CCF Chase Corp.

Management Discussion

• The Company’s revenue contracted in the current year, affected by challenges faced in Asian markets, a tight credit market in the Middle East and the prior year divestiture of our structural composites rod business. These decreases were tempered by a comparative bump from our December 2017 (fiscal 2018) acquired Zappa Stewart superabsorbents business, and organic sales growth in our primarily North American focused pulling and detection and cable materials product lines.  Price increases continued during the current year to address elevated raw material costs, but came short of obtaining full margin recovery for the period.
• During fiscal 2019, the Company made further strides on its consolidation and rationalization initiative. We made substantial progress on relocating our pulling and detection product line production operations from our Granite Falls, NC facility to our Hickory, NC facility.  The Company has been successful in not incurring elevated levels of manufacturing spend during pulling and detection’s period of transition, which is anticipated to be completed in the first half of fiscal 2020. Operational efficiency gains were made in the latter half of the year at our Oxford, MA and Lenoir, NC facilities, which absorbed the specialized cable material manufacturing operations of our Pawtucket, RI facility at the start of fiscal 2019. Following the move out of Pawtucket, higher manufacturing expenses were required to maintain service levels during the transition; these expenses were seen in the first half of fiscal 2019 but subsided in the second half of the year, and the Company is now beginning to recognize the long-term cost savings initially sought by combining the operations. 
• Net cash provided by operating activities exceeded the prior year and, along with cash repatriated from our U.K. operations, was utilized to pay off in full the outstanding principal balance of our $150,000,000 revolving credit facility.  The Company had borrowed $65,000,000 from the facility in December 2017 to substantially fund the acquisition of Zappa Stewart, and had begun paying down the balance in fiscal 2018. Our revolving credit facility allows for us to pay down debt when we have excess cash, while retaining access to immediate liquidity to fund future accretive activities as identified.