forward."

Industrial Materials:

         

For the Three Months Ended November 30,

2018     2017
Revenue $ 60,160 $ 49,985
Cost of products and services sold   39,610   30,465
Gross Margin $ 20,550 $ 19,520
Gross Margin % 34% 39%

Mr. Chase continued, "Inorganic sales growth from Zappa Stewart
accounted for $6.53 million of our Industrial Materials overall growth,
while both volume- and price-related organic growth came from our cable
materials and pulling and detection product lines. Both legacy
businesses benefit from the ever-growing IoT (Internet of Things) which
is a driving force behind the growth of telecom and utility
infrastructure. Our specialty products business also recognized
increases over the prior year, but with lower-margin custom
manufacturing services driving a large part of that growth."

Construction Materials:

          For the Three Months Ended November 30,
2018     2017
Revenue $ 12,343 $ 11,932
Cost of products and services sold   6,965   6,430
Gross Margin $ 5,378 $ 5,502
Gross Margin % 44% 46%

"Our Construction Materials segment recognized revenue growth over the
prior-year first quarter" noted Mr. Chase. "Volume-driven growth,
especially in the western U.S. and internationally, bolstered our
coating and lining systems' top-line results. Our bridge and highway
products gained on volume and price increases, with our Rosphalt50®
product being utilized in several domestic bridge rehabilitation
projects including the Benjamin Franklin (PA), Verrazano (NY), RFK (NY)
and Cross Bay (NY) bridges. Our pipeline coatings products did not
repeat prior year results for the quarter, on overall tightening credit
across the Middle East for water infrastructure project work, as well as
slower sales of our domestically-produced oil and gas pipeline products."

Other matters:

Kenneth J. Feroldi, Treasurer and Chief Financial Officer, added, "In
the first quarter of fiscal 2019, we continued to book preliminary and
conditional entries related to U.S. tax reform, and we anticipate final
and complete entries will be booked in the second quarter. We have
entered our first full year under the new Federal tax rates dictated by
the Tax Act, and recognized an effective tax rate of 25.3%, as compared
to the pre-Tax Act rate of 34% recognized in the prior year period. The
reduction in rate came nearly entirely from the Tax Act, as we had no
significant discrete items in the current period.

"Benefiting from the flexibility allowed under the Tax Act, we were able
to repatriate an additional $10 million during the first quarter of
fiscal 2019, with no additional tax effects, and utilized the funds to
continue to pay down debt incurred in the prior year to acquire Zappa
Stewart.

"On a personal note, I have completed my 28th year with the Company and
my 4th year as Chief Financial Officer and Treasurer of Chase
Corporation, having spent the majority of the prior two decades in a
similar role at our subsidiary NEPTCO. I remain grateful to Adam and
Peter Chase and our Board of Directors for the opportunity to serve in
this role and am thankful for the dedicated and hard-working associates
I have had the pleasure and honor of working alongside. The growth the
Company achieved during my time here was rewarding and I was fortunate
to have played a role. This past August, Chase welcomed Christian J.
Talma into the newly created role of Chief Accounting Officer, and I am
pleased with the speed and thoroughness with which he has gained an
understanding of the Company and the trust of our associates. Effective
with our annual shareholders meeting scheduled for February 5, 2019, and
subject to final board approval at that time, Christian will be named
Chief Financial Officer, while I will retain the role of Treasurer. Our
plan is for me to work closely with Christian through this transition,
while remaining an executive officer and employee of the Company."

Mr. Chase also commented, "Our balance sheet remains strong. As of
November 30, 2018, the Company's cash on hand was $35.52 million and our
$150 million revolving credit facility had $135 million of unused
availability. Strategic growth initiatives in marketing and product
development, along with mergers, acquisitions and divestitures, and
operational consolidation will all continue to be our foundation for
long-term growth and value creation — and our current financial position
puts us on solid footing to execute on these objectives."

The following table summarizes the Company's financial results for the
three months ended November 30, 2018 and 2017.

             
For the Three Months Ended November 30,
All figures in thousands, except per share figures         2018 2017
Revenue $ 72,503 $ 61,917
Costs and Expenses
Cost of products and services sold 46,575 36,895
Selling, general and administrative expenses 13,362 11,896
Exit costs related to idle facility   260  
Operating income 12,306 13,126
Interest expense (204) (45)
Other income (expense)   (294)   (482)
Income before income taxes 11,808 12,599
Income taxes   2,985   4,284
Net income $ 8,823 $ 8,315
Net income per diluted share $ 0.93 $ 0.88
Weighted average diluted shares outstanding   9,381   9,384
Reconciliation of net income to EBITDA and adjusted EBITDA
Net income $ 8,823 $ 8,315
Interest expense 204 45
Income taxes 2,985 4,284
Depreciation expense 1,238 1,254
Amortization expense   3,113   2,314
EBITDA $ 16,363 $ 16,212
Exit costs related to idle facility 260
Pension settlement costs   200  
Adjusted EBITDA $ 16,823 $ 16,212
Reconciliation of net income to adjusted net income
Net income $ 8,823 $ 8,315
Exit costs related to idle facility 260
Pension settlement costs 200
Income taxes **   (97)  
Adjusted net income $ 9,186 $ 8,315
Adjusted net income per diluted share (Adjusted diluted EPS) $ 0.97 $ 0.88
 

** For the three months ended November 30, 2018, represents the
aggregate tax effect assuming a 21% tax rate for the items
impacting pre-tax income, which is our estimated effective U.S.
statutory Federal tax rate for fiscal 2019.

Chase Corporation, a global specialty chemicals company that was founded
in 1946, is a leading manufacturer of protective materials for
high-reliability applications throughout the world.

Use of Non-GAAP Financial Measures

The Company has used non-GAAP financial measures in this press release.
Adjusted net income, Adjusted diluted EPS, EBITDA and Adjusted EBITDA
are non-GAAP financial measures. The Company believes that Adjusted net
income, Adjusted diluted EPS, EBITDA and Adjusted EBITDA 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 and Adjusted EBITDA
are commonly used by financial analysts and others in the industries in
which the Company operates, and thus provide useful information to
investors. Non-GAAP financial measures should be considered in addition
to, and not as an alternative to, the Company's reported results
prepared in accordance with GAAP.

Cautionary Note Concerning Forward-Looking Statements

Certain statements in this press release are forward-looking. These may
be identified by the use of forward-looking words or phrases such as
"believe"; "expect"; "anticipate"; "should"; "planned"; "estimated" and
"potential", among others. These forward-looking statements are based on
Chase Corporation's current expectations. The Private Securities
Litigation Reform Act of 1995 provides a "safe harbor" for such
forward-looking statements. To comply with the terms of the safe harbor,
the Company cautions investors that any forward-looking statements made
by the Company are not guarantees of future performance and that a
variety of factors could cause the Company's actual results and
experience to differ materially from the anticipated results or other
expectations expressed in the Company's forward-looking statements. The
risks and uncertainties which may affect the operations, performance,
development and results of the Company's business include, but are not
limited to, the following: uncertainties relating to economic
conditions; uncertainties relating to customer plans and commitments;
the pricing and availability of equipment, materials and inventories;
technological developments; performance issues with suppliers and
subcontractors; economic growth; delays in testing of new products; the
Company's ability to successfully integrate acquired operations; the
effectiveness of cost-reduction plans; rapid technology changes; and the
highly competitive environment in which the Company operates. Readers
are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date the statement was made.

View Comments and Join the Discussion!
 
Fastest Market News Application
You'll Hear It First On Pro
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Trading Daily
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com