Annual Report

Annual Report

Annual Report

Fellow Shareholders,

These are unprecedented times.

We want to start by extending our gratitude to all Chase associates, their families and all essential workers. To a person, and as a worldwide team, we could not be prouder of their hard work and dedication to ensuring that our customers and suppliers receive our full support.

Going into the final month of our second quarter – February 2020 – the severity of coronavirus became crystal clear, with the CDC ultimately declaring it a global pandemic in March 2020.

Was the pandemic unexpected? Yes. But expecting the unexpected is our business posture; how we operate and how we respond to market disruptions.

We continuously assess the circumstance and develop strategic and tactical options. We evaluate our long-term strategies and how they must adjust to the situation.

Financial stability and flexibility are core strategies, and we were and continue to be in a strong financial position.

The impact of COVID-19 was felt across nearly all industries. Despite decreased revenue in all of our operating segments; the Company:

  • Increased relative gross margin
  • Completed the consolidation of its pulling and detection operations into its existing Hickory, NC location
  • Liquidated two real estate assets for gains
  • Achieved a year-over-year increase in cashflows from operations
  • Ended the fiscal year debt free and with a cash balance of $99.1 million
  • Maintained a fully available credit facility of $150 million

Recognizing the gravity of the pandemic, we first established a COVID-19 task force to ensure that our focus was crystal clear on the health and well-being of our associates, strategic issues and the need to react quickly and decisively to the changing landscape.

We built upon our strong employee health and safety culture foundation and long-standing programs by implementing new COVID-19 protocols for essential workers including PPE (Personal Protective Equipment), and new guidelines specific to the pandemic.

Our focus on Energy & Resources, Safety Performance and Environmental Impact will continue through our EHS Sustainability initiative. We launched a new Responsibility section on our website to further bring light to the environmental, social and governance ideals we strive for. These elements are consistent with our Mission, which guides us.

It is not just what we do, but how we do it that helps define Chase. Bringing meaning and substance to our Mission is an established set of Core Values that define Chase’s culture and behaviors for our employees and stakeholders.

FISCAL YEAR 2020 SUMMARY

Our products and services are sold into numerous essential industries (healthcare, utilities, infrastructure and telecommunications, among others), and our responsibility during this time has been to continue supplying our valued customers, while protecting our employees. With minimal disruption, our operations remained online and productive.

So, in a year when the unexpected happened, our team responded with a disciplined approach and remained unrattled by market disruptions. Organizational changes over the past few years have made Chase stronger and better prepared to manage headwinds and respond to unplanned challenges in our markets.

BUSINESS SEGMENTS

The Company is organized into three reportable operating segments: Adhesives, Sealants and Additives, Industrial Tapes, and Corrosion Protection and Waterproofing.

Revenue from the Adhesives, Sealants and Additives segment decreased versus the prior year. Volume within the electronic and industrial coatings product line decreased in North American, European, and Asian markets. This decrease was attributable to the effects of the COVID-19 pandemic on the already strained automotive and industrial markets, and Asian headwinds. The Company’s specialty chemical intermediates product line sales, which have a North American concentration, also experienced a volume drop compared to the prior year. Despite the revenue downturn, the segment maintained its impressive 42% relative gross margin in the current year.

Sales decreased in the Industrial Tapes segment compared to the prior year, with the cable materials and specialty products product lines driving the top-line decrease. A primary driver in the sales reduction in the specialty products product line was the Company’s planned exit from providing transitional toll manufacturing services to the purchaser of its former structural composites rod and fiber optical cable components businesses, with sales tapering in the first quarter of fiscal 2020 and fully ending in the second quarter. The Company’s electronic materials packaging product line, which services Asian markets, achieved volume growth over the prior year. The pulling and detection product line, carried by 5G demand momentum in the North American utility and telecommunication markets, also achieved a year-over-year increase in revenue. While total revenue for the Industrial Tapes segment was down on a year-over-year basis, product mix and operational efficiencies contributed to its relative gross margin increasing 400 basis points to 32% in the current year.

The Company’s Corrosion Protection and Waterproofing segment’s revenue decreased compared to the prior year. The building envelope product line’s sales were unfavorable to the prior year, driving much of the segment’s overall results. The coating and lining systems, bridge and highway and pipeline coatings product lines all saw volume increases over the prior year. The pipeline coatings product line results were driven by increased sales by our Rye, U.K. facility, especially in the fourth fiscal quarter of 2020 with sales into the Middle East. In spite of its net sales decrease, the segment’s relative gross margin improved to 45% in Fiscal 2020, over the 43% achieved in the prior year.

Though M&A activity scaled back industry wide over much of Fiscal 2020, we remained focused on the primary and vital role growth through acquisition will continue to play in Chase’s future. In September 2020 (Fiscal 2021), we acquired ABchimie, a Corbelin, France headquartered solutions provider for the cleaning and the protection of electronic assemblies, with additional formulation, production, and research and development capabilities. This acquisition demonstrated our commitment to inorganic growth initiatives and broadens our electronics coatings product portfolio within the Adhesives, Sealants and Additives reporting segment with high performance, environmentally friendly technologies that are complementary to our existing product lines.

While M&A has been our primary strategic growth component, we believe there is some organic growth potential by leveraging our trusted partnerships and a successful track record of supplying our proven technology to a diverse range of industries. Electric vehicle (EV) and hybrid electric vehicle (HEV) market opportunities were a focus this fiscal year with product development and specification work utilizing our Adhesives, Sealants and Additives technology continuing despite the pandemic. While certain product demand has increased with 5G and broadband infrastructure buildout, others have been negatively affected by unstable oil and gas demand. As we continue to review and refine our product portfolio, we see more promise in the ability to leverage our channels to market and manufacturing footprint across all reporting segments to generate shareholder value.

LOOKING AHEAD

Fiscal 2021 will continue to pose significant challenges and we are not planning on a return to “normal” soon. Our hope is that a COVID-19 vaccine will be widely available around the world by late Fiscal 2021, though we are not factoring this into our plans at this time. Could there be more “unexpected challenges”? Assuredly yes. We learned much in the last year and are applying this to all activities going forward.

We are pleased with the response of our management, administrative, operations and commercial teams to adapt to the “new normal”. Though revenue declined, we feel that we fared well in other important metrics. We are confident that with the continued support of our shareholders, our Company will successfully face the year ahead.

Sincerely,

Adam P. Chase
President and Chief Executive Officer

Peter R. Chase
Executive Chairman

Christian J. Talma
Treasurer and Chief Financial Officer

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