Shaping the future
®
Annual Report 2014
Peter R. Chase
Chairman & Chief Executive Officer
Adam P. Chase
President & Chief Operating Officer
To our Shareholders
Fiscal 2014 was a strong year for Chase Corporation. The Company made important progress on several fronts.
REVENUE
2013
2014
$216.1 million
$224.0 million
NET INCOME (attributable to Chase)
2013
$17.2 million
2014
1 Includes gain of of $5.7 million from asset sale.
$26.6 million1
NET INCOME PER SHARE
2013
2014
$1.87
$2.862
2 Includes gain of $0.61 per share from
asset sale.
CASH DIVIDEND
2013
2014
GROSS MARGIN
2013
2014
$0.45
$0.60
32.4%
35.2%
ADJUSTED EBITDA
2013
2014
$40.0 million
$46.9 million
TEAM
Strong leadership, exceptional brands, an innovative spirit and a global workforce dedicated to delivering superior
value to customers were the foundation for another record year for the Company. Adam and I applaud the efforts of a
great team.
GLOBAL BUSINESS
Pockets of improvement in the global economy boosted key industry segments, which helped performance of our
Industrial and Construction segments with revenue gains over the previous fiscal year. Profitability also improved as a
result of a number of factors including relatively stable raw material costs, enhanced manufacturing processes and
ongoing consolidation initiatives.
Revenue from European operations registered a substantial gain, driven by increased demand for coatings from the
automotive industry, and a significant pipeline infrastructure project in the Middle East, which we expect to continue
into fiscal 2015.
INNOVATION
New products and new applications were an instrumental element in increasing market share in key segments and
further reinforcing the Company’s position as a leading specialty chemical manufacturer. In particular, HumiSeal® UV50
and UV500 coatings continue to leverage our expertise with this environmentally friendly technology platform.
These products significantly increase performance and meet or exceed the stringent test requirements that are
fundamental in the electronics industry.
(Continued on next page)
To our Shareholders (continued)
PRODUCTIVITY
Consolidation has been and remains a long-term strategy to ensure that growth comes with efficiencies that
streamline operations and add to the bottom line. These efforts result in both consolidating manufacturing plants and
maximizing production throughput. The latter was the case earlier this year with the sale of our Insulfab® product line
and exiting the facility in Taylorsville, North Carolina. Other Chase products that were manufactured at that site were
moved to our plant in Lenoir, North Carolina.
Enterprise Resource Planning (ERP) is crucial to connected and efficient global operations, enabling us to leverage
talent throughout the organization. An ERP system was in place at NEPTCO prior to the acquisition. Extending the
existing system to Chase facilities resulted in substantial cost savings and will be online company-wide by the end of
calendar 2014.
SHAPING THE FUTURE
Chase is a company in transition: we have grown from a domestic products manufacturer to an important global
provider of critical solutions for numerous industries. Our success in the future will come from:
• Organic growth by remaining focused on the strategies that have brought us year-over-year growth. In particular,
leveraging existing technologies to anticipate customer needs for next generation products.
• Acquisitions as a means to build upon our strong base of technology and products; and to enter new markets that
offer opportunities to expand logically.
• Talent, which is the critical resource for growth and a productive investment for us. We will add to the team as
our business grows increasingly more global and complex.
Adam Chase, President and Chief Operating Officer since 2008 will assume CEO responsibilities in fiscal 2015;
Peter Chase will become Executive Chairman. Adam has steadily assumed more of the day-to-day management
responsibility over the past six years and is fully prepared to step into his new role.
As always our sincere thanks for the unwavering support of you, our Shareholders.
Peter R. Chase
Chairman and Chief Executive Officer
Adam P. Chase
President and Chief Operating Officer
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended August 31, 2014
Commission File Number: 1-9852
CHASE CORPORATION
(Exact name of registrant as specified in its charter)
Massachusetts
(State or other jurisdiction of incorporation of organization)
11-1797126
(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)
Securities registered pursuant to section 12(b) of the Act:
Title of Each Class:
Common Stock
($0.10 Par Value)
Name of Each Exchange on Which Registered
NYSE MKT
Securities registered pursuant to section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer (as defined in Rule 405 of the Securities
Act). YES (cid:1) NO (cid:2)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Exchange Act. YES (cid:1) NO (cid:2)
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 (cid:2) NO (cid:1)
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 (cid:2) NO (cid:1)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (cid:1)
Indicate by checkmark 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 (cid:1)
Smaller reporting company (cid:1)
Accelerated filer (cid:2)
Non-accelerated filer (cid:1)
(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 (cid:1) NO (cid:2)
The aggregate market value of the common stock held by non-affiliates of the registrant, as of February 28, 2014
(the last business day of the registrant’s second quarter of fiscal 2014), was approximately $203,473,000.
As of October 31, 2014, the Company had outstanding 9,129,427 shares of common stock, $.10 par value, which
is its only class of common stock.
Documents Incorporated By Reference:
Portions of the registrant’s definitive proxy statement for the Annual Meeting of Shareholders, which is expected to be
filed within 120 days after the registrant’s fiscal year ended August 31, 2014, are incorporated by reference into Part III
hereof.
CHASE CORPORATION
INDEX TO ANNUAL REPORT ON FORM 10-K
For the Year Ended August 31, 2014
PART I
Item 1
Item 1A
Item 1B
Item 2
Item 3
Item 4
Item 4A
PART II
Item 5
Item 6
Item 7
Item 7A
Item 8
Item 9
Item 9A
Item 9B
PART III
Item 10
Item 11
Item 12
Item 13
Item 14
PART IV
Item 15
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Officers of the Registrant
Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . .
Quantitative and Qualitative Disclosures about Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . .
Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . .
Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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1
ITEM 1—BUSINESS
Primary Operating Divisions and Facilities and Industry Segment
PART I
Chase Corporation (the ‘‘Company,’’ ‘‘Chase,’’ ‘‘we,’’ or ‘‘us’’), founded in 1946, is a leading manufacturer of
protective materials for high reliability applications. Our strategy is to maximize the performance of our core
businesses and brands while seeking future opportunities through strategic acquisitions. We are organized into two
operating segments, an Industrial Materials segment and a Construction Materials segment. The basis for our
segmentation is distinguished by the nature of the products we manufacture and how they are delivered to their
respective markets. The Industrial Materials segment represents our specified products which are used in or
integrated into another company’s product with demand dependent upon general economic conditions. The
Construction Materials segment reflects our construction project oriented product offerings which are primarily sold
and used as ‘‘Chase’’ branded products in final form. Our manufacturing facilities are distinct to their respective
segments with the exception of our O’Hara Township, PA and Blawnox, PA facilities, which produce products related
to both operating segments. A summary of our operating structure as of August 31, 2014 is as follows:
Primary
Manufacturing
Location(s)
Oxford, MA
INDUSTRIAL MATERIALS SEGMENT
Key Products
Specialty tapes and related products for the electronic and
telecommunications industries using the brand name
Chase & Sons(cid:3).
Insulating and conducting materials for the manufacture of
electrical and telephone wire and cable, electrical splicing,
and terminating and repair tapes, which are marketed to wire
and cable manufacturers and public utilities.
PaperTyger(cid:3) a trademark for laminated durable papers sold to
the envelope converting and commercial printing industries,
was acquired by us in 2003.
Chase BLH2OCK(cid:3), a water blocking compound sold to the
wire and cable industry.
Blawnox, PA
Background/History
In August 2011, we moved
our manufacturing processes
that had been previously
conducted at our Webster, MA
facility to this location.
In December 2012, we moved
the majority of our
manufacturing processes that
had been previously conducted
at our Randolph, MA facility to
this location. Our Randoph
facility was one of our first
operating facilities, and had
been producing products for
the wire and cable industry for
more than fifty years.
In September 2012, we
moved our manufacturing
processes of Chase
BLH2OCK(cid:3) that had been
previously conducted at our
Randolph, MA facility to this
location.
Protective conformal coatings under the brand name
HumiSeal(cid:3), moisture protective electronic coatings sold to
the electronics industry.
O’Hara Township,
PA
The HumiSeal business and
product lines were acquired in
the early 1970’s.
2
Key Products
Laminated film foils for the electronics and cable industries
and cover tapes essential to delivering semiconductor
components via tape and reel packaging.
Primary
Manufacturing
Location(s)
Pawtucket, RI
Lenoir, NC
Pulling and detection tapes used in the installation,
measurement and location of fiber optic cables, water and
natural gas lines.
Granite Falls, NC
Flexible, rigid and semi-rigid fiber optic strength elements
designed to allow fiber optic cables to withstand mechanical
and environmental strain and stress.
Cover tapes essential to delivering semiconductor
components via tape and reel packaging.
Suzhou, China
Protective conformal coatings under the brand name
HumiSeal(cid:3), moisture protective electronic coatings sold to
the electronics industry.
Winnersh,
Wokingham,
England
HumiSeal Europe SARL operates a sales/technical service
office and warehouse near Paris. This business works closely
with the HumiSeal operation in Winnersh, Wokingham,
England allowing direct sales and service to the French
market.
Background/History
In June 2012, we acquired all
of the capital stock of NEPTCO
Incorporated.
In October 2013, we moved
the majority of our
manufacturing processes that
had been conducted at our
Taylorsville, NC facility to our
Lenoir, NC location.
In October 2005, we acquired
all of the capital stock of
Concoat Holdings Ltd. and its
subsidiaries. In 2006 Concoat
was renamed HumiSeal
Europe.
In March 2007, we expanded
our international presence with
the formation of HumiSeal
Europe SARL in France.
3
CONSTRUCTION MATERIALS SEGMENT
Key Products
Protective pipe coating tapes and other protectants for
valves, regulators, casings, joints, metals, concrete, and
wood which are sold under the brand name Royston(cid:3), to oil
companies, gas utilities, and pipeline companies.
Rosphalt50(cid:3) is a polymer additive that provides long term
cost effective solutions in many applications such as
waterproofing of approaches and bridges, ramps, race tracks,
airports and specialty road applications.
Primary
Manufacturing
Location(s)
Blawnox, PA
Background/History
The Royston business was
acquired in the early 1970’s.
Waterproofing sealants, expansion joints and accessories for
the transportation, industrial and architectural markets.
O’Hara Township,
PA
Manufacturer of technologically advanced products, including
the brand Tapecoat(cid:3), for demanding anti-corrosion
applications in the gas, oil and marine pipeline market
segments, as well as tapes and membranes for roofing and
other construction related applications.
Evanston, IL
Specialized manufacturer of high performance coating and
lining systems used worldwide in the liquid storage and
containment applications.
Houston, TX
Manufacturer of waterproofing and corrosion protection
systems for oil, gas and water pipelines and a supplier to
Europe, the Middle East and Southeast Asia. This facility joins
Chase’s North American based Tapecoat(cid:3) and Royston(cid:3)
brands to broaden the protective coatings product line and
better address increasing global demand.
Rye, East Sussex,
England
The ServiWrap(cid:3) product line complements the portfolio of our
pipeline protection tapes, coatings and accessories to extend
our global customer base.
4
In April 2005, we acquired
certain assets of E-Poxy
Engineered Materials.
Additionally, in September
2006, we acquired all of the
capital stock of Capital
Services Joint Systems. Both
of these acquisitions were
combined to form the
Expansion Joints product line
which is now manufactured at
our O’Hara Township, PA
facility.
In November 2001, we
acquired substantially all of
the assets of Tapecoat, a
division of T.C.
Manufacturing Inc.
In September 2009, we
acquired all of the outstanding
capital stock of C.I.M.
Industries Inc. (‘‘CIM’’).
In September 2007, we
purchased certain product
lines and a related
manufacturing facility in Rye,
East Sussex, England through
our wholly owned subsidiary,
Chase Protective Coatings Ltd.
In December 2009, we
acquired the full range of
ServiWrap(cid:3) pipeline protection
products (‘‘ServiWrap’’) from
Grace Construction Products
Limited, a UK based unit of
W.R. Grace & Co.
Other Business Developments
On October 31, 2014, we purchased the 50% non-controlling membership interest of NEPTCO JV LLC (the
‘‘JV’’) that had been owned by our now-former joint venture partner, an otherwise unrelated party. The purchase
consideration due at the time of closing was not deemed to be material to Chase, and is subject to certain
contingent adjustments based on certain future events related to the JV. We also do not believe that these
contingent adjustments will be material to us. The purchase was funded entirely with available cash on hand.
Because of our controlling financial interest, the JV’s assets, liabilities and results of operations have been
consolidated within our consolidated financial statements since June 27, 2012, the date Chase acquired NEPTCO.
Given our 100% ownership as of October 31, 2014, in subsequent periods we will continue to fully consolidate
assets, liabilities and results of operations, but will no longer record an offsetting amount for a non-controlling
interest.
Products and Markets
Our principal products are specialty tapes, laminates, sealants and coatings that are sold by our salespeople,
manufacturers’ representatives and distributors. In our Industrial Materials segment, these products consist of:
(i) insulating and conducting materials for the manufacture of electrical and telephone wire and cable,
electrical splicing, and terminating and repair tapes, which are marketed to wire and cable manufacturers;
(ii) laminated film foils, composite strength elements, anti-static packaging tape and pulling tapes for the
electronics and cable industries;
(iii) moisture protective coatings, which are sold to the electronics industry including circuitry used in
automobiles and home appliances;
(iv) laminated durable papers, including laminated paper with an inner security barrier used in personal and
mail-stream privacy protection, which are sold primarily to the envelope converting and commercial printing
industries;
(v) pulling and detection tapes used in the installation, measurement and location of fiber optic cables, water
and natural gas lines, and power, data, and video cables for commercial buildings;
(vi) cover tapes with reliable adhesive and anti-static properties essential to delivering semiconductor
components via tape and reel packaging; and
(vii) flexible, rigid and semi-rigid fiber optic strength elements designed to allow fiber optic cables to withstand
mechanical and environmental strain and stress.
In our Construction Materials segment, these products consist of:
(i) protective pipe coating tapes and other protectants for valves, regulators, casings, joints, metals, concrete
and wood, which are sold to oil companies, gas utilities and pipeline companies;
(ii) protectants for highway bridge deck metal supported surfaces, which are sold to municipal transportation
authorities;
(iii) fluid applied coating and lining systems for use in the water and wastewater industry; and
(iv) expansion and control joint systems designed for roads, bridges, stadiums and airport runways.
There is some seasonality in selling products into the construction market as higher demand is often
experienced when temperatures are warmer in most of North America (April through October) with less demand
occurring when temperatures are colder (typically our second fiscal quarter). We did not introduce any new products
requiring an investment of a material amount of our assets during fiscal year 2014.
Employees
As of October 31, 2014, we employed approximately 667 people (including union employees). We consider our
employee relations to be good. In the U.S., we offer our employees a wide array of company-paid benefits, which
we believe are competitive relative to others in our industry. In our operations outside the U.S., we offer benefits
that may vary from those offered to our U.S. employees due to customary local practices and statutory
requirements.
5
Backlog, Customers and Competition
As of October 31, 2014, the backlog of customer orders believed to be firm was approximately $15,453,000.
This compared with a backlog of $16,546,000 as of October 31, 2013. The decrease in backlog from the prior
year amount is primarily due to an overall decrease in order activity across our North America pipeline and
construction product lines. During fiscal 2014, 2013 and 2012, no customer accounted for more than 10% of
sales. No material portion of our business is subject to renegotiation or termination of profits or contracts at the
election of the United States Federal Government.
There are other companies that manufacture or sell products and services similar to those made and sold by
us. Many of those companies are larger and have greater financial resources than we have. We compete principally
on the basis of technical performance, service reliability, quality and price.
Raw Materials
We obtain raw materials from a wide variety of suppliers with alternative sources of most essential materials
available within reasonable lead times.
Patents, Trademarks, Licenses, Franchises and Concessions
We own the following trademarks that we believe are of material importance to our business: Chase
Corporation(cid:3), C-Spray (Logo), a trademark used in conjunction with most of the Company’s business segment and
product line marketing material and communications; HumiSeal(cid:3), a trademark for moisture protective coatings sold
to the electronics industry; Chase & Sons(cid:3), a trademark for barrier and insulating tapes sold to the wire and cable
industry; Chase BLH2OCK(cid:3), a trademark for a water blocking compound sold to the wire and cable industry;
Rosphalt50(cid:3), a trademark for an asphalt additive used predominantly on bridge decks for waterproofing protection;
PaperTyger(cid:3), a trademark for laminated durable papers sold to the envelope converting and commercial printing
industries; Tapecoat(cid:3), a trademark for corrosion preventative surface coatings and primers; Maflowrap(cid:3), a trademark
for anti-corrosive tapes incorporating self-adhesive mastic or rubber backed strips, made of plastic materials;
Royston(cid:3), a trademark for corrosion inhibiting coating composition for use on pipes; Ceva(cid:3), a trademark for epoxy
pastes/gels/mortars and elastomeric concrete used in the construction industry; CIM(cid:3) trademarks for fluid applied
coating and lining systems used in the water and wastewater industry; ServiWrap(cid:3) trademarks for pipeline protection
tapes, coatings and accessories; NEPTCO(cid:3), a trademark used in conjunction with most of NEPTCO’s business and
product line marketing material and communications; NEPTAPE(cid:3), a trademark for coated shielding and insulation
materials used in the wire and cable industry; Muletape(cid:3), a trademark for pulling and installation tapes sold to the
telecommunications industry; and Tracesafe(cid:3), a trademark for detection tapes sold to the water and gas industry.
We do not have any other material trademarks, licenses, franchises, or concessions. While we do hold various
patents, at this time, we do not believe that they are material to the success of our business. We did file one new
patent application during this fiscal year under our PaperTyger(cid:3) product line which is a paper/plastic laminate and
electromagnetic shielding material used to protect against identity and property theft.
Working Capital
We fund our business operations through a combination of available cash and cash equivalents, short-term
investments and cash flows generated from operations. In addition, our revolving credit facility is available for
additional working capital needs or investment opportunities. We have historically funded acquisitions through
additional borrowings and term loans from our bank lenders.
Research and Development
Approximately $2,599,000, $3,395,000 and $2,958,000 was spent for Company-sponsored research and
development during fiscal 2014, 2013 and 2012, respectively. Research and development decreased by $796,000
in fiscal 2014 primarily due to a reduction in the use of outside services and our continued emphasis on
streamlining processes.
Available Information
Chase maintains a website at http://www.chasecorp.com. Our annual reports on Form 10-K, quarterly reports
on Form 10-Q, current reports on Form 8-K and amendments to such reports filed or furnished pursuant to
6
section 13(a) or 15(d) of the Securities Exchange Act of 1934, as well as section 16 reports on Form 3, 4, or 5,
are available free of charge on this site as soon as is reasonably practicable after they are filed or furnished with the
SEC. Our Code of Conduct and Ethics and the charters for the Audit Committee, the Nominating and Governance
Committee and the Compensation and Management Development Committee of our Board of Directors are also
available on our Internet site. The Code of Conduct and Ethics and charters are also available in print to any
shareholder upon request. Requests for such documents should be directed to Paula Myers, Shareholder and
Investor Relations Department, at 26 Summer Street, Bridgewater, Massachusetts 02324. Our Internet site and the
information contained on it or connected to it are not part of or incorporated by reference into this Form 10-K. Our
filings with the SEC are also available on the SEC’s website at http://www.sec.gov.
Financial Information Regarding Segment and Geographic Areas
Please see Notes 11 and 12 to the Company’s Consolidated Financial Statements for financial information
about the Company’s operating segments and domestic and foreign operations for each of the last three fiscal
years.
ITEM 1A—RISK FACTORS
The following risk factors should be read carefully in connection with evaluating our business and the forward-
looking information contained in this Annual Report on Form 10-K. We feel that any of the following risks could
materially adversely affect our business, operations, industry, financial position or our future financial performance.
While we believe that we have identified and discussed below the key risk factors affecting our business, there may
be additional risks and uncertainties that are not presently known or that are not currently believed to be significant
that may adversely affect our business, operations, industry, financial position and financial performance in the
future.
We currently operate in mature markets where increases or decreases in market share could be
significant.
Our sales and net income are largely dependent on sales from a consistent and well established customer
base. Organic growth opportunities are minimal; however, we have used and will continue to use strategic
acquisitions as a means to build and grow the business. In this business environment, increases or decreases in
market share could have a material effect on our business condition or results of operation. We face intense
competition from a diverse range of competitors, including operating divisions of companies much larger and with
far greater resources than we have. If we are unable to maintain our market share, our business could suffer.
Our business strategy includes the pursuit of strategic acquisitions, which may not be successful if they
happen at all.
From time to time, we engage in discussions with potential target companies concerning potential acquisitions.
In executing our acquisition strategy, we may be unable to identify suitable acquisition candidates. In addition, we
may face competition from other companies for acquisition candidates, making it more difficult to acquire suitable
companies on favorable terms.
Even if we do identify a suitable acquisition target and are able to negotiate and close a transaction, the
integration of an acquired business into our operations involves numerous risks, including potential difficulties in
integrating an acquired company’s product line with ours; the diversion of our resources and management’s
attention from other business concerns; the potential loss of key employees; limitations imposed by antitrust or
merger control laws in the United States or other jurisdictions; risks associated with entering a new geographical or
product market; and the day-to-day management of a larger and more diverse combined company. In June 2012,
for example, we completed the acquisition of NEPTCO Incorporated, which represented approximately 39% of our
consolidated total assets as of the end of fiscal 2012, making it the largest acquisition in the Company’s history.
We may not realize the synergies, operating efficiencies, market position or revenue growth we anticipate from
acquisitions and our failure to effectively manage the above risks could have a material adverse effect on our
business, growth prospects and financial performance.
7
Our results of operations could be adversely affected by uncertain economic and political conditions and
the effects of these conditions on our customers’ businesses and levels of business activity.
Global economic and political conditions can affect the businesses of our customers and the markets they
serve. A severe or prolonged economic downturn or a negative or uncertain political climate could adversely affect
the levels of business activity of our customers and the industries they serve, including the automotive, housing,
construction, pipeline, energy, transportation infrastructure and electronics industries. This may reduce demand for
our products or depress pricing of those products, either of which may have a material adverse effect on our results
of operations. Changes in global economic conditions could also shift demand to products for which we do not have
competitive advantages, and this could negatively affect the amount of business that we are able to obtain. In
addition, if we are unable to successfully anticipate changing economic and political conditions, we may be unable
to effectively plan for and respond to those changes and our business could be negatively affected.
General economic factors, domestically and internationally, may also adversely affect our financial
performance through increased raw material costs or other expenses and by making access to capital
more difficult.
The cumulative effect of higher interest rates, energy costs, inflation, levels of unemployment, healthcare costs,
unsettled financial markets, and other economic factors could adversely affect our financial condition by increasing
our manufacturing costs and other expenses at the same time that our customers may be scaling back demand for
our products. Prices of certain commodity products, including oil and petroleum-based products, are historically
volatile and are subject to fluctuations arising from changes in domestic and international supply and demand, labor
costs, competition, weather events, market speculation, government regulations and periodic delays in delivery.
Rapid and significant changes in commodity prices may affect our sales and profit margins. These factors can
increase our merchandise costs and/or selling, general and administrative expenses, and otherwise adversely affect
our operating results. Disruptions in the credit markets may limit our ability to access debt capital for use in
acquisitions or other purposes on advantageous terms or at all. If we are unable to manage our expenses in
response to general economic conditions and margin pressures, or if we are unable to obtain capital for strategic
acquisitions or other needs, then our results of operations would be negatively affected.
Fluctuations in the supply and prices of raw materials may negatively impact our financial results.
We obtain raw materials needed to manufacture our products from a number of suppliers. Many of these raw
materials are petroleum-based derivatives. Under normal market conditions, these materials are generally available
on the open market and from a variety of producers. From time to time, however, the prices and availability of these
raw materials fluctuate, which could impair our ability to procure necessary materials, or increase the cost of
manufacturing our products. If the prices of raw materials increase, and we are unable to pass these increases on
to our customers, we could experience reduced profit margins.
If our products fail to perform as expected, or if we experience product recalls, we could incur significant
and unexpected costs and lose existing and future business.
Our products are complex and could have defects or errors presently unknown to us, which may give rise to
claims against us, diminish our brands or divert our resources from other purposes. Despite testing, new and
existing products could contain defects and errors and may in the future contain manufacturing or design defects,
errors or performance problems when first introduced, or even after these products have been used by our
customers for a period of time. These problems could result in expensive and time-consuming design modifications
or warranty charges, changes to our manufacturing processes, product recalls, significant increases in our
maintenance costs, or exposure to liability for damages, any of which may result in substantial and unexpected
expenditures, require significant management attention, damage our reputation and customer relationships, and
adversely affect our business, our operating results and our cash flow.
We are dependent on key personnel.
We depend significantly on our executive officers including our Chairman and Chief Executive Officer, Peter R.
Chase, and our President and Chief Operating Officer, Adam P. Chase, and on other key employees. The loss of the
services of any of these key employees could have a material impact on our business and results of operations. In
addition, our acquisition strategy will require that we attract, motivate and retain additional skilled and experienced
8
personnel. The inability to satisfy such requirements could have a negative impact on our ability to remain
competitive in the future. We have recently announced a transition plan under which we expect Peter R. Chase to
become Executive Chairman and Adam P. Chase to become Chief Executive Officer, subject to board approval at the
time, effective with our annual meeting of shareholders in 2015.
If we cannot successfully manage the unique challenges presented by international markets, we may not
be successful in expanding our international operations.
Our strategy includes expansion of our operations in existing and new international markets by selective
acquisitions and strategic alliances. Our ability to successfully execute our strategy in international markets is
affected by many of the same operational risks we face in expanding our U.S. operations. In addition, our
international expansion may be adversely affected by our ability to identify and gain access to local suppliers as well
as by local laws and customs, legal and regulatory constraints, political and economic conditions and currency
regulations of the countries or regions in which we currently operate or intend to operate in the future. Risks
inherent in our international operations also include, among others, the costs and difficulties of managing
international operations, adverse tax consequences and greater difficulty in enforcing intellectual property rights.
Additionally, foreign currency exchange rates and fluctuations may have an impact on future costs or on future cash
flows from our international operations.
We may experience difficulties in the redesign and consolidation of our manufacturing facilities which
could impact shipments to customers, product quality, and our ability to realize cost savings.
We currently have several ongoing projects to streamline our manufacturing operations, which include the
redesign and consolidation of certain manufacturing facilities. We anticipate a reduction of overhead costs as a
result of these projects, to the extent that we can effectively leverage assets, personnel, and business processes in
the transition of production among manufacturing facilities. However, uncertainty is inherent within the facility
redesign and consolidation process, and unforeseen circumstances could offset the anticipated benefits, disrupt
service to customers, and impact product quality.
Financial market performance may have a material adverse effect on our pension plan assets and require
additional funding requirements.
Significant and sustained declines in the financial markets may have a material adverse effect on the fair
market value of the assets of our pension plans. While these pension plan assets are considered non-financial
assets since they are not carried on our balance sheet, the fair market valuation of these assets could impact our
funding requirements, funded status or net periodic pension cost. Any significant and sustained declines in the fair
market value of these pension assets could require us to increase our funding requirements, which would have an
impact on our cash flow, and could also lead to additional pension expense.
Regulations related to conflict minerals could adversely impact our business.
The Dodd-Frank Wall Street Reform and Consumer Protection Act contains provisions to improve transparency
and accountability concerning the supply of certain minerals, known as ‘‘conflict minerals’’ (tin, tungsten, tantalum,
and gold). As a result, the SEC has adopted annual disclosure and reporting requirements concerning the supply
chain for those public companies that use conflict minerals that are necessary to the functionality or production of
their products. These requirements require companies to perform certain reasonable country of origin and due
diligence exercises to determine if any of their sourced conflict minerals originated from the Democratic Republic of
Congo (DRC) and adjoining countries. We filed our first report under these rules in May 2014, to cover calendar
year 2013, and anticipate filing reports on this matter on or prior to the annual May 31 due date going forward.
There are costs associated with complying with these annual disclosure requirements, including ongoing due
diligence to determine the sources of conflict minerals used in our products and other potential changes to
products, processes or sources of supply as a consequence of such verification activities. Continued adherence to
these rules, and Chase’s desire to obtain and maintain a DRC Conflict Free status, could adversely affect the
sourcing, supply and pricing of materials used in our products. As there may be only a limited number of suppliers
offering conflict free conflict minerals, we cannot be sure that we will be able to obtain necessary conflict minerals
from such suppliers in sufficient quantities or at competitive prices. Also, we may face reputational challenges if we
determine that certain of our products contain minerals not determined to be conflict free or if we are unable to
9
sufficiently verify the origins for all conflict minerals used in our products through the procedures we may implement.
In addition, some of our customers may choose to disqualify us as a supplier if we are unable to verify that any
conflict minerals used in our products are not sourced from the covered countries or are not done so by conflict
free certified refiners and smelters.
Failure or compromise of security with respect to an operating or information system or portable
electronic device could adversely affect our results of operations and financial condition or the
effectiveness of our internal controls over operations and financial reporting.
We are highly dependent on automated systems to record and process our daily transactions and certain other
components of our financial statements. We could experience a failure of one or more of these systems, or a
compromise of our security due to technical system flaws, data input or record-keeping errors, or tampering or
manipulation of our systems by employees or unauthorized third parties. Information security risks also exist with
respect to the use of portable electronic devices, such as laptops and smartphones, which are particularly
vulnerable to loss and theft. We may also be subject to disruptions of any of these systems arising from events that
are wholly or partially beyond our control (for example, natural disasters, acts of terrorism, epidemics, computer
viruses, and electrical/telecommunications outages). All of these risks are also applicable wherever we rely on
outside vendors to provide services. Operating system failures, disruptions, or the compromise of security with
respect to operating systems or portable electronic devices could subject us to liability claims, harm our reputation,
interrupt our operations, or adversely affect our internal control over financial reporting, business, results from
operations, financial condition or cash flow.
ITEM 1B—UNRESOLVED STAFF COMMENTS
Not applicable
10
ITEM 2—PROPERTIES
We own and lease office and manufacturing properties as outlined in the table below.
Location
Bridgewater, MA
Westwood, MA
Square
Feet
Owned /
Leased
Principal Use
5,200
Owned
Corporate headquarters and executive office
20,200
Leased
Global Operations Center including research and development, sales
and administrative services
Randolph, MA
77,500
Owned
Oxford, MA
73,600
Owned
We ceased manufacturing of products at this location effective
December 2012, and this facility is currently being used for storage of
inventory and fixed assets.
Manufacture of tape and related products for the electronic and
telecommunications industries, as well as laminated durable papers
Paterson, NJ
40,000
Owned/ We own the building and lease the land from the landowner. Currently,
the building is being leased to a tenant and the land is being
Leased
sub-leased.
Blawnox, PA
44,000
Owned
Manufacture and sale of protective coatings and tape products
O’Hara Township, PA
109,000
Owned
Manufacture and sale of protective electronic coatings, expansion joints
and accessories
Evanston, IL
Houston, TX
100,000
Owned
Manufacture and sale of protective coatings and tape products
45,000
Owned
Manufacture of coating and lining systems for use in liquid storage and
containment applications
Pawtucket, RI
70,400
Owned
Granite Falls, NC
108,000
Owned
Manufacture and sale of laminated film foils for the electronics and
cable industries, and offices for sales and administrative services
Manufacture and sale of pulling and detection tapes, and fiber optic
strength elements, as well as research and development services
Lenoir, NC
110,000
Owned
Manufacture and sale of laminated film foils and cover tapes
Winnersh, Wokingham, England
18,800
Leased
Manufacture and sale of protective electronic coatings
Rye, East Sussex, England
36,600
Owned
Manufacture and sale of protective coatings and tape products
Paris, France
1,350
Leased
Sales/technical service office and warehouse allowing direct sales and
service to the French market
Mississauga, Canada
2,500
Leased
Distribution center for Canadian market supply chain demands
Rotterdam, Netherlands
2,500
Leased
Distribution center for European market supply chain demands
Suzhou, China
48,000
Leased
Manufacture of packaging tape products for the electronics industries
The above facilities range in age from new to about 100 years, are generally in good condition and, in the
opinion of management, adequate and suitable for present operations. We also own equipment and machinery that
is in good repair and, in the opinion of management, adequate and suitable for present operations. We could
significantly add to our capacity by increasing shift operations. Availability of machine hours through additional shifts
would provide expansion of current product volume without significant additional capital investment.
11
ITEM 3—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.
ITEM 4—MINE SAFETY DISCLOSURES
Not applicable.
ITEM 4A—EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth information concerning our Executive Officers as of October 31, 2014. Each of
our Executive Officers is selected by our Board of Directors and holds office until his successor is elected and
qualified.
Name
Peter R. Chase . . . . . . . .
Age
66
Offices Held and Business Experience during the Past Five Years
Chairman of the Board of the Company since February 2007, and Chief
Executive Officer of the Company since September 1993.
Adam P. Chase . . . . . . . .
42
President of the Company since January 2008, Chief Operating Officer of the
Company since February 2007. Adam Chase is the son of Peter Chase.
Kenneth J. Feroldi
. . . . . .
58
Chief Financial Officer and Treasurer of the Company since September 2014.
Previously Director of Finance for the Company, prior to which he served as Vice
President—Finance, Chief Financial Officer and Treasurer of NEPTCO, Inc. from
1992 until 2012 when NEPTCO was acquired by the Company.
In October 2014, Chase Corporation announced that as part of the Company’s succession plan, effective with
its annual meeting of shareholders scheduled for February 3, 2015, and subject to final board approval at that
time, Adam P. Chase, its current President and Chief Operating Officer, will be named Chief Executive Officer and
Peter R. Chase, its current Chairman and Chief Executive Officer, will be named Executive Chairman.
12
PART II
ITEM 5—MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
Our common stock is traded on the NYSE MKT under the symbol CCF. As of October 31, 2014, there were
380 shareholders of record of our Common Stock and we believe that there were approximately 3,394 beneficial
shareholders who held shares in nominee name. On that date, the closing price of our common stock was $35.87
per share as reported by the NYSE MKT.
The following table sets forth the high and low daily sales prices for our common stock as reported by the NYSE
MKT for each quarter in the fiscal years ended August 31, 2014 and 2013:
Fiscal 2014
Fiscal 2013
High
Low
High
Low
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
First Quarter
Second Quarter
. . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . .
$32.00
36.76
33.74
36.19
$26.13
29.17
28.21
28.85
$19.00
19.68
19.94
30.75
$15.51
17.02
16.98
19.52
Single annual cash dividend payments were declared and scheduled to be paid subsequent to year end in the
amounts of $0.60, $0.45, and $0.40 per common share, for the years ended August 31, 2014, 2013 and 2012,
respectively. Certain of our borrowing facilities contain financial covenants which may have the effect of limiting the
amount of dividends that we can pay.
Comparative Stock Performance
The following line graph compares the yearly percentage change in our cumulative total shareholder return on
the Common Stock for the last five fiscal years with the cumulative total return on the Standard & Poor’s 500 Stock
Index (the ‘‘S&P 500 Index’’), and a composite peer index that is weighted by market equity capitalization (the
‘‘Peer Group Index’’). The companies included in the Peer Group Index are American Biltrite Inc., Circor
International Inc., H.B. Fuller Company, Quaker Chemical Corporation and RPM International, Inc. Cumulative total
returns are calculated assuming that $100 was invested on August 31, 2009 in each of the Common Stock, the
S&P 500 Index and the Peer Group Index, and that all dividends were reinvested.
Comparison of 5 Year Cumulative Total Return
Assumes Initial Investment of $100 on August 31, 2009
$400
$350
$300
$250
$200
$150
$100
$50
$0
2009
2010
2011
2012
2013
2014
Chase Corp.
S&P 500 Index - Total Returns
Peer Group
2009
2010
2011
2012
2013
2014
12NOV201412011808
Chase Corp . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
S&P 500 Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Peer Group Index
$100
$100
$100
$113
$105
$108
$116
$124
$135
$152
$147
$177
$284
$174
$236
$344
$218
$316
The information under the caption ‘‘Comparative Stock Performance’’ above is not deemed to be ‘‘filed’’ as part
of this Annual Report, and is not subject to the liability provisions of Section 18 of the Securities Exchange Act of
1934. Such information will not be deemed to be incorporated by reference into any filing we make under the
Securities Act of 1933 unless we explicitly incorporate it into such a filing at the time.
13
ITEM 6—SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with ‘‘Item 7—Management’s Discussion
and Analysis of Financial Condition and Results of Operations’’ and ‘‘Item 8—Financial Statements and
Supplementary Data.’’
Fiscal Years Ended August 31,
2014
2013
2012
2011
2010
(In thousands, except per share amounts)
Statement of Operations Data
Revenues from continuing operations . . . . . . . .
$224,006
$216,062
$148,919
$123,040
$118,743
Income from continuing operations, net of taxes
Income from discontinued operations, net of
$ 26,523
$ 16,740
$
9,264
$ 10,931
$ 10,726
taxes . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
—
1,790
Net income . . . . . . . . . . . . . . . . . . . . . . . . .
Add: net loss attributable to non-controlling
$ 26,523
$ 16,740
$
9,264
$ 10,931
$ 12,516
interest . . . . . . . . . . . . . . . . . . . . . . . . . .
108
474
74
—
—
Net income attributable to Chase Corporation . .
Net income available to common shareholders,
per common and common equivalent share:
Basic:
Continuing operations . . . . . . . . . . . . . . . .
Discontinued operations . . . . . . . . . . . . . . .
Net income per common and common
equivalent share . . . . . . . . . . . . . . . . . .
Diluted:
Continuing operations . . . . . . . . . . . . . . . .
Discontinued operations . . . . . . . . . . . . . . .
Net income per common and common
$ 26,631
$ 17,214
$
9,338
$ 10,931
$ 12,516
$
$
$
$
$
$
2.92
—
2.92
2.86
—
$
$
$
1.90
—
1.90
1.87
—
$
$
$
1.03
—
1.03
1.03
—
$
$
$
1.22
—
1.22
1.22
—
1.22
0.20
1.42
1.21
0.20
equivalent share . . . . . . . . . . . . . . . . . .
$
2.86
$
1.87
$
1.03
$
1.22
$
1.41
Balance Sheet Data
Total assets . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . .
Total stockholders’ equity . . . . . . . . . . . . . . . .
$245,545
51,800
137,490
$224,360
58,800
113,860
$214,832
64,400
99,645
$128,909
8,267
91,880
$123,201
12,667
81,531
Cash dividends paid per common and common
equivalent share . . . . . . . . . . . . . . . . . . . .
$
0.45
$
0.40
$
0.35
$
0.35
$
0.20
The Electronic Manufacturing Services business was sold in June 2010 and the financial results of this
previously reported segment are classified as discontinued operations in the above financial data schedule.
14
ITEM 7—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 Consolidated Financial Statements and notes thereto included in Item 8 of this Annual
Report on Form 10-K.
Selected Relationships within the Consolidated Statements of Operations
Years Ended August 31,
2014
2013
2012
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$224,006
(Dollars in thousands)
$216,062
$148,919
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Add: net loss attributable to non-controlling interest . . . . . . . . . . . . . . . . .
$ 26,523
108
$ 16,740
474
Net income attributable to Chase Corporation . . . . . . . . . . . . . . . . . . . . .
$ 26,631
$ 17,214
$
$
9,264
74
9,338
Increase in revenues from prior year
Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase/(Decrease) in net income, net of taxes from prior year
Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
7,944
4%
$ 67,143
45%
$ 25,879
21%
9,783
58%
$
7,476
80%
$ (1,667)
(15)%
Percentage of revenues:
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses:
Cost of products and services sold . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . .
Acquisition related costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other (income) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100%
100%
100%
65%
19
—
(2)
18
6
12%
68%
20
—
—
12
4
8%
68%
21
2
—
9
3
6%
Overview
Continued strong demand for many of our product areas as well as favorable sales mix contributed to increased
revenues and net income over the prior year results. Our strategic diversification was also a contributing factor as
several product lines in both of our segments exceeded prior year revenues, offsetting shortfalls from others, which
led to revenue growth for the fiscal year. Additionally, our ongoing efforts with production facility consolidation,
efficiency improvements and streamlining overhead costs have improved our profitability. The sale of the Company’s
Insulfab product line in October 2013 significantly contributed to earnings and cash flows earlier in fiscal 2014.
Revenues from the Industrial Materials segment exceeded prior year results primarily due to strong demand in
Europe and Asia for our electronic coatings products, as well as increased sales of our pulling and detection tapes,
electronic materials, and power cable products. These increased sales were partially offset by a reduction in demand
for our specialty materials products and fiber optic cable component products from our joint venture business.
Revenues from the Construction Materials segment surpassed the prior year primarily driven by increased
demand for pipeline coatings products produced at our Rye, UK facility due to Middle East project demand, as well
as increased sales of our coating and lining system products over the final half of the fiscal year. These increases
were partially offset by decreased sales of our private label products and bridge & highway construction products
due to the impact of the harsh winter across the U.S. on these businesses.
In the upcoming fiscal year, we will continue with our global ERP system implementation which was initiated in
fiscal 2013 and is scheduled for full company-wide deployment by the end of December 2014. Additionally,
consolidation efforts will remain a priority and other key strategies will include a focus on our marketing and product
development efforts along with a continued emphasis on identifying potential acquisition targets. Our balance sheet
15
continues to remain strong, with cash on hand of $53.2 million and a current ratio of 3.5. Our $15.0 million line of
credit is fully available, while the balance of our term debt is $58.8 million.
The Company has two reportable segments summarized below:
Segment
Industrial Materials
Product Lines
Manufacturing Focus and Products
(cid:127) Wire and Cable
(cid:127) Electronic Coatings
(cid:127) Specialty Products
(cid:127) Pulling and Detection
(cid:127) Electronic Materials
(cid:127) Structural Composites
(cid:127) Fiber Optic Cable
Components (1)
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, 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, cover tapes essential to
delivering semiconductor components via tape and
reel packaging, wind energy composite materials and
elements; and glass-based strength elements
designed to allow fiber optic cables to withstand
mechanical and environmental strain and stress.
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.
Construction Materials
(cid:127) Pipeline
(cid:127) Bridge and Highway
(cid:127) Coating and Lining Systems
(cid:127) Private Label
(1) Through a 50% owned joint venture until October 31, 2014, when we purchased the non-controlling 50%
interest.
16
Results of Operations
Revenues and Operating Profit by Segment are as follows:
Fiscal 2014
Industrial Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Revenues
Income Before
Income Taxes
% of
Revenues
(Dollars in thousands)
$169,657
54,349
$40,015 (a)
8,157
$224,006
48,172
24%
15%
22%
Less corporate and common costs . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(7,682)(b)
$40,490
Fiscal 2013
Industrial Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$163,474
52,588
$26,400 (c)
6,463
$216,062
32,863
16%
12%
15%
Less corporate and common costs . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(7,053)(d)
$25,810
Fiscal 2012
Industrial Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 95,988
52,931
$17,643 (e)
4,913
$148,919
22,556
18%
9%
15%
Less corporate and common costs . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(8,560)(f)
$13,996
(a)
Includes $5,706 gain on sale of Insulfab product line
(b)
Includes $348 of pension related settlement costs due to the timing of lump sum distributions
(c)
Includes $564 of expenses related to inventory step up in fair value related to the NEPTCO acquisition and
$521 of pension related settlement costs due to the timing of lump sum distributions
(d)
Includes $595 of pension related settlement costs due to the timing of lump sum distributions
(e)
(f)
Includes $828 of expenses related to inventory step up in fair value related to the NEPTCO acquisition and
$303 of pension related settlement costs due to the timing of lump sum distributions
Includes $3,206 in acquisition related expenses, partially offset by a gain of $425 related to Evanston, IL sale
leaseback transaction
Total Revenues
Total revenues in fiscal 2014 increased $7,944,000 or 4% to $224,006,000 from $216,062,000 in the prior
year. Revenues in our Industrial Materials segment increased $6,183,000 or 4% to $169,657,000 for the year
ended August 31, 2014 compared to $163,474,000 in fiscal 2013. The increase in revenues from our Industrial
Materials segment in fiscal 2014 was primarily due to increased sales of: (a) $3,465,000 from our global electronic
coatings product line primarily due to higher sales into Europe and Asia; (b) $2,015,000 from our pulling and
detection tape products; (c) $1,447,000 from electronic cover tapes; and (d) $1,072,000 from our wire and cable
products that are used in energy-related applications. These increases were partially offset by decreased sales of
$975,000 from our specialty materials products as well as lower sales of $520,000 from our joint venture fiber
optic cable products.
Revenues from our Construction Materials segment increased $1,761,000 or 3% to $54,349,000 for the year
ended August 31, 2014 compared to $52,588,000 for fiscal 2013. The increased sales from our Construction
Materials segment in fiscal 2014 was primarily due to increased sales of $5,563,000 in pipeline products produced
17
at our Rye, UK facility as a result of higher project related demands in the Middle East. These increases were
partially offset by decreased sales of $2,032,000 from our bridge and highway products as well as lower sales of
$1,733,000 from our private label products as both experienced slower demand earlier this fiscal year during the
winter and spring months due to the impact of the harsh winter across the U.S. on these businesses.
Royalties and commissions in the Industrial Materials segment were $2,972,000, $2,414,000 and
$2,425,000 for the years ended August 31, 2014, 2013 and 2012, respectively. The increase in royalties and
commissions in fiscal 2014 over both fiscal 2013 and 2012 was due to increased sales of electronic coating
products by our licensed manufacturer in Asia.
Export sales from domestic operations to unaffiliated third parties were $21,212,000, $22,827,000 and
$21,204,000 for the years ended August 31, 2014, 2013 and 2012, respectively. Export sales had a slight decline
in fiscal 2014 as compared to fiscal 2013 primarily due to the prior year’s inclusion of some large export shipments
of our C.I.M. products that were not repeated in fiscal 2014. We do not anticipate any material changes to export
sales during fiscal 2015.
Total revenues in fiscal 2013 increased $67,143,000 or 45% to $216,062,000 from $148,919,000 in the
prior year. Revenues in our Industrial Materials segment increased $67,486,000 or 70% to $163,474,000 for the
year ended August 31, 2013 compared to $95,988,000 in fiscal 2012. The increase in revenues from our
Industrial Materials segment in fiscal 2013 was primarily due to increased sales of: (a) $63,452,000 from NEPTCO
product offerings which we acquired in the fourth quarter of fiscal 2012; (b) $3,779,000 from our global electronic
coatings product line; and (c) $2,253,000 from our laminated durable paper products. These increases were
partially offset by decreased sales in the aerospace and transportation market of $835,000. Revenues from our
Construction Materials segment decreased $343,000 or 1% to $52,588,000 for the year ended August 31, 2013
compared to $52,931,000 for fiscal 2012. The decreased sales from our Construction Materials segment in fiscal
2013 was primarily due to reduced sales of $2,266,000 in pipeline products produced at our UK facility as a result
of lower project demand primarily in the Middle East, as well as decreased sales of $2,108,000 from our highway
construction products. These decreases were partially offset by increased sales of: (a) $2,397,000 from our coating
and lining systems; (b) $827,000 from pipeline products produces at our North America facilities; and
(c) $805,000 from our private label products due to increased demand from some of our key customers.
Cost of Products and Services Sold
Cost of products and services sold decreased $842,000 or 1% to $145,193,000 for the fiscal year ended
August 31, 2014 compared to $146,035,000 in fiscal 2013. As a percentage of revenues, cost of products and
services sold decreased to 65% in fiscal 2014 compared to 68% for fiscal 2013.
The following table summarizes the relative percentages of costs of products and services sold to revenues for
both of our operating segments:
Cost of products and services sold
Fiscal Years Ended
August 31,
2014
2013
2012
Industrial Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
64% 67% 67%
68% 68% 69%
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
65% 68% 68%
Cost of products and services sold in our Industrial Materials segment was $108,121,000 for the fiscal year
ended August 31, 2014 compared to $110,051,000 in fiscal 2013. As a percentage of revenues, cost of products
and services sold in this segment decreased to 64% in fiscal 2014 compared to 67% in fiscal 2013. As a
percentage of revenues, cost of products and services sold in the Industrial Materials segment decreased primarily
due to sales mix as well as cost savings realized from the Company’s recent plant consolidation efforts. In the past
two years, this segment has benefitted from exiting the Randolph, MA (operations relocated in December 2012)
and Taylorsville, NC (Insulfab product line sold in October 2013) facilities and transitioning the remaining
manufacturing activities from those two facilities to other domestic Chase facilities. Additionally, in the first three
months of fiscal 2013, 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.
18
Cost of products and services sold in our Construction Materials segment was $37,072,000 for the fiscal year
ended August 31, 2014 compared to $35,984,000 in fiscal 2013. As a percentage of revenues, cost of products
and services sold in the Construction Materials segment remained relatively flat despite increased sales of lower
margin products primarily due to management’s ability to leverage its fixed overhead costs on a higher revenue base
coupled with continued focus and scrutiny on material purchases that helped stabilize margins on many of our key
product lines.
In fiscal 2013, cost of products and services sold increased $44,786,000 or 44% to $146,035,000 for the
fiscal year ended August 31, 2013 compared to $101,249,000 in fiscal 2012. As a percentage of revenues, cost
of products and services sold remained flat at 68% in fiscal 2013 and fiscal 2012. Cost of products and services
sold in our Industrial Materials segment was $110,051,000 for the fiscal year ended August 31, 2013 compared to
$64,539,000 in fiscal 2012. As a percentage of revenues, cost of products and services sold in this segment
remained relatively flat year over year. The 2013 fiscal year was negatively impacted by the following: (a) a full year
of costs of the NEPTCO JV, which has higher cost of products sold as a percentage of revenues, as opposed to the
prior year only including two months of the NEPTCO JV costs (acquired in June 2012); (b) expenses of $564,000
due to the fair value inventory step up related to the NEPTCO acquisition; and (c) accrued transition costs of
$150,000 related to our move from our Randolph plant. These increases in costs were offset by a more favorable
product sales mix in fiscal 2013, as well as the inclusion of the following costs in fiscal 2012: (a) expense of
$828,000 due to the fair value inventory step up related to the NEPTCO acquisition; (b) moving expenses of
$324,000 related to our plant transition from Webster to Oxford and Camberley to Winnersh; (c) accrued transition
costs of $550,000 related to our move from our Randolph plant; and (d) certain supplier inconsistencies that
resulted in excess waste and incremental expenses of $345,000 related to the utilization of specialized testing
facilities for analyzing incoming raw materials for proper specifications. Cost of products and services sold in our
Construction Materials segment was $35,984,000 for the fiscal year ended August 31, 2013 compared to
$36,710,000 in fiscal 2012. As a percentage of revenues, cost of products and services sold in the Construction
Materials segment decreased slightly due to a positive sales mix earlier in the fiscal year as we had increased sales
of higher margin products coupled with decreased sales of lower margin products.
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased $596,000 or 1% to $42,640,000 during fiscal 2014
compared to $43,236,000 in fiscal 2013. As a percentage of revenues, selling, general and administrative
expenses decreased to 19% of total revenues in fiscal 2014 compared to 20% for fiscal 2013. The percentage
decrease is primarily attributable to our continued emphasis on controlling costs, as well as the increased benefit
due to the capitalization of internal costs related to our on-going global ERP implementation project. Additionally, the
prior year period included an incremental $247,000 of pension related settlement costs due to the timing of
lump sum distributions.
During fiscal 2013, selling, general and administrative expenses increased $13,064,000 or 43% to
$43,236,000, compared to $30,172,000 in fiscal 2012. The dollar increase in fiscal 2013 was primarily
attributable to increased sales, as well as incremental expenses from NEPTCO, which was acquired in June 2012,
and included amortization of additional intangible assets of $2,209,000. Additionally, fiscal 2013 included
$595,000 of pension related settlement costs due to the timing of lump sum distributions, as well as $1,700,000
of increased incentive compensation expense due to the fiscal 2013 financial results, increased incentive
compensation for NEPTCO employees, and overall plan design. As a percentage of revenues, however, selling,
general and administrative expenses decreased to 20% of total revenues in fiscal 2013 compared to 21% for fiscal
2012. The percentage decrease was attributable to management’s continued emphasis on controlling costs,
including reduced travel, advertising, and other selling related expenses.
In fiscal 2014, bad debt expense, net of recoveries, was $28,000 compared to fiscal 2013 where we had
recoveries of previously identified bad debt that exceeded additions to bad debt expense for the year, resulting in a
net gain of $114,000. The gain of $114,000 in fiscal 2013 compared to bad debt expense, net of recoveries, of
$155,000 in fiscal 2012. The comparatively higher bad debt expense in fiscal 2012 was primarily due to financial
difficulties for some of our international customers, as well as overall increased receivable balances due to higher
sales. We continue with our strict adherence to our established credit policies and continue to closely monitor the
accounts receivable function while taking a proactive approach to the collections process.
19
Acquisition related costs
In fiscal 2012, we incurred $3,206,000 of acquisition costs related to our acquisition of NEPTCO. This
acquisition was accounted for as a business combination in accordance with the accounting standards, and as such
all related professional service fees (i.e., banking, legal, accounting, actuarial, etc.) were expensed as incurred
during the year ended August 31, 2012.
Interest Expense
Interest expense decreased $151,000 or 12% to $1,143,000 in fiscal 2014 compared to $1,294,000 in
fiscal 2013. The decrease in interest expense in fiscal 2014 as compared to fiscal 2013 is a direct result of a
reduction in our overall debt balance through required principal payments made from operating cash flow over the
past year. Interest expense increased $896,000 to $1,294,000 in fiscal 2013 compared to $398,000 in fiscal
2012 primarily due to incurring a full year of interest expense on the term note related to the June 2012
acquisition of NEPTCO.
Gain on sale of product line
On October 7, 2013, we sold substantially all of our property and assets, including intellectual property,
comprising the Insulfab product line, to an unrelated buyer. This transaction resulted in a pre-tax book gain of
$5,706,000, which was recorded in our fiscal quarter ended November 30, 2013 (the first quarter of our fiscal
2014).
Other (Expense) Income
Other expense was $246,000 in fiscal 2014 compared to other income of $313,000 in fiscal 2013, a
decrease of $559,000. Other (expense) income primarily includes interest income and foreign exchange gains and
losses caused by changes in exchange rates on transactions or balances denominated in currencies other than the
functional currency of our subsidiaries. The decrease in other expense in fiscal 2014 as compared to the prior year
is primarily due to foreign exchange losses driven by the strengthening of the pound sterling against both the euro
and US dollar throughout fiscal 2014.
Other income increased $211,000 to $313,000 in fiscal 2013 compared to $102,000 in fiscal 2012,
primarily due to foreign exchange gains driven by the strengthening of the pound sterling during fiscal 2013.
Income Taxes
The effective tax rate for fiscal 2014 was 34.5% as compared to 35.1% and 33.8% in fiscal 2013 and 2012,
respectively. In all three years, we have received the benefit of the domestic production deduction and foreign rate
differential. The decreased effective tax rate in fiscal 2014 is primarily due to a more favorable effective state
income tax rate and foreign rate differential than realized in fiscal 2013. The effective tax rate of 35.1% for fiscal
2013 compares unfavorably to 2012 primarily due to a less favorable effective state income tax rate than realized
in the prior fiscal year.
Non-controlling Interest
The net 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 is to
combine the elements of each member’s fiber optic strength businesses.
Net Income attributable to Chase Corporation
Net income in fiscal 2014 increased $9,417,000 or 55% to $26,631,000 compared to $17,214,000 in fiscal
2013. The increase in net income in fiscal 2014 is primarily due to the previously mentioned $5,706,000 pre-tax
gain that resulted from the sale of the Insulfab product line in October 2013, numerous cost containment initiatives
including recent plant consolidation efforts, and the incremental benefit of $236,000 from capitalized internal labor
used in our on-going global ERP implementation project. We have capitalized $719,000 of internal costs related to
our ERP implementation project for the year to date period compared to $483,000 in the prior year to date period.
Additionally, net income in fiscal 2013 was negatively impacted 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
$1,223,000 resulting from the timing of lump sum distributions to participants.
20
Net income in fiscal 2013 increased $7,876,000 or 84% to $17,214,000 compared to $9,338,000 in fiscal
2012. The increase in net income in fiscal 2013 was primarily due to the inclusion of NEPTCO, and the favorable
mix on product sales as discussed previously. These increases were partially offset by expenses related to the
acceleration of defined benefit plan settlement costs of $1,223,000 resulting from the timing of lump sum
distributions to participants. Additionally, net income in the prior year period was negatively impacted by the
following: (a) $3,206,000 in acquisition related expenses; (b) expenses of $828,000 in inventory fair value step up
related to the NEPTCO acquisition; (c) plant transition and moving expenses of $874,000; and (d) accelerated
pension settlement charges of $550,000 resulting from the timing of lump sum distributions.
Other Important Performance Measures
We believe that EBITDA and Adjusted EBITDA are useful performance measures. They are used by our executive
management team and board of directors to measure operating performance, to allocate resources, to evaluate the
effectiveness of our business strategies and to communicate with our Board of Directors and investors concerning
our financial performance. EBITDA and Adjusted EBITDA are non-GAAP financial measures.
We define EBITDA as follows: net income attributable to Chase Corporation before interest expense from
borrowings, income tax expense, depreciation expense from fixed assets, and amortization expense from intangible
assets. We define Adjusted EBITDA as EBITDA excluding costs and gains/losses related to our acquisitions and
divestitures, 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 EBITDA and Adjusted EBITDA has limitations and these performance measures 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 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 EBITDA and Adjusted EBITDA for the
periods presented:
Net income attributable to Chase Corporation . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition related costs (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sale of inventory step-up (b)
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension curtailment and settlement costs (c) . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of Insulfab (d)
Years Ended August 31,
2014
2013
2012
$26,631
1,143
13,967
5,692
4,822
$52,255
—
—
348
(5,706)
$17,214
1,294
9,070
5,872
4,793
$38,243
—
564
1,223
—
$ 9,338
398
4,775
3,262
2,710
$20,483
3,206
828
550
—
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$46,897
$40,030
$25,067
(a) Represents costs related to our June 2012 acquisition of NEPTCO
(b) Represents expenses related to the step-up in fair value of inventory through purchase accounting from the
June 2012 acquisition of NEPTCO
(c) Represents pension related curtailment and settlement costs due to the timing of lump sum distributions
(d) Represents gain on sale of Insulfab product line that was completed in October 2013
Liquidity and Sources of Capital
Our cash balance increased $23,225,000 to $53,222,000 at August 31, 2014 from $29,997,000 at
August 31, 2013. The increased cash balance is primarily attributable to the proceeds from the sale of the Insulfab
product line in October 2013, as well as from cash from operations, partially offset by payments on: our fiscal 2013
annual dividend, outstanding debt, income taxes, annual incentive compensation and equipment purchases. Of the
21
above noted amounts, $14,575,000 and $10,013,000 were held outside the U.S. by our foreign subsidiaries as of
August 31, 2014 and 2013, respectively. Given our cash position in the U.S. and the potential for increased
investment and acquisitions in foreign jurisdictions, we do not have a history of repatriating a significant portion of
our foreign cash. However, we do not currently take the position that undistributed foreign subsidiaries’ earnings are
considered to be permanently reinvested. Accordingly, we recognize a deferred tax liability for the estimated future
tax effects attributable to temporary differences due to these unremitted earnings. In the event that circumstances
should change in the future and we decide to repatriate these foreign amounts to fund U.S. operations, the
Company would pay the applicable U.S. taxes on these repatriated foreign amounts to satisfy all previously recorded
tax liabilities.
Our cash balance increased $14,817,000 to $29,997,000 at August 31, 2013 from $15,180,000 at
August 31, 2012. This was a result of cash flows generated from operations during the fiscal year, offset by
principal payments on outstanding debt, equipment purchases, and payment of our fiscal 2012 annual dividend. Of
the above noted amounts, $10,013,000 and $4,826,000 were held outside the U.S. by our foreign subsidiaries as
of August 31, 2013 and 2012, respectively.
Cash provided by operations was $28,606,000 for the year ended August 31, 2014 compared to
$28,157,000 in fiscal 2013 and $13,946,000 in fiscal 2012. Cash provided by operations during fiscal 2014 was
primarily due to operating income and increased accounts payable due to the timing of vendor payments, offset by
increased inventory resulting from strategic purchases of raw materials and increased accounts receivable balances
due to higher sales volumes. Cash provided by operations during fiscal 2013 was primarily due to operating income,
offset by decreased accrued expenses and increased inventory balances. Cash provided by operations during fiscal
2012 was primarily due to operating income and decreased inventory as a result of higher sales volumes, offset by
decreased accounts payable and increased accounts receivable balances.
The ratio of current assets to current liabilities was 3.5 as of August 31, 2014 compared to 3.1 as of
August 31, 2013. The increase in our current ratio at August 31, 2014 was primarily attributable to increases in
cash due to the proceeds from the sale of the Insulfab product line in October 2013 and accounts receivable
resulting from higher sales volumes, as well as decreases in accrued income taxes due to the timing of tax
payments. This was partially offset by an increase to accounts payable due to the timing of some raw material
purchases during fiscal 2014.
Cash provided by investing activities was $4,443,000 for the year ended August 31, 2014 compared to cash
used in investing activities of $3,580,000 in fiscal 2013 and $67,090,000 in fiscal 2012. During fiscal 2014,
cash provided by investing activities was primarily due to the proceeds from the sale of the Insulfab product line in
October 2013, which was partially offset by cash paid for purchases of machinery and equipment at our
manufacturing locations. During fiscal 2013, cash used in investing activities was primarily due to $3,043,000 paid
for purchases of machinery and equipment at our manufacturing locations, and $354,000 of professional legal
services for new patent work that have been capitalized as intangibles. During fiscal 2012, cash used in investing
activities was primarily due to payments totaling $62,217,000, net of cash acquired, for the acquisition of NEPTCO
and $5,230,000 paid for purchases of machinery and equipment at our manufacturing locations.
Cash used in financing activities was $10,501,000 for the year ended August 31, 2014 compared to
$9,614,000 in fiscal 2013 and cash provided by financing activities of $53,508,000 in fiscal 2012. During both
fiscal 2014 and fiscal 2013, cash used in finance activities was primarily due to our annual dividend payment and
payments made on the bank loans used to finance our acquisition of NEPTCO. During fiscal 2012, cash provided by
financing activities primarily resulted from $70,000,000 in term debt used to finance our acquisition of NEPTCO,
offset by payments of $10,667,000 to retire our previously held term notes with Bank of America and RBS Citizens,
payments on our line of credit arrangement, and payment of our annual dividend. Additionally, in fiscal 2012, we
paid the final two scheduled promissory note payments of $1,000,000 each to the former CIM shareholders in
accordance with the CIM stock purchase agreement.
On October 23, 2014, we announced a cash dividend of $0.60 per share (totaling $5,462,000), composed of
$0.50 related to earnings from continuing operations and $0.10 related to the sale of a non-strategic business, to
shareholders of record on November 3, 2014 and payable on December 4, 2014.
On October 23, 2013, we announced a cash dividend of $0.45 per share (totaling $4,080,000) to
shareholders of record on November 5, 2013 and paid on December 4, 2013.
22
On October 23, 2012, we announced a cash dividend of $0.40 per share (totaling $3,626,000) to
shareholders of record on November 2, 2012 and paid 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 August 31, 2014, the applicable interest rate was 1.91% per annum and the
outstanding principal amount was $58,800,000. We are required to repay the principal amount of the term loan in
quarterly installments. Installment payments of $1,400,000 began in September 2012 and continued through June
2014, increased to $1,750,000 per quarter thereafter through June 2015, and will increase to $2,100,000 per
quarter thereafter through March 2017. The Credit Facility matures in June 2017 and prepayment of the Credit
Facility is allowed at any time.
We have a revolving line of credit with Bank of America (the ‘‘Revolver’’) totaling $15,000,000, which 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 August 31, 2014 and October 31, 2014, 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 2015 and future periods.
Our credit agreement with Bank of America, which outlines the terms of both the Credit Facility and the
Revolver, 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 credit agreement) of no more than 3.00 to 1.00, and to maintain a consolidated
fixed charge coverage ratio (as calculated in the credit agreement) of at least 1.25 to 1.00. We were in compliance
with our debt covenants as of August 31, 2014.
We currently have several on-going capital projects that are important to our long term strategic goals.
Machinery and equipment will also be added as needed to increase capacity or enhance operating efficiencies in
our other manufacturing plants.
We may also consider the acquisition of companies or other assets this year or in future periods which 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 material off balance sheet arrangements.
Contractual Obligations
The following table summarizes our contractual cash obligations at August 31, 2014 and the effect such
obligations are expected to have on our liquidity and cash flow in future periods.
Contractual Obligations
Total
Payments Due
Less than 1 Year
Payments Due Payments Due
1 - 3 Years
4 - 5 Years
Payments
After 5 Years
Long-term debt including estimated interest . . . $61,541
6,775
Operating leases . . . . . . . . . . . . . . . . . . . . .
86
Capital leases . . . . . . . . . . . . . . . . . . . . . . .
4,560
Purchase Obligations . . . . . . . . . . . . . . . . . .
$ 8,116
740
43
4,560
(Dollars in thousands)
$53,425
1,479
43
—
—
1,408
—
—
Total (1) (2) . . . . . . . . . . . . . . . . . . . . . . $72,962
$13,459
$54,947
$1,408
$ —
3,148
—
—
$3,148
(1) We may be required to make payments related to our unrecognized tax benefits. However, due to the
uncertainty of the timing of future cash flows associated with these unrecognized tax benefits, we are unable to
make reasonably reliable estimates of the period of cash settlement, if any, with the respective taxing
authorities. Accordingly, unrecognized tax benefits of $1,030,000 as of August 31, 2014 have been excluded
23
from the contractual obligations table above. See Note 7 ‘‘Income Taxes’’ to the Consolidated Financial
Statements for further information.
(2) This table does not include the expected payments for our obligations for pension and other post-retirement
benefit plans. As of August 31, 2014, we had recognized an accrued benefit plan liability of $10,424,000
representing the unfunded obligations of the pension benefit plans. See Note 9 ‘‘Benefits and Pension Plans’’
to the Consolidated Financial Statements for further information, including expected pension benefit payments
for the next 10 years.
Recently Issued Accounting Standards
In February 2013, the Financial Accounting Standards Board (‘‘FASB’’) issued Accounting Standards Update
(‘‘ASU’’) No. 2013-02, ‘‘Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated
Other Comprehensive Income’’. This ASU expands the presentation of changes in accumulated other comprehensive
income. The new guidance requires an entity to disaggregate the total change of each component of other
comprehensive income either on the face of the net income statement or as a separate disclosure in the notes.
ASU 2013-02 is effective for fiscal years beginning after December 15, 2012. We adopted this ASU in the first
quarter of fiscal 2014. The provisions of ASU 2013-02 did not have a material impact on our consolidated financial
position, results of operations or cash flows.
In May 2014, the FASB issued ASU No. 2014-09, ‘‘Revenue from Contracts with Customers’’, which will
replace most existing revenue recognition guidance in U.S. Generally Accepted Accounting Principles. The core
principle of the ASU is that an entity should recognize revenue for the transfer of goods or services equal to the
amount that it expects to be entitled to receive for those goods or services. The ASU requires additional disclosure
about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts,
including significant judgments and changes in judgments. The ASU will be effective for our fiscal year 2018,
beginning September 1, 2017, including interim periods, and allows for both retrospective and prospective methods
of adoption. We are in the process of determining the method of adoption and assessing the impact of this ASU on
our consolidated financial position, results of operations or cash flows.
Critical Accounting Policies, Judgments, and Estimates
The U.S. Securities and Exchange Commission (‘‘SEC’’) requires companies to provide additional disclosure and
commentary on their most critical accounting policies. The SEC has defined the most critical accounting policies as
the ones that are most important to the portrayal of a company’s financial condition and operating results, and
requires management to make its most significant estimates and judgments in the preparation of its consolidated
financial statements. Our critical accounting policies are described below.
Accounts Receivable
We evaluate the collectability of accounts receivable balances based on a combination of factors. In cases
where we are aware of circumstances that may impair a specific customer’s ability to meet its financial obligations
to us, a specific allowance against amounts due to us is recorded, and thereby reduces the net recognized
receivable to the amount we reasonably believe will be collected. For all other customers, we recognize allowances
for doubtful accounts based on the length of time the receivables are past due, industry and geographic
concentrations, the current business environment and our historical experience. If the financial condition of our
customers deteriorates or if economic conditions worsen, additional allowances may be required in the future, which
could have an adverse impact on our future operating results.
Inventories
We value inventory at the lower of cost or market using the first-in, first-out (FIFO) method. Management
assesses the recoverability of inventory based on types and levels of inventory held, forecasted demand and
changes in technology. These assessments require management judgments and estimates, and valuation
adjustments for excess and obsolete inventory may be recorded based on these assessments. We estimate excess
and obsolescence exposures based upon assumptions about future demand, product transitions, and market
conditions and record adjustments to reduce inventories to their estimated net realizable value. The failure to
accurately forecast demand may lead to additional excess and obsolete inventory and future charges.
24
Business Combinations
We assign the value of the consideration transferred to acquire a business to the tangible assets and
identifiable intangible assets acquired and liabilities assumed on the basis of their fair values at the date of
acquisition. We assess the fair value of assets, including intangible assets, using a variety of methods and each
asset is measured at fair value from the perspective of a market participant. The method used to estimate the fair
values of intangible assets incorporates significant assumptions regarding the estimates a market participant would
make in order to evaluate an asset, including a market participant’s use of the asset and the appropriate discount
rates for a market participant. Assets recorded from the perspective of a market participant that are determined to
not have economic use for us are expensed immediately. Any excess purchase price over the fair value of the net
tangible and intangible assets acquired is allocated to goodwill. Transaction costs and restructuring costs associated
with a transaction to acquire a business are expensed as incurred.
Goodwill, Intangible Assets, and Other Long-Lived Assets
Long-lived assets consist of goodwill, identifiable intangible assets, trademarks, patents and agreements and
property, plant, and equipment. Intangible assets and property, plant, and equipment, excluding goodwill, are
amortized using the straight-line method over their estimated useful life. We review long-lived assets and all
intangible assets for impairment whenever events or changes in circumstances indicate the carrying amount of such
assets may not be recoverable.
Goodwill is also reviewed at least annually for impairment. We perform our annual goodwill impairment
assessment during the fourth fiscal quarter of each year. When evaluating the potential impairment of goodwill we
first assess a range of qualitative factors, including but not limited to, industry conditions, the competitive
environment, changes in the market for our products and services, entity specific factors such as strategy and
changes in key personnel, and the overall financial performance for each of our reporting units relative to expected
historical or projected future operating results. If after completing this assessment, it is determined that it is more
that than likely than not that the fair value of a reporting unit is less than its carrying value, we then proceed to a
two-step impairment testing methodology using the income approach (discounted cash flow method).
In the first step of this testing methodology, we compare the carrying value of the reporting unit, including
goodwill, with its fair value, as determined by its estimated discounted cash flows. If the carrying value of a
reporting unit exceeds its fair value, we then complete the second step of the impairment test to determine the
amount of impairment to be recognized. In the second step, we estimate an implied fair value of the reporting unit’s
goodwill by allocating the fair value of the reporting unit to all of the assets and liabilities other than goodwill
(including intangible assets). If the carrying value of a reporting unit’s goodwill exceeds its implied fair value, we
record an impairment loss equal to the difference in that period.
When required, we arrive at our estimates of fair value using a discounted cash flow methodology which
includes estimates of future cash flows to be generated by particular assets, as well as selecting a discount rate to
measure the present value of those anticipated cash flows. Estimating future cash flows requires significant
judgment and includes making assumptions about projected growth rates, industry-specific factors, working capital
requirements, current and anticipated operating conditions, any terminal sales value at the end of the period under
review. The cash flow estimates used to determine impairment, if any, contain management’s best estimates, using
appropriate and customary assumptions and projections at the time. See Note 4 to the Consolidated Financial
Statements included in this Report.
Revenues
We recognize revenue when persuasive evidence of an arrangement exists, performance of our obligation is
complete, our price to the buyer is fixed or determinable, and we are reasonably assured of collecting. This is
typically at the time of shipment or upon receipt by the customer based on contractual terms. If a loss is
anticipated on any contract, a provision for the entire loss is made immediately. Revenue recognition involves
judgments and assessments of expected returns, and the likelihood of nonpayment by customers. We analyze
various factors, including a review of specific customer contracts and shipment terms, historical experience,
creditworthiness of customers and current market and economic conditions in determining when to recognize
revenue. Changes in judgments on these factors could impact the timing and amount of revenue recognized with a
resulting impact on the timing and amount of operating income. Commissions are recognized when earned and
payments are received from the manufacturers represented. Royalty revenue is recognized based on licensee
25
production statements received from the authorized manufacturers. Billed shipping and handling fees are recorded
as sales revenue with the associated costs recorded as costs of products and services sold.
Contingent Income Tax Liabilities
We are subject to routine income tax audits that occur periodically in the normal course of business. Our
contingent income tax liabilities are estimated based on the methodology prescribed in the guidance for accounting
for uncertain tax positions, which we adopted as of the beginning of fiscal 2008. The guidance prescribes a
minimum recognition threshold a tax position is required to meet before being recognized in the financial
statements. Our liabilities related to uncertain tax positions require an assessment of the probability of the
income-tax-related exposures and settlements and are influenced by our historical audit experiences with various
state and federal taxing authorities, as well as by current income tax trends. If circumstances change, we may be
required to record adjustments that could be material to our reported financial condition and results of operations.
See Note 7 to the Consolidated Financial Statements included in this Report for more information on our
accounting for uncertain tax positions.
Deferred Income Taxes
We evaluate the need for a valuation allowance to reduce our deferred tax assets to the amount that is more
likely than not to be realized. We have considered future taxable income and ongoing prudent and feasible tax
planning strategies in assessing the need for a valuation allowance. Should we determine that we would not be able
to realize all or part of our net deferred tax asset in the future, an adjustment to the deferred tax asset would be
charged to income in the period such determination was made.
Stock Based Compensation
We measure compensation cost for share-based compensation at fair value, including estimated forfeitures,
and recognize the expense over the period that the recipient is required to provide service in exchange for the
award, which generally is the vesting period. We use the Black-Scholes option pricing model to measure the fair
value of stock options. This model requires significant estimates related to the award’s expected life and future
stock price volatility of the underlying equity security. In determining the amount of expense to be recorded, we are
also required to estimate forfeiture rates for awards, based on the probability that employees will complete the
required service period. We estimate the forfeiture rate based on historical experience. If actual forfeitures differ
significantly from our estimates, additional adjustments to compensation expense may be required in future periods.
Pension Benefits
We sponsor a non-contributory defined benefit pension plan covering employees of certain divisions of the
Company. In calculating our retirement plan obligations and related expense, we make various assumptions and
estimates. These assumptions include discount rates, benefits earned, expected return on plan assets, mortality
rates, and other factors. While we believe that the assumptions used are appropriate, differences in actual
experience or changes in assumptions may affect our pension obligations and future expense.
Effective December 1, 2008, the Chase defined benefit pension plan was amended to include a soft freeze
whereby any employee hired after the effective date of December 1, 2008 will not be admitted to the plan. The
only exception related to employees of the International Association of Machinists and Aerospace Workers Union
whose contract was amended recently to include a soft freeze whereby any employees hired after the effective date
of July 15, 2012 will not be admitted to the plan. All eligible participants who were previously admitted to the plan
prior to the applicable soft freeze dates will continue to accrue benefits as detailed in the plan agreements.
NEPTCO has a defined benefit pension plan covering substantially all of our union employees at our Pawtucket,
RI plant. This plan was frozen effective October 31, 2006, and as a result, no new participants can enter the plan
and the benefits of current participants were frozen as of that date. The benefits are based on years of service and
the employee’s average compensation during the earlier of five years before retirement, or October 31, 2006.
We account for our pension plans following the requirements of ASC Topic 715, ‘‘Compensation—Retirement
Benefits’’ (‘‘ASC 715’’). ASC 715 requires an employer to: (a) recognize in its statement of financial position the
funded status of a benefit plan; (b) measure defined benefit plan assets and obligations as of the end of the
employer’s fiscal year (with limited exceptions); and (c) recognize as a component of other comprehensive income,
26
net of tax, the gains or losses and prior service costs or credits that arise but are not recognized as components of
net periodic benefit costs pursuant to prior existing guidance.
Impact of Inflation
Inflation has not had a significant long-term impact on our earnings. In the event of significant inflation, our
efforts to recover cost increases would be hampered as a result of the competitive nature of the industries in which
we operate.
Forward-Looking Information
From time to time, we may publish, verbally or in written form, forward-looking statements relating to such
matters as anticipated financial performance, business prospects, technological developments, new products,
acquisition or consolidation strategies, anticipated sources of capital, research and development activities and
similar matters. In fact, this Form 10-K (or any other periodic reporting documents required by the Securities
Exchange Act of 1934, as amended) may contain forward-looking statements reflecting our current views concerning
potential or anticipated future events or developments, including our strategic goals for future fiscal periods. The
Private Securities Litigation Reform Act of 1995 provides a ‘‘safe harbor’’ for forward-looking statements. We caution
investors that any forward-looking statements made by us are not guarantees of future performance and that a
variety of factors could cause our actual results and experience to differ materially from the anticipated results or
other expectations expressed in our forward-looking statements. The risks and uncertainties which may affect the
operations, performance, development and results of our 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; the impact of acquisitions on our business and results of
operations; technological developments; performance issues with suppliers and subcontractors; our ability to renew
existing credit facilities or to obtain new or additional financing as needed; economic growth; delays in testing of
new products; our ability to comply with new regulatory requirements without undue expense or other difficulties; the
impact of changes in accounting standards; rapid technology changes and the highly competitive environment in
which we operate. These risks and uncertainties also include those risks outlined under Item 1A (Risk Factors) of
this Annual Report on Form 10-K. Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date the statement was made.
ITEM 7A—QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We limit the amount of credit exposure to any one issuer. At August 31, 2014, 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
U.S. dollars. 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 currency denoted customers. As of August 31, 2014, the Company had cash balances in the
following foreign currencies (with USD equivalents):
Currency Code
Currency Name
USD Equivalent at
August 31, 2014
GBP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EUR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CNY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CAD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Canadian Dollar
British Pound
Euro
Chinese Yuan
$12,041,000
$ 2,597,000
310,000
$
90,000
$
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 year ended August 31, 2014 in the amount of
$2,055,000 related to our European operations which is recorded in accumulated other comprehensive income
(loss) within our Statement of Equity. We do not have or utilize any derivative financial instruments.
We pay interest on our outstanding long-term debt at interest rates that fluctuate based upon changes in
various base interest rates. The carrying value of our long-term debt was $58,800,000 at August 31, 2014. See
‘‘Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and
Sources of Capital’’ and Note 16—‘‘Fair Value Measurements’’ to the Consolidated Financial Statements for
additional information regarding our outstanding long-term debt. The effect of an immediate hypothetical 10%
change in variable interest rates would not have a material effect on our Consolidated Financial Statements.
27
ITEM 8—FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following Consolidated Financial Statements of Chase Corporation are filed as part of this Annual Report on
Form 10-K:
Index to Consolidated Financial Statements:
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets as of August 31, 2014 and 2013 . . . . . . . . . . . . . . . . . . . . . . . . .
Page No.
29
30
Consolidated Statements of Operations for each of the three fiscal years in the period ended
August 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
31
Consolidated Statements of Comprehensive Income for each of the three fiscal years in the period
ended August 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
32
Consolidated Statements of Equity for each of the three fiscal years in the period ended August 31,
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
33
Consolidated Statements of Cash Flows for each of the three fiscal years in the period ended
August 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
34
35
28
To The Board of Directors and Shareholders of Chase Corporation:
Report of Independent Registered Public Accounting Firm
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of
operations, comprehensive income, equity and cash flows present fairly, in all material respects, the financial
position of Chase Corporation and its subsidiaries at August 31, 2014 and 2013, and the results of their operations
and their cash flows for each of the three years in the period ended August 31, 2014 in conformity with accounting
principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all
material respects, effective internal control over financial reporting as of August 31, 2014, based on criteria
established in Internal Control—Integrated Framework 1992 issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements, for
maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal
control over financial reporting, included in Item 9A, ‘‘Controls and Procedures.’’ Our responsibility is to express
opinions on these financial statements and on the Company’s internal control over financial reporting based on our
integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material misstatement and whether effective internal
control over financial reporting was maintained in all material respects. Our audits of the financial statements
included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by management, and evaluating the overall
financial statement presentation. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our
audits also included performing such other procedures as we considered necessary in the circumstances. We
believe that our audits provide a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting
includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 14, 2014
29
CHASE CORPORATION
CONSOLIDATED BALANCE SHEETS
In thousands, except share and per share amounts
August 31,
2014
2013
ASSETS
Current Assets
Cash & cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, less allowance for doubtful accounts of $670 and $696 . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due from sale of product line . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 53,222
35,601
31,539
2,437
739
—
2,315
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
125,853
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
44,085
Other Assets
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets, less accumulated amortization of $22,941 and $17,554 . . . . . . . .
Cash surrender value of life insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Funded pension plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
38,280
27,215
7,249
1,256
962
470
175
$ 29,997
32,084
32,048
1,826
—
1,905
2,115
99,975
45,192
37,815
31,781
7,278
1,094
1,014
—
211
$245,545
$224,360
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued payroll and other compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of long-term debt
$ 15,121
7,754
4,842
1,377
7,000
$ 12,416
7,046
5,171
2,161
5,600
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt, less current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated pension obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
36,094
51,800
2,037
10,418
126
7,580
32,394
58,800
1,897
7,834
108
9,467
Commitments and Contingencies (Notes 6, 8 and 19)
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; 9,103,292 shares at
August 31, 2014 and 9,066,115 shares at August 31, 2013 issued and outstanding
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chase Corporation stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . .
Non-controlling interest related to NEPTCO joint venture (Note 15)
910
13,620
(4,250)
126,272
136,552
938
907
13,336
(5,163)
103,734
112,814
1,046
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
137,490
113,860
Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$245,545
$224,360
See accompanying notes to the consolidated financial statements.
30
CHASE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
In thousands, except share and per share amounts
Revenues
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Royalties and commissions . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 221,034
2,972
$ 213,648
2,414
$ 146,494
2,425
Years Ended August 31,
2014
2013
2012
Costs and Expenses
Cost of products and services sold . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . . . . . . . . .
Acquisition related costs . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .
Gain on sale of product line (Note 18)
Other (expense) income . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . .
Add: net loss attributable to non-controlling interest
Net income attributable to Chase Corporation . . . . . . . . . . . . . . . . .
Net income available to common shareholders, per common and
common equivalent share
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
$
$
Weighted average shares outstanding
224,006
216,062
148,919
145,193
42,640
—
36,173
(1,143)
5,706
(246)
40,490
13,967
26,523
108
26,631
2.92
2.86
$
$
$
$
146,035
43,236
—
26,791
(1,294)
—
313
25,810
9,070
16,740
474
17,214
1.90
1.87
$
$
$
$
101,249
30,172
3,206
14,292
(398)
—
102
13,996
4,732
9,264
74
9,338
1.03
1.03
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,952,026
9,165,666
8,860,972
8,978,438
8,761,262
8,786,750
See accompanying notes to the consolidated financial statements.
31
CHASE CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
In thousands, except share and per share amounts
Years Ended August 31,
2014
2013
2012
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$26,523
$16,740
$ 9,264
Other comprehensive income:
Net unrealized gain on restricted investments, net of tax of $38, $20 and $20,
respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in funded status of pension plans, net of tax of ($796), $281 and
65
85
33
$297, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,207)
2,055
Total other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . .
913
201
(419)
(133)
Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive loss attributable to non-controlling interest . . . . . . . . . . . . . . . .
27,436
108
16,607
474
(493)
(904)
(1,364)
7,900
74
Comprehensive income attributable to Chase Corporation . . . . . . . . . . . . . . . .
$27,544
$17,081
$ 7,974
See accompanying notes to the consolidated financial statements.
32
CHASE CORPORATION
CONSOLIDATED STATEMENTS OF EQUITY
In thousands, except share and per share amounts
Common Stock
Shares
Amount
Additional
Paid-In
Capital
Accumulated
Other
Chase
Comprehensive Retained Stockholders’ Non-controlling
Income (loss)
Earnings
Interest
Equity
$(3,666)
$ 83,973
3
3
Balance at August 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted stock grants, net of forfeitures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of restricted stock grants
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of stock option grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock issuance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-controlling Interest—NEPTCO joint venture . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess tax benefit (expense) from stock based compensation . . . . . . . . . . . . . . . . . . .
Common stock retained to pay statutory minimum withholding taxes on common stock . . . . . .
Cash dividend paid, $0.35 per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in funded status of pension plan, net of tax of $297 . . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized gain on restricted investments, net of tax of $20 . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at August 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted stock grants, net of forfeitures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of restricted stock grants
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of stock option grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock issuance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercise of stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock received for payment of stock option exercises . . . . . . . . . . . . . . . . . . .
Excess tax benefit (expense) from stock based compensation . . . . . . . . . . . . . . . . . . .
Common stock retained to pay statutory minimum withholding taxes on common stock . . . . . .
Cash dividend paid, $0.40 per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in funded status of pension plan, net of tax of $281 . . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized gain on restricted investments, net of tax of $20 . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at August 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted stock grants, net of forfeitures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of restricted stock grants
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of stock option grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercise of stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock received for payment of stock option exercises . . . . . . . . . . . . . . . . . . .
Excess tax benefit (expense) from stock based compensation . . . . . . . . . . . . . . . . . . .
Common stock retained to pay statutory minimum withholding taxes on common stock . . . . . .
Cash dividend paid, $0.45 per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in funded status of pension plan, net of tax of $796 . . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized gain on restricted investments, net of tax of $38 . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,952,910
98,135
$895
10
2,205
(51,668)
(5)
9,001,582
71,801
—
—
566
49,042
(20,284)
—
(36,592)
—
—
—
—
—
9,066,115
32,851
—
—
114,872
(47,121)
—
(63,425)
—
—
—
—
—
$900
7
—
—
0
5
(2)
—
(3)
—
—
—
—
—
$907
3
—
—
11
(5)
—
(6)
—
—
—
—
—
$910
$10,678
(10)
1,448
563
29
209
(808)
$12,109
(7)
1,145
466
10
557
(486)
622
(1,080)
—
—
—
—
—
$13,336
(3)
857
239
1,604
(1,545)
1,324
(2,192)
—
—
—
—
—
$13,620
$ 91,880
—
1,448
563
29
209
(813)
(3,165)
(493)
(904)
33
9,338
$ 98,125
—
1,145
466
10
562
(488)
622
(1,083)
(3,626)
201
(419)
85
17,214
$112,814
—
857
239
1,615
(1,550)
1,324
(2,198)
(4,093)
(1,207)
2,055
65
26,631
(3,165)
9,338
$ 90,146
—
—
—
—
—
—
—
—
(3,626)
—
—
—
17,214
$103,734
—
—
—
—
—
—
—
(4,093)
—
—
—
26,631
(493)
(904)
33
$(5,030)
—
—
—
—
—
—
—
—
—
201
(419)
85
—
$(5,163)
—
—
—
—
—
—
—
—
(1,207)
2,055
65
—
$(4,250)
Balance at August 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,103,292
$126,272
$136,552
See accompanying notes to the consolidated financial statements.
Total
Equity
$ 91,880
—
1,448
563
29
1,594
209
(813)
(3,165)
(493)
(904)
33
9,264
$ 99,645
—
1,145
466
10
562
(488)
622
(1,083)
(3,626)
201
(419)
85
16,740
$113,860
—
857
239
1,615
(1,550)
1,324
(2,198)
(4,093)
(1,207)
2,055
65
26,523
$137,490
$ —
1,594
(74)
$1,520
—
—
—
—
—
—
—
—
—
—
—
—
(474)
$1,046
—
—
—
—
—
—
—
—
—
—
—
(108)
$ 938
CHASE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Dollars in thousands
Years Ended August 31,
2014
2013
2012
CASH FLOWS FROM OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income to net cash provided by operating
$ 26,523
$16,740
$ 9,264
activities
(Gain) loss on disposal/sale of fixed assets . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of product line . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sale of inventory step-up . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision (recovery) for allowance for doubtful accounts . . . . . . . . . . . . .
Stock based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Realized gain on restricted investments . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in cash surrender value life insurance . . . . . . . . . . .
Pension curtailment and settlement loss . . . . . . . . . . . . . . . . . . . . . . .
Excess tax expense from stock based compensation . . . . . . . . . . . . . . .
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) from changes in assets and liabilities
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses & other assets . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2
(5,706)
5,692
4,822
—
28
1,096
(63)
202
348
(1,324)
(2,529)
(3,335)
(1,550)
(297)
2,578
1,351
627
141
(8)
—
5,872
4,793
564
(114)
1,621
(51)
52
1,223
(622)
(1,385)
(363)
(1,240)
8
886
(791)
850
122
32
—
3,172
2,716
828
155
2,040
(22)
(37)
550
(209)
(1,442)
(1,717)
942
(55)
(2,683)
(174)
408
178
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . .
28,606
28,157
13,946
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment
. . . . . . . . . . . . . . . . . . . . . .
Cost to acquire intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contingent purchase price paid for acquisition . . . . . . . . . . . . . . . . . . . . .
Payments for acquisitions, net of cash acquired . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net proceeds from sale of product line . . . . . . . . . . . . . . . . . . . . . . . . . .
Net withdrawals (contributions) from restricted investments . . . . . . . . . . . .
Payments for cash surrender value life insurance . . . . . . . . . . . . . . . . . . .
(4,290)
(123)
(160)
—
17
9,179
3
(183)
(3,043)
(354)
(141)
84
105
—
(48)
(183)
(5,230)
(74)
(358)
(62,217)
1,032
—
(60)
(183)
Net cash provided by (used in) investing activities . . . . . . . . . . . . . .
4,443
(3,580)
(67,090)
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments of principal on debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividend paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from exercise of common stock options . . . . . . . . . . . . . . . . . . .
Payments of statutory minimum taxes on stock options and restricted stock .
Excess tax benefit from stock based compensation . . . . . . . . . . . . . . . . . .
2,104
(7,704)
(4,093)
66
(2,198)
1,324
Net cash (used in) provided by financing activities . . . . . . . . . . . . . .
(10,501)
INCREASE IN CASH & CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of foreign exchange rates on cash . . . . . . . . . . . . . . . . . . . . . . . . . .
CASH & CASH EQUIVALENTS, BEGINNING OF PERIOD . . . . . . . . . . . . . . . . .
22,548
677
29,997
313
(5,913)
(3,626)
74
(1,083)
621
(9,614)
14,963
(146)
15,180
79,331
(22,054)
(3,165)
—
(813)
209
53,508
364
(166)
14,982
CASH & CASH EQUIVALENTS, END OF PERIOD . . . . . . . . . . . . . . . . . . . . . .
$ 53,222
$29,997
$ 15,180
See Note 13 for supplemental cash flow information including non-cash financing and investing activities
See accompanying notes to the consolidated financial statements.
34
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
Note 1—Summary of Significant Accounting Policies
The principal accounting policies of Chase Corporation (the ‘‘Company’’) and its subsidiaries are as follows:
Products and Markets
The Company’s principal products are specialty tapes, laminates, sealants and coatings that are sold by
Company salespeople, manufacturers’ representatives and distributors. In the Company’s Industrial Materials
segment, these products consist of:
(i) insulating and conducting materials for the manufacture of electrical and telephone wire and cable,
electrical splicing, and terminating and repair tapes, which are marketed to wire and cable manufacturers;
(ii) laminated film foils, composite strength elements, anti-static packaging tape and pulling tapes for the
electronics and cable industries;
(iii) moisture protective coatings, which are sold to the electronics industry including circuitry used in
automobiles and home appliances;
(iv) laminated durable papers, including laminated paper with an inner security barrier used in personal and
mail-stream privacy protection, which are sold primarily to the envelope converting and commercial printing
industries;
(v) pulling and detection tapes used in the installation, measurement and location of fiber optic cables, water
and natural gas lines, and power, data and video cables for commercial buildings;
(vi) cover tapes with reliable adhesive and anti-static properties essential to delivering semiconductor
components via tape and reel packaging; and
(vii) flexible, rigid and semi-rigid fiber optic strength elements designed to allow fiber optic cables to withstand
mechanical and environmental strain and stress.
In the Company’s Construction Materials segment, these products consist of:
(i) protective pipe coating tapes and other protectants for valves, regulators, casings, joints, metals, concrete
and wood, which are sold to oil companies, gas utilities and pipeline companies;
(ii) protectants for highway bridge deck metal supported surfaces, which are sold to municipal transportation
authorities;
(iii) fluid applied coating and lining systems for use in the water and wastewater industry; and
(iv) expansion and control joint systems designed for roads, bridges, stadiums and airport runways.
Basis of Presentation
The financial statements include the accounts of the Company and its wholly-owned subsidiaries. Investments
in unconsolidated companies which are at least 20% owned are carried under the equity method since acquisition
or investment. All intercompany transactions and balances have been eliminated in consolidation. The Company
uses the U.S. dollar as the functional currency for financial reporting.
As part of the Company’s purchase of NEPTCO in June 2012, it also acquired NEPTCO’s 50% ownership stake
in its financially- controlled joint venture, NEPTCO JV LLC (‘‘JV’’). Given the Company’s controlling financial interest,
the JV’s assets and liabilities as of August 31, 2014 and 2013, and the results of operations beginning June 27,
2012, have been consolidated within the Company’s consolidated balance sheet and the related consolidated
statements of operations and cash flows. An offsetting amount equal to 50% of net assets and net loss of the JV
has also been recorded within the Company’s consolidated financial statements to non-controlling interest,
representing the joint venture partner’s 50% ownership stake and pro rata share in net results of the JV.
35
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands, except share and per share amounts
The Company has evaluated events and transactions subsequent to the balance sheet date. Based on this
evaluation, and other than the October 2014 purchase of the 50% non-controlling membership interest in
NEPTCO JV LLC described in Note 14, and the cash dividend announced on October 23, 2014 of $0.60 per share
to shareholders of record on November 3, 2014 payable on December 4, 2014, the Company is not aware of any
other 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.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents consist primarily of demand deposits accounts or investment instruments that meet
high credit quality standards such as money market funds, government securities, or commercial paper. The
Company considers all highly liquid debt instruments purchased with a maturity of three months or less from date of
purchase to be cash equivalents.
Accounts Receivable
The Company evaluates the collectability of accounts receivable balances based on a combination of factors. In
cases where the Company is aware of circumstances that may impair a specific customer’s ability to meet its
financial obligations to it, a specific allowance against amounts due to the Company is recorded, and thereby
reduces the net recognized receivable to the amount the Company reasonably believes will be collected. For all
other customers, the Company recognizes allowances for doubtful accounts based on the length of time the
receivables are past due, industry and geographic concentrations, the current business environment and its
historical experience. Receivables are written off against these reserves in the period they are determined to be
uncollectible.
Inventories
The Company values inventory at the lower of cost or market using the first-in, first-out (FIFO) method.
Management assesses the recoverability of inventory based on types and levels of inventory held, forecasted
demand and changes in technology. These assessments require management judgments and estimates, and
valuation adjustments for excess and obsolete inventory may be recorded based on these assessments. The
Company estimates excess and obsolescence exposures based upon assumptions about future demand, product
transitions, and market conditions and records reserves to reduce inventories to their estimated net realizable value.
The failure to accurately forecast demand may lead to additional excess and obsolete inventory and future charges.
Goodwill
The Company accounts for goodwill in accordance with ASC Topic 350, ‘‘Intangibles—Goodwill and Other.’’ The
Company identified several reporting units within each of its two operating segments. These are used to evaluate
the possible impairment of goodwill annually each fourth quarter and whenever events or circumstances indicate the
carrying value of goodwill may not be recoverable. When evaluating the potential impairment of goodwill, the
Company will first assess a range of qualitative factors, including but not limited to, industry conditions, the
competitive environment, changes in the market for our products and services, entity specific factors such as
strategy and changes in key personnel, and the overall financial performance for each of our reporting units relative
to expected historical or projected future operating results. If after completing this assessment, it is determined that
36
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands, except share and per share amounts
it is more likely than not that the fair value of a reporting unit is less than its carrying value, the Company will then
proceed to a two-step impairment testing methodology using the income approach (discounted cash flow method).
In the first step of this testing methodology, we compare the carrying value of the reporting unit, including
goodwill, with its fair value, as determined by its estimated discounted cash flows. If the carrying value of a
reporting unit exceeds its fair value, we then complete the second step of the impairment test to determine the
amount of impairment to be recognized. In the second step, we estimate an implied fair value of the reporting unit’s
goodwill by allocating the fair value of the reporting unit to all of the assets and liabilities other than goodwill
(including intangible assets). If the carrying value of a reporting unit’s goodwill exceeds its implied fair value, we
record an impairment loss equal to the difference in that period. The key assumptions incorporated in the
discounted cash flow approach include projected operating income, changes in working capital, projected capital
expenditures, estimated terminal sales value and a discount rate equal to the assumed long-term cost of capital.
Cash flows may be adjusted to exclude certain non-recurring or unusual items. The cash flow estimates used to
determine impairment, if any, contain management’s best estimates, using appropriate and customary assumptions
and projections at the time.
Intangible Assets
Intangible assets consist of patents, agreements, formulas, trade names, customer relationships and
trademarks. The Company capitalizes costs related to patent applications and technology agreements. The costs of
these assets are amortized using the straight-line method over the lesser of the useful life of the asset or its
statutory life. Capitalized costs are periodically reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of the asset may not be recoverable.
Property, Plant and Equipment
Property, plant and equipment are stated at cost and depreciated using the straight-line method over the
assets’ estimated useful lives. Expenditures for maintenance repairs and minor renewals are charged to expense as
incurred. Betterments and major renewals are capitalized. Upon retirement or other disposition of assets, related
allowances for depreciation and amortization are eliminated from the accounts and any resulting gain or loss is
included in the determination of income or loss. The estimated useful lives of property, plant and equipment are as
follows:
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15 to 40 years
3 to 10 years
Leasehold improvements are depreciated over the lesser of the useful life or the term of the lease.
Restricted Investments and Deferred Compensation
The Company has a non-qualified deferred savings plan that covers its Board of Directors and selected
employees. Participants may elect to defer a portion of their compensation for payment in a future tax year. The
plan is funded by trusteed assets that are restricted to the payment of deferred compensation or satisfaction of the
Company’s general creditors. The Company’s restricted investments and corresponding deferred compensation
liability under the plan were $1,256 and $1,094 at August 31, 2014 and 2013, respectively. The Company
accounts for the restricted investments as available for sale by recording unrealized gains or losses in other
comprehensive income as a component of stockholders’ equity.
Split-Dollar Life Insurance Arrangements
The net liability related to these postretirement benefits was calculated as the difference between the present
value of future premiums to be paid by the Company reduced by the present value of the expected proceeds to be
returned to the Company upon the insured’s death. The Company prepared its calculation by using mortality
assumptions which are based on the IRS 2014 Combined Static Mortality Table, and a 1.63% discount rate. The
37
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands, except share and per share amounts
Company’s net liability related to these postretirement obligations was $54 and $56 at August 31, 2014 and
2013, respectively.
Revenues
The Company recognizes revenue when persuasive evidence of an arrangement exists, performance of its
obligation is complete, its price to the buyer is fixed or determinable, and the Company is reasonably assured of
collecting. This is typically at the time of shipment or upon receipt by the customer based on contractual terms. If a
loss is anticipated on any contract, a provision for the entire loss is made immediately. Revenue recognition involves
judgments and assessments of expected returns, and the likelihood of nonpayment by customers. The Company
analyzes various factors, including a review of specific customer contracts and shipment terms, historical experience,
creditworthiness of customers and current market and economic conditions in determining when to recognize
revenue. Changes in judgments on these factors could impact the timing and amount of revenue recognized with a
resulting impact on the timing and amount of operating income. Commissions are recognized when earned and
payments are received from the manufacturers represented. Royalty revenue is recognized based on licensee
production statements received from the authorized manufacturers. Billed shipping and handling fees are recorded
as sales revenue with the associated costs recorded as costs of products and services sold.
The Company’s warranty policy provides that the products (or materials) delivered will meet its standard
specifications for the products or any other specifications as may be expressly agreed to at time of purchase. All
warranty claims must be received within 90 days from the date of delivery, unless some other period has been
expressly agreed to within the terms of the sales agreement. The Company’s warranty costs have historically been
insignificant. The Company records a current liability for estimated warranty claims with a corresponding debit to
cost of products and services sold based upon current and historical experience and upon specific claims issues as
they arise.
In addition, the Company offers certain sales incentives based on sales levels as they are earned.
Research and Product Development Costs
Research and product development costs are expensed as incurred and include primarily engineering salaries,
overhead and materials used in connection with research and development projects. Research and development
expense amounted to $2,599, $3,395 and $2,958 for the years ended August 31, 2014, 2013 and 2012,
respectively.
Pension Plan
The Company accounts for its pension plans following the requirements of ASC Topic 715, ‘‘Compensation—
Retirement Benefits’’ (‘‘ASC 715’’). ASC 715 requires an employer to: (a) recognize in its statement of financial
position the funded status of a benefit plan; (b) measure defined benefit plan assets and obligations as of the end
of the employer’s fiscal year (with limited exceptions); and (c) recognize as a component of other comprehensive
income, net of tax, the gains or losses and prior service costs or credits that arise but are not recognized as
components of net periodic benefit costs pursuant to prior existing guidance.
Stock Based Compensation
In accordance with the accounting for stock based compensation guidance, the Company measures and
recognizes compensation expense for all share-based payment awards made to employees and directors based on
estimated fair values. This includes restricted stock, restricted stock units and stock options. The guidance allows for
the continued use of the simplified method as the Company has concluded that its historical share option exercise
experience does not provide a reasonable basis for estimating expected term. The Company uses the short cut
method to calculate the historical windfall tax pool.
Stock-based compensation expense recognized in fiscal years 2014, 2013 and 2012 was $1,096, $1,621
and $2,040, respectively.
38
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands, except share and per share amounts
The fair value of options granted was estimated on the date of grant using the Black-Scholes option pricing
model with the following weighted average assumptions for the years ending August 31, 2014, 2013 and 2012:
Expected Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . .
Expected life . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . .
2.0%
6.0 years
41.0%
2.8%
2.2%
6.0 years
33.0%
1.6%
2.3%
6.0 years
30.0%
2.2%
2014
2013
2012
Expected volatility is determined by looking at a combination of historical volatility over the past seven years as
well as implied volatility going forward.
Translation of Foreign Currency
The financial position and results of operations of the Company’s HumiSeal Europe Ltd and Chase Protective
Coatings Ltd businesses are measured using the UK pound sterling as the functional currency, and the financial
position and results of operations of the Company’s HumiSeal Europe SARL business in France are measured using
euros as the functional currency. Revenues and expenses of these businesses have been translated at average
exchange rates. Assets and liabilities have been translated at the year-end exchange rates. Translation gains and
losses are being recorded as a separate component of shareholders’ equity. Transaction 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 income on the consolidated statements of operations.
Income Taxes
The Company accounts for income taxes under the asset and liability method. Under this method, a deferred
tax asset or liability is determined based upon the differences between the financial statement and tax bases of
assets and liabilities as measured by the enacted tax rates that will be in effect when these differences reverse. Tax
credits are recorded as a reduction in income taxes. Valuation allowances are provided if, based upon the weight of
available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.
The Company estimates contingent income tax liabilities based on the guidance for accounting for uncertain tax
positions as prescribed in ASC Topic 740, ‘‘Income Taxes.’’ See Note 7 for more information on the Company’s
income taxes.
Net Income Per Share
The Company has unvested share-based payments awards with a right to receive nonforfeitable dividends,
which are considered participating securities under ASC Topic 260, ‘‘Earnings Per Share’’ (‘‘ASC 260’’). The
Company allocates earnings to participating securities and computes earnings per share using the two class
method.
Comprehensive Income
Comprehensive income is defined as the change in equity of a business enterprise during a period from
transactions and other events and circumstances from non-owner sources, including foreign currency translation
adjustments, unrealized gains and losses on marketable securities and adjustments related to the change in the
funded status of the pension plans.
39
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands, except share and per share amounts
Non-controlling Interest
A legal entity is subject to the consolidation rules of ASC Topic 810, ‘‘Consolidations’’ (‘‘ASC 810’’) if the total
equity investment at risk is not sufficient to permit the legal entity to finance its activities without additional
subordinated financial support or the equity investors lack certain specified characteristics of a controlling financial
interest. Based on the criteria in ASC 810, the Company determined that its joint venture agreement qualifies as a
variable interest entity (‘‘VIE’’). The purpose of the joint venture is to combine the elements of NEPTCO’s and the
joint venture partner’s (an otherwise unrelated party) fiber optic strength element businesses. Under ASC 810, a
reporting entity shall consolidate a VIE when that reporting entity has a variable interest (or combination of variable
interests) that provides the reporting entity with a controlling financial interest. The reporting entity shall be deemed
to have a controlling financial interest in a VIE if it has both of the following characteristics: a) the power to direct
the activities of a VIE that most significantly impact the VIE’s economic performance; and b) the obligation to
absorb losses or right to receive benefits from the VIE that could potentially be significant to the VIE. The reporting
entity that consolidates a VIE is called the ‘‘primary beneficiary’’ of that VIE. The Company determined that it is the
primary beneficiary of the VIE primarily due to Chase directing the activities that most significantly impact the VIE’s
economic performance, which is the actual management and operation of the joint venture and having the
obligation to absorb losses and the right to receive benefits from the VIE that could potentially be significant to the
VIE through our equity investment in the VIE. As a result, the Company has consolidated the operations of the joint
venture in its consolidated financial statements.
Segments
The segment reporting topic of the Financial Accounting Standards Board (‘‘FASB’’) codification establishes
standards for reporting information about operating segments. 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, laminates for the 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, cover tapes essential to delivering semiconductor components via tape and reel packaging, and wind energy
composite materials and elements. Additionally, the Industrial Materials segment includes a joint venture which
produces glass-based strength elements designed to allow fiber optic cables to withstand mechanical and
environmental strain and stress. The Construction Materials segment reflects its construction project oriented
product offerings which are primarily sold and used as ‘‘Chase’’ branded products in final form. 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.
Recently Issued Accounting Standards
In February 2013, the Financial Accounting Standards Board (‘‘FASB’’) issued Accounting Standards Update
(‘‘ASU’’) No. 2013-02, ‘‘Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated
Other Comprehensive Income’’. This ASU expands the presentation of changes in accumulated other comprehensive
income. The new guidance requires an entity to disaggregate the total change of each component of other
comprehensive income either on the face of the net income statement or as a separate disclosure in the notes.
ASU 2013-02 is effective for fiscal years beginning after December 15, 2012. The Company adopted this ASU in
the first quarter of fiscal 2014 (See Note 23 for additional details). The provisions of ASU 2013-02 did not have a
material impact on the Company’s consolidated financial position, results of operations or cash flows.
In May 2014, the FASB issued Accounting Standards Update (‘‘ASU’’) No. 2014-09, ‘‘Revenue from Contracts
with Customers’’, which will replace most existing revenue recognition guidance in U.S. Generally Accepted
40
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands, except share and per share amounts
Accounting Principles. The core principle of the ASU is that an entity should recognize revenue for the transfer of
goods or services equal to the amount that it expects to be entitled to receive for those goods or services. The ASU
requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising
from customer contracts, including significant judgments and changes in judgments. The ASU will be effective for
the Company beginning September 1, 2017 (fiscal 2018), including interim periods in its fiscal year 2018, and
allows for both retrospective and prospective methods of adoption. The Company is in the process of determining
the method of adoption and assessing the impact of this ASU on the Company’s consolidated financial position,
results of operations or cash flows.
Note 2—Inventories
Inventories consist of the following as of August 31, 2014 and 2013:
Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Work in process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$13,785
7,359
10,395
$14,545
5,967
11,536
Total Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$31,539
$32,048
2014
2013
Note 3—Property, Plant and Equipment
Property, plant and equipment consist of the following as of August 31, 2014 and 2013:
2014
2013
Property, Plant and Equipment
Land and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 5,770
21,259
49,045
2,091
2,378
$ 5,719
20,943
44,284
2,034
3,763
Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
80,543
(36,458)
76,743
(31,551)
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . .
$ 44,085
$ 45,192
Note 4—Goodwill and Intangible Assets
The changes in the carrying value of goodwill, by operating segment, are as follows:
Balance at August 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of NEPTCO, Inc.—working capital settlement . . . . . . . . . . . . .
Acquisition of Paper Tyger—additional earnout . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustment
Balance at August 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of Paper Tyger—additional earnout . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustment
Construction
Materials
Industrial
Materials
Consolidated
$10,740
—
—
(5)
$10,735
—
17
$27,045
(84)
141
(22)
$27,080
161
287
$37,785
(84)
141
(27)
$37,815
161
304
Balance at August 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$10,752
$27,528
$38,280
41
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands, except share and per share amounts
The Company’s goodwill is allocated to each reporting unit based on the nature of the products manufactured
by the respective business combinations that originally created the goodwill. The Company identified several
reporting units within each of its two operating segments that are used to evaluate the possible impairment of
goodwill. Goodwill impairment exists when the carrying amount of goodwill exceeds its fair value. Assessments of
possible impairment of goodwill are made when events or changes in circumstances indicate that the carrying value
of the asset may not be recoverable through future operations. Additionally, testing for possible impairment of
recorded goodwill and certain intangible asset balances is required annually. The amount and timing of any
impairment charges based on these assessments require the estimation of future cash flows and the fair market
value of the related assets based on management’s best estimates of certain key factors, including future selling
prices and volumes; operating, raw material and energy costs, and various other projected operating and economic
factors. When testing, fair values of the reporting units and the related implied fair values of their respective goodwill
are established using public company analysis and discounted cash flows.
The Company performs impairment reviews annually each fourth quarter (as of its fiscal year end, August 31st)
and whenever events or circumstances indicate the carrying value of goodwill may not be recoverable. For fiscal
2014, the Company’s review indicated no impairment of goodwill.
As of August 31, 2014, the Company had a total goodwill balance of $38,280 related to its acquisitions, of
which $1,440 remains deductible for income taxes.
Intangible assets subject to amortization consist of the following as of August 31, 2014 and 2013:
Weighted-Average
Amortization Period
Gross Carrying
Value
Accumulated
Amortization
Net Carrying
Value
August 31, 2014
Patents and agreements . . . . . . . . . . . . . . . . . .
Formulas . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trade names . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer lists and relationships . . . . . . . . . . . . .
11.9 years
9.1 years
5.7 years
10.2 years
August 31, 2013
Patents and agreements . . . . . . . . . . . . . . . . . .
Formulas . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trade names . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer lists and relationships . . . . . . . . . . . . .
11.9 years
9.1 years
5.7 years
10.2 years
$ 3,104
5,849
6,406
34,797
$50,156
$ 3,198
5,772
6,345
34,020
$49,335
$ 2,281
2,851
3,153
14,656
$
823
2,998
3,253
20,141
$22,941
$27,215
$ 2,200
2,238
2,055
11,061
$
998
3,534
4,290
22,959
$17,554
$31,781
Aggregate amortization expense related to intangible assets for the years ended August 31, 2014, 2013 and
2012 was $4,822, $4,793 and $2,716, respectively. As of August 31, 2014 estimated amortization expense for
each of the five succeeding fiscal years is as follows:
Years ending August 31,
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 4,736
4,674
4,237
4,006
3,308
$20,961
42
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands, except share and per share amounts
Note 5—Cash Surrender Value of Life Insurance
Life insurance is provided under split dollar life insurance agreements whereby the Company will recover the
premiums paid from the proceeds of the policies. The Company recognizes an offset to expense for the growth in
the cash surrender value of the policies.
The Company recognized cash surrender value of life insurance policies, net of loans of $5 at August 31, 2014
and 2013, secured by the policies, with the following carriers as of August 31, 2014 and 2013:
John Hancock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . .
John Hancock (formerly Manufacturers’ Life Insurance Company)
Metropolitan Life Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other life insurance carriers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014
2013
$4,450
1,054
1,665
80
$4,450
1,009
1,739
80
$7,249
$7,278
Subject to periodic review, the Company intends to maintain these policies through the lives or retirements of
the insureds.
Note 6—Long-Term Debt
Long-term debt consists of the following at August 31, 2014 and 2013:
2014
2013
Term note payable to bank in 19 quarterly installments that began in
September 2012. The principal amount of the quarterly installments is
$1,400 through June 2014, increased to $1,750 per quarter thereafter
through June 2015, and will increase to $2,100 per quarter thereafter
through March 2017. Interest is payable monthly at LIBOR rate plus
175 to 225 basis points, based upon the Company’s consolidated
leverage ratios (effective interest rate of 1.91% at August 31, 2014).
Quarterly principal payments will continue through March 2017, and
Chase will repay the remaining principal balance plus any interest due
on the term note maturity date of June 27, 2017.
. . . . . . . . . . . . . .
Less portion payable within one year classified as current
. . . . . . . . . . .
$58,800
$64,400
58,800
(7,000)
64,400
(5,600)
Long-term debt, less current portion . . . . . . . . . . . . . . . . . . . . . . . . . .
$51,800
$58,800
The Company has a revolving line of credit totaling $15,000 with Bank of America that bears interest at
London Interbank Offered Rate (LIBOR) plus a range of 1.75% to 2.25%, depending on the consolidated leverage
ratio of Chase Corporation, or, at our option, at the bank’s base lending rate. As of August 31, 2014, the entire
amount of $15,000 was available for use. The revolving line of credit is scheduled to mature in June 2017. This
revolving line of credit 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 2015 and future
periods.
Our credit agreement with Bank of America, which outlines the terms of both the term note payable and the
revolving line of credit, contains customary affirmative and negative covenants that, among other things, restrict our
ability to incur additional indebtedness. It also requires the Company to maintain a ratio of consolidated
indebtedness to consolidated EBITDA (each as defined in the agreement) of no more than 3.00 to 1.00, and to
maintain a consolidated fixed charge coverage ratio (as calculated in the agreement) of at least 1.25 to 1.00. The
Company was in compliance with its debt covenants as of August 31, 2014.
43
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands, except share and per share amounts
Note 7—Income Taxes
Domestic and foreign pre-tax income for the years ended August 31, 2014, 2013 and 2012 was:
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$35,480
5,010
$23,562
2,248
$12,767
1,229
$40,490
$25,810
$13,996
The provision (benefit) for income taxes for the years ended August 31, 2014, 2013 and 2012 was:
Year Ended August 31,
2014
2013
2012
Year Ended August 31,
2014
2013
2012
Current:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$13,012
1,437
1,149
$ 8,112
1,652
1,043
$ 5,073
392
287
Total current income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15,598
10,807
5,752
Deferred:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,446)
(168)
(17)
(1,302)
(92)
(343)
(860)
(150)
(10)
Total deferred income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,631)
(1,737)
(1,020)
Total income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$13,967
$ 9,070
$ 4,732
The provision (benefit) for income taxes differs from the amount computed by applying the federal statutory
income tax rate to income before income taxes. The Company’s combined federal, state and foreign effective tax
rate as a percentage before taxes for fiscal 2014, 2013 and 2012, net of offsets generated by federal, state and
foreign tax benefits, was 34.5%, 35.1% and 33.8%, respectively. The following is a reconciliation of the effective
income tax rate with the U.S. federal statutory income tax rate for the years ended August 31, 2014, 2013 and
2012:
Year Ended August 31,
2014
2013
2012
Federal statutory rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
35.0% 35.0% 35.0%
Adjustment resulting from the tax effect of:
State and local taxes, net of federal benefit . . . . . . . . . . . . . . . . . . . . . . . . . . .
Domestic production deduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign tax rate differential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustment to uncertain tax position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transaction costs not deductible . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research credit generated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncontrolling partnership interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax effect of undistributed earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.8%
1.1%
3.8%
(3.1)% (3.3)% (3.5)%
(1.3)% (0.7)% (0.6)%
(1.1)% (1.3)%
0.3%
2.6%
—
—
(0.2)% (1.2)% (0.8)%
0.6%
0.1%
0.6%
1.8%
1.4%
0.1%
—
0.1%
1.2%
Effective income tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
34.5% 35.1% 33.8%
44
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands, except share and per share amounts
The following table summarizes the tax effect of temporary differences on the Company’s income tax provision:
Year Ended August 31,
2014
2013
2012
Current income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$15,598
$10,807
$ 5,752
Deferred provision (benefit):
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loan finance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accruals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warranty reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted stock grant
Unrepatriated earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign taxes net of unrepatriated earnings . . . . . . . . . . . . . . . . . . . . . . . .
Foreign amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(149)
(167)
(332)
(36)
7
(12)
(6)
(1,914)
315
1,753
(1,014)
(106)
30
(15)
(259)
(207)
(51)
66
861
—
(1,836)
(102)
1,572
(1,425)
(105)
(236)
(39)
(640)
446
(70)
(116)
(177)
(56)
(701)
(74)
(133)
497
(134)
177
Total deferred income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,631)
(1,737)
(1,020)
Total income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$13,967
$ 9,070
$ 4,732
45
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands, except share and per share amounts
The following table summarizes the tax effects of temporary differences that give rise to significant portions of
the deferred tax assets and liabilities:
As of August 31,
2014
2013
Current:
Deferred tax assets:
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accruals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warranty reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Current deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
479
1,458
342
88
2,367
$
330
1,291
504
82
2,207
Deferred tax liabilities:
Prepaid liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(52)
(52)
(92)
(92)
Current deferred tax assets, net . . . . . . . . . . . . . . . . . . . . . . . . . .
2,315
2,115
Noncurrent:
Deferred tax assets:
Pension accrual . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loan finance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized gain/loss on restricted investments . . . . . . . . . . . . . . .
Restricted stock grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non qualified stock options . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,464
811
44
(61)
804
16
7,340
470
2,162
775
50
(23)
1,122
16
6,326
256
Noncurrent deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . .
12,888
10,684
Deferred tax liabilities:
Unrepatriated earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(8,148)
—
(11,812)
(38)
(6,515)
118
(13,780)
26
Noncurrent deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . .
(19,998)
(20,151)
Noncurrent deferred tax liabilities, net . . . . . . . . . . . . . . . . . . . . . .
(7,110)
(9,467)
Net deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (4,795) $ (7,352)
A summary of the Company’s adjustments to its uncertain tax positions in fiscal years ended August 31, 2014,
2013 and 2012 are as follows:
Balance, at beginning of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase for tax positions related to the current year . . . . . . . . . . . . . . . . . . . . .
Increase / (decrease) for tax positions related to prior years . . . . . . . . . . . . . . . .
Increase for amounts recorded in acquisition accounting . . . . . . . . . . . . . . . . . .
Decreases for settlements with applicable taxing authorities . . . . . . . . . . . . . . . .
Decreases for lapses of statute of limitations . . . . . . . . . . . . . . . . . . . . . . . . .
$ 900
58
80
—
—
(8)
$1,180
17
73
—
—
(370)
$ 893
19
(176)
465
(21)
—
Balance, at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,030
$ 900
$1,180
2014
2013
2012
46
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands, except share and per share amounts
The unrecognized tax benefits mentioned above include an aggregate of $489 of accrued interest and penalty
balances related to uncertain tax positions. The Company recognizes interest and penalties related to uncertain tax
positions in income tax expense. An increase in accrued interest and penalty charges of approximately $33, net of
federal tax expense, was recorded as a tax expense during the current fiscal year. The Company does not anticipate
that its accrual for uncertain tax positions will be reduced by a material amount over the next twelve month period,
as it does not expect to settle any potential disputed items with the appropriate taxing authorities nor does it expect
the statute of limitations to expire for any items.
The Company is subject to U.S. federal income tax, as well as to income tax of multiple state and foreign tax
jurisdictions. The statute of limitations for all material U.S. federal, state, and local tax filings remains open for fiscal
years subsequent to 2010. For foreign jurisdictions, the statute of limitations remains open in the UK for fiscal years
subsequent to 2010 and in France for fiscal years subsequent to 2013.
Note 8—Capital and Operating Leases
The Company is obligated under various capital and operating leases, primarily for real property and equipment.
Future minimum lease payments under non-cancelable operating leases (with initial or remaining lease terms in
excess of one year), and the present value of future minimum capital lease payments as of August 31, 2014, are
as follows:
Year ending August 31,
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total future minimum lease payments . . . . . . . . . . . . . . . . .
Less: interest (at rates ranging from 4% to 8%) . . . . . . . . . . .
Less: current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Future Capital
Lease Payments
Future Operating
Lease Payments
$ 740
742
737
706
702
3,148
$6,775
$ 43
34
9
—
—
—
$ 86
(8)
$ 78
(38)
$ 40
Total rental expense for all operating leases amounted to $1,577, $1,761 and $1,178 for the years ended
August 31, 2014, 2013 and 2012, respectively.
Note 9—Benefits and Pension Plans
401(k) Plan
The Company has a defined contribution plan adopted pursuant to Section 401(k) of the Internal Revenue
Code of 1986. Any qualified employee who has attained age 21 and has been employed by the Company for at
least six months may contribute a portion of his or her salary to the plan and the Company will match 100% of the
first one percent of salary contributed and 50% thereafter, up to an amount equal to three and one half percent of
such employee’s annual salary.
NEPTCO has two 401(k) savings plans, one for union employees and one for non-union employees. Under
these plans, substantially all employees of NEPTCO are eligible to participate by making before-tax contributions to
these plans. Participants may elect to defer between 1% and 10% of their annual compensation. The Company may
contribute $0.75 for each $1.00 of participant deferrals up to 3% of the non-union participant’s compensation. The
Company may match union employee contributions by $0.50 for each $1.00 of participant deferrals up to 3% of
the participant’s compensation.
The Company’s contribution expense for all 401(k) plans was $392, $351 and $294 for the years ended
August 31, 2014, 2013 and 2012, respectively.
47
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands, except share and per share amounts
Non-Qualified Deferred Savings Plan
The Company has a non-qualified deferred savings plan covering the Board of Directors and a separate plan
covering selected employees. Participants may elect to defer a portion of their compensation for future payment.
The plans are funded by trusteed assets that are restricted to the payment of deferred compensation or satisfaction
of the Company’s general creditors. The Company’s liability under the plan was $1,256 and $1,094 at August 31,
2014 and 2013, respectively.
Pension Plans
The Company has non-contributory defined benefit pension plans covering employees of certain divisions of the
Company. The Company has a funded, qualified plan (‘‘Qualified Plan’’) and an unfunded supplemental plan
(‘‘Supplemental Plan’’) designed to maintain benefits for certain employees at the plan formula level. The plans
provide for pension benefits determined by a participant’s years of service and final average compensation. The
Qualified Plan assets consist of separate pooled investment accounts with a trust company. The measurement date
for the plans is August 31, 2014.
Effective December 1, 2008, a soft freeze in the Qualified Plan was adopted whereby no new employees hired
will be admitted to the Qualified Plan, with the exception of the International Association of Machinists and
Aerospace Workers Union whose contract was amended in June 2012 to include a soft freeze with an effective date
of July, 15, 2012. All eligible participants who were previously admitted to the plan prior to the applicable soft
freeze dates will continue to accrue benefits as detailed in the plan agreements.
NEPTCO has a defined benefit pension plan (‘‘NEPTCO Pension Plan’’) covering substantially all of its union
employees at its Pawtucket facility. This plan was frozen effective October 31, 2006, and as a result, no new
participants can enter the plan and the benefits of current participants were frozen as of that date. The benefits are
based on years of service and the employee’s average compensation during the earlier of five years before
retirement, or October 31, 2006. The NEPTCO Pension Plan assets consist of separate pooled investment accounts
with a trust company. The measurement date for the NEPTCO Pension Plan is August 31, 2014.
The following tables reflect the status of the Company’s pension plans for the years ended August 31, 2014,
2013 and 2012:
Year Ended August 31,
2014
2013
2012
Change in benefit obligation
Projected benefit obligation at beginning of year . . . . . . . . . . . . . . . . . . . . .
Acquired benefit obligation for Neptco pension plan . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service cost
Interest cost
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Curtailments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$15,651
—
323
643
2,933
—
(1,233)
(38)
$17,322
—
352
503
1,019
24
(3,443)
(126)
$13,953
1,806
482
532
1,908
—
(1,316)
(43)
Projected benefit obligation at end of year
. . . . . . . . . . . . . . . . . . . . . . . .
$18,279
$15,651
$17,322
48
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands, except share and per share amounts
Year Ended August 31,
2014
2013
2012
Change in plan assets
Fair value of plan assets at beginning of year . . . . . . . . . . . . . . . . . . . . . . .
Fair value of Neptco pension plan assets . . . . . . . . . . . . . . . . . . . . . . . . .
Actual return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employer contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 8,826
—
996
267
(1,233)
(38)
$ 9,405
—
690
2,300
(3,443)
(126)
$ 7,235
884
752
1,893
(1,316)
(43)
Fair value of plan assets at end of year
. . . . . . . . . . . . . . . . . . . . . . . . . .
$ 8,818
$ 8,826
$ 9,405
Funded status at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (9,461) $ (6,825) $ (7,917)
Amounts recognized in consolidated balance sheets
Non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
962
(5)
(10,418)
$ 1,014
(5)
(7,834)
$
—
(215)
(7,702)
Net amount recognized in Consolidated Balance Sheets . . . . . . . . . . . . . . .
$ (9,461) $ (6,825) $ (7,917)
Actuarial present value of benefit obligation and funded status
Accumulated benefit obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Projected benefit obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plan assets at fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$16,362
$18,279
$ 8,818
$13,842
$15,651
$ 8,826
$14,735
$17,322
$ 9,405
Amounts recognized in accumulated other comprehensive Income
Prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
64
7,567
$
67
5,561
$
82
6,029
Adjustment to pre-tax accumulated other comprehensive income . . . . . . . . .
$ 7,631
$ 5,628
$ 6,111
Other changes in plan assets and benefit obligations recognized in other
comprehensive income
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of settlement on accumulated other comprehensive income . . . . . . . . .
$ 2,647
(293)
(3)
(348)
Total recognized in other comprehensive income . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net periodic pension cost
2,003
900
$
979
(250)
(13)
(1,198)
(482)
1,690
$ 1,691
(276)
(74)
(550)
791
1,378
Total recognized in net periodic pension cost and other comprehensive income
$ 2,903
$ 1,208
$ 2,169
Estimated amounts that will be amortized from accumulated
comprehensive income over the next fiscal year
Prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
3
307
$
3
293
14
337
Prior service cost arose from the amendment of the plan’s benefit schedules to comply with the Tax Reform Act
of 1986 and adoption of the unfunded supplemental pension plan.
49
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands, except share and per share amounts
Components of net periodic pension cost for the fiscal years ended August 31, 2014, 2013 and 2012
included the following:
Year Ended August 31,
2014
2013
2012
Components of net periodic benefit cost
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of prior service cost
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of accumulated loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlement and curtailment loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 323
643
(710)
3
293
348
$ 352
503
(651)
13
250
1,223
$ 482
532
(536)
74
276
550
Net periodic benefit cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 900
$1,690
$1,378
Weighted-average assumptions used to determine benefit obligations as of August 31, 2014, 2013 and 2012
are as follows:
Discount rate
2014
2013
2012
Qualified plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplemental plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Neptco plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.83%
3.01%
4.06%
4.54%
3.76%
4.63%
3.40%
3.14%
3.77%
Rate of compensation increase
Qualified and supplemental plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Neptco plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.50%
0.00%
3.50%
0.00%
3.50%
0.00%
Weighted-average assumptions used to determine net periodic benefit cost for the years ended August 31,
2014, 2013 and 2012 are as follows:
Discount rate
Qualified plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplemental plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Neptco plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected long-term return on plan assets
Qualified plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplemental plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Neptco plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rate of compensation increase
2014
2013
2012
4.54%
3.76%
4.63%
8.00%
0.00%
8.00%
3.40%
3.14%
3.77%
8.00%
0.00%
8.00%
4.73%
3.00%
4.08%
8.00%
0.00%
8.00%
Qualified and supplemental plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Neptco plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.50%
0.00%
3.50%
0.00%
3.50%
0.00%
It is the Company’s policy to evaluate, on an annual basis, the discount rate used to determine the projected
benefit obligation to approximate rates on high-quality, long-term obligations. The Moody’s Corporate Aa Bond index
has generally been used as a benchmark for this purpose, with adjustments made if the duration of the index
differed from that of the plan. For periods since August 31, 2008, the discount rate has been determined by
matching the expected payouts from the respective plans to the spot rates inherent in the Citigroup Pension
Discount Curve. A single rate is then developed, that when applied to the expected cash flows, results in the same
present value as determined using the various spot rates. The Company believes that this approach produces the
most appropriate approximation of the plan liability.
50
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands, except share and per share amounts
The Company estimates that for each 100 basis point reduction in the discount rate would result in additional
net periodic pension cost, the Company’s primary pension obligation, of approximately $81 for the Qualified Plan
and $3 for the Supplemental Plan. For the current fiscal year, the NEPTCO Pension Plan expense is insignificant so
sensitivity disclosure is not presented. The expected return on plan assets is derived from a periodic study of
long-term historical rates of return on the various asset classes included in the Company’s targeted pension plan
asset allocation. The Company estimates that each 100 basis point reduction in the expected return on plan assets
would result in additional net periodic pension cost of approximately $76 for the Qualified Plan. No rate of return is
assumed for the Supplemental Plan since that plan is currently not funded. The rate of compensation increase is
also evaluated and is adjusted by the Company, if necessary, periodically.
Qualified Plan Assets
The investment policy for the Qualified Plan is based on ERISA standards for prudent investing. The
fundamental goal underlying the investment policy is to ensure that the assets of the plans are invested in a
prudent manner to meet the obligations of the plans as these obligations come due. The primary investment
objectives include providing a total return which will promote the goal of benefit security by attaining an appropriate
ratio of plan assets to plan obligations, to provide for real asset growth while also tracking plan obligations, to
diversify investments across and within asset classes, to reduce the impact of losses in single investments, and to
follow investment practices that comply with applicable laws and regulations.
The primary policy objectives will be met by investing assets to achieve a reasonable tradeoff between return
and risk relative to the plans’ obligations. This includes investing a portion of the assets in funds selected in part to
hedge the interest rate sensitivity to plan obligations.
The Qualified Plan assets are invested in a diversified mix of United States equity and fixed income securities.
Asset manager performance is reviewed at least annually and benchmarked against the peer universe for the given
investment style. The Company’s expected return for the Qualified Plan is 8.0%. To determine the expected
long-term rate of return on the assets for the Qualified Plan, the Company considered the historical and expected
return on the plan assets, as well as the current and expected allocation of the plan assets.
Asset allocation is monitored on an ongoing basis relative to the established asset class targets. The interaction
between plan assets and benefit obligations is periodically studied to assist in the establishment of strategic asset
allocation targets. The investment policy permits variances from the targets within certain parameters. Asset
rebalancing occurs when the underlying asset class allocations move outside these parameters at which time the
asset allocation is rebalanced back to the policy target weight.
The Qualified Plan has the following target allocation and weighted-average asset allocations as of August 31,
2014, 2013 and 2012:
Asset Category
Equity securities . . . . . . . . . . . . . . . . . .
Debt securities . . . . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . .
NEPTCO Pension Plan Assets
Target
Allocation
Range
40-70%
20-50%
0-15%
0-10%
100%
Percentage of Plan Assets as of August 31,
2014
43%
51%
0%
6%
100%
2013
56%
40%
4%
0%
100%
2012
54%
39%
5%
2%
100%
The investment policy for the NEPTCO Pension Plan is based on ERISA standards for prudent investing. The
fundamental goal underlying the investment policy is to ensure that the assets of the plans are invested in a
prudent manner to meet the obligations of the plan as these obligations come due. The primary investment
objectives include maximization of return within reasonable and prudent levels of risk, provision of returns
51
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands, except share and per share amounts
comparable to returns for similar investment options, provision of exposure to a wide range of investment
opportunities in various asset classes and vehicles, control administrative and management costs, provision of
appropriate diversification within investment vehicles, and govern investment manager’s adherence to stated
investment objectives and style.
The primary policy objectives will be met by investing assets to achieve a reasonable tradeoff between return
and risk relative to the plans’ obligations. This includes investing a portion of the assets in funds selected in part to
hedge the interest rate sensitivity to plan obligations.
The NEPTCO Pension Plan assets are invested in a diversified mix of fixed income, and both domestic and
foreign equity investments. The ongoing monitoring of investments is a regular and disciplined process and confirms
that the criteria remain satisfied. The process of monitoring investment performance relative to specified guidelines
is consistently applied.
The Company’s expected return for the NEPTCO Pension Plan is 8.0%. To determine the expected long-term
rate of return on the assets for the NEPTCO Pension Plan, the Company considered the historical and expected
return on the plan assets, as well as the current and expected allocation of the plan assets.
The NEPTCO Pension Plan has the following target allocation and weighted-average asset allocations as of
August 31, 2014, 2013 and 2012:
Asset Category
Equity securities . . . . . . . . . . . . . . . . . . . . . .
Debt securities . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Target
Allocation
Range
20-65%
35-80%
0-10%
Percentage of Plan Assets
as of August 31,
2014
30%
60%
10%
2013
56%
44%
0%
2012
50%
50%
0%
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100%
100%
100%
100%
Fair Market Value of Pension Plan Assets
The Company is required to categorize pension plan assets using 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 following table presents the Company’s pension plan assets at August 31, 2014 and 2013 by asset
category:
Fair value measurements at
August 31, 2014:
Fair value measurements at
August 31, 2013:
Quoted prices
in active
markets
(Level 1)
Significant
other
Significant
observable unobservable
inputs
(Level 2)
inputs
(Level 3)
August 31,
2013
Quoted prices
in active
markets
(Level 1)
Significant
other
Significant
observable unobservable
inputs
(Level 2)
inputs
(Level 3)
August 31,
2014
Asset Category
Equity securities . . . .
Debt securities . . . . .
Real estate . . . . . . .
Other . . . . . . . . . . .
$3,629
4,610
—
579
Total . . . . . . . . . .
$8,818
$3,629
4,610
—
579
$8,818
$—
—
—
—
$—
$—
—
—
—
$—
$4,939
3,553
334
—
$8,826
$4,056
2,795
—
—
$6,851
$ 883
758
334
—
$1,975
$—
—
—
—
$—
52
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands, except share and per share amounts
Level 1 Assets: The fair values of the common stocks, corporate bonds and U.S. Government securities
included in this tier are based on the closing price reported on the active market where the individual securities are
traded.
Level 2 Assets: The fair values of the common/collective trust funds included in this tier are not traded on
active markets. These common/collective trust funds are valued based on the calculated unit values. The unit values
are based on the fair value of the underlying assets of the common/collective trust funds derived from inputs
principally based on quoted market prices in an active market or corroborated by observable market data by
correlation or other means.
Estimated Future Benefit Payments
The following pension benefit payments (which include expected future service) are assumed to be paid in each
of the following fiscal years based on the participants’ normal retirement age:
Year ending August 31,
Pension Benefits
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020-2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$9,628
302
358
630
405
$2,657
The Company contributed $267, $2,300 and $1,893 to fund its obligations under the pension plans for the
years ended August 31, 2014, 2013 and 2012, respectively. The Company’s pension plans are fully funded as of
August 31, 2014 and there are no required contributions currently for fiscal 2015. If a contribution should be
required, the Company plans to make the necessary contributions during fiscal 2015 to ensure its pension plans
continue to be adequately funded given the current market conditions.
Note 10—Stockholders’ Equity
2013 Equity Incentive Plan
In October 2012, the Company adopted and the stockholders subsequently approved the 2013 Equity Incentive
Plan (the ‘‘2013 Plan’’). The 2013 Plan permits the grant of restricted stock, stock options, deferred stock, stock
payments or other awards to employees, participating officers, directors, consultants and advisors who are linked
directly to increases in shareholder value. The aggregate number of shares available for grant under the 2013 Plan
is 1,200,000. Additional shares may become available in connection with share splits, share dividends or similar
transactions. As of August 31, 2014, the Company had not yet made any awards under the 2013 Plan.
2005 Incentive Plan
In November 2005, the Company adopted and the stockholders subsequently approved the 2005 Incentive
Plan (the ‘‘2005 Plan’’). The 2005 Plan permits the grant of restricted stock, stock options, deferred stock, stock
payments or other awards to employees, participating officers, directors, consultants and advisors who are linked
directly to increases in shareholder value. The aggregate number of shares available for grant under the 2005 Plan
was initially 1,000,000. Additional shares may become available in connection with share splits, share dividends or
similar transactions. As of August 31, 2014, 67,007 shares remained available for future grant under the 2005
Plan.
2001 Senior Management Stock Plan and 2001 Non-Employee Director Stock Option Plan
In October 2002, the Company adopted, and the stockholders subsequently approved, the 2001 Senior
Management Stock Plan and the 2001 Non-Employee Director Stock Option Plan (the ‘‘2001 Plans’’). The 2001
53
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands, except share and per share amounts
Plans reserved 1,500,000 and 180,000 shares of the Company’s common stock for grants related to the Senior
Management Stock Plan and Non-Employee Director Stock Option Plan, respectively.
Under the terms of the Senior Management Stock Plan, equity awards may be granted in the form of incentive
stock options, non-qualified stock options and restricted stock. Options granted under the Non-Employee Director
Stock Option Plan were issued as non-qualified stock options. Options granted under the 2001 Plans generally vest
over a period ranging from three to five years and expire after ten years.
The Company is no longer granting equity awards under the 2001 Plans.
Restricted Stock
Employees and Executive Management
In August 2009, the Board of Directors of Chase Corporation approved a plan for issuing a performance and
service based restricted stock grant of 76,874 shares in the aggregate, subject to adjustment, to key members of
management with an issue date of September 1, 2009 and a vesting date of August 31, 2012. Based on the fiscal
year 2010 financial results, 68,453 additional shares of restricted stock were earned and granted subsequent to
the end of fiscal year 2010 in accordance with the performance measurement criteria. The adjusted restricted stock
award of 145,327 shares was issued in the form of common stock on August 31, 2012 upon vesting.
Compensation expense was recognized on a ratable basis over the vesting period.
In December 2009, restricted stock in amounts of 2,377 and 8,421 shares related to the September 2008
and 2009 grants, respectively, were forfeited in conjunction with the retirement of an executive officer of the
Company.
In August 2010, the Board of Directors of the Company approved the fiscal year 2011 Long Term Incentive
Plan (‘‘LTIP’’) for the executive officers. The fiscal 2011 LTIP is an equity based plan with a grant date of
September 1, 2010. In addition to the stock option component described below, the plan contained the following
restricted stock components: (a) a performance and service based restricted stock grant of 32,835 shares in the
aggregate, subject to adjustment, with a vesting date of August 31, 2013, for which compensation expense was
recognized on a ratable basis over the vesting period based on quarterly probability assessments; and (b) a
time-based restricted stock grant of 16,417 shares in the aggregate, and a vesting date of August 31, 2013, for
which compensation expense was recognized on a ratable basis over the vesting period.
Based on the fiscal year 2011 financial results, 32,835 additional shares of restricted stock (total of 65,670
shares) were earned and granted subsequent to the end of fiscal year 2011 in accordance with the performance
measurement criteria. No further performance-based measurements apply to this award.
In April 2011, the Board of Directors of the Company approved a plan for issuing a time-based restricted stock
grant of 4,249 shares in the aggregate to certain non-executive officer employees, with an issue date of April 30,
2011 and a vesting date of April 30, 2014. Compensation expense is being recognized on a ratable basis over the
vesting period.
In August 2011, the Board of Directors of the Company approved the fiscal year 2012 LTIP for the executive
officers. The fiscal 2012 LTIP is an equity based plan with a grant date of September 1, 2011. In addition to the
stock option component described below, the plan contained the following restricted stock components: (a) 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, for which compensation expense is recognized on a ratable basis over the
vesting period based on quarterly probability assessments; and (b) a time-based restricted stock grant of 16,899
shares in the aggregate, and a vesting date of August 31, 2014, for which compensation expense is recognized on
a ratable basis over the vesting period.
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.
54
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands, except share and per share amounts
In August 2011, the Board of Directors of the Company approved a plan for issuing a time-based restricted
stock grant of 5,037 shares in the aggregate to certain non-executive officer employees, with an issue date of
September 1, 2011 and a vesting date of August 31, 2014. Compensation expense is being recognized on a
ratable basis over the vesting period.
In December 2011, restricted stock in the amount of 1,887 shares related to the April 2011 grant was
forfeited in conjunction with the termination of employment of a non-executive officer of the Company.
In March 2012, the Board of Directors of the Company approved a plan for issuing a time-based restricted
stock grant of 1,368 shares to a non-executive officer employee, with an issue date of March 8, 2012 and a
vesting date of August 31, 2012. Compensation expense was recognized on a ratable basis over the vesting period.
In October 2012, the Board of Directors of the Company approved the fiscal year 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. In addition to the stock option component described below, the plan contained the following
restricted stock components: (a) 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, 2014, for which compensation expense is
recognized on a ratable basis over the vesting period based on quarterly probability assessments; and (b) a
time-based restricted stock grant of 16,505 and 1,931 shares in the aggregate, with a vesting date of August 31,
2015 and August 31, 2013, respectively, for which compensation expense is recognized on a ratable basis over the
vesting period.
Based on the fiscal year 2013 financial results, 11,861 additional shares of restricted stock (total of 23,722
shares) were earned and granted subsequent to the end of fiscal year 2013 in accordance with the performance
measurement criteria. No further performance-based measurements apply to this award.
In September 2013, the Board of Directors of the Company approved the fiscal year 2014 LTIP for the
executive officers and other members of management. The 2014 LTIP is an equity based plan with a grant date of
September 1, 2013. In addition to the stock option component described below, the plan contained the following
restricted stock components: (a) performance and service-based restricted stock grant of 7,529 shares in the
aggregate, subject to adjustment, with a vesting date of August 31, 2016, for which compensation expense is
recognized on a ratable basis over the vesting period based on quarterly probability assessments; and (b) a
time-based restricted stock grant of 8,323 and 1,040 shares in the aggregate, with vesting dates of August 31,
2016 and August 31, 2014, respectively, for which compensation expense is recognized on a ratable basis over the
vesting period.
Non-Employee Board of Directors
In February 2011, non-employee members of the Board received a total grant of 11,031 shares of restricted
stock for service for the period from January 31, 2011 through January 31, 2012. The shares of restricted stock
vested at the conclusion of this service period. Compensation was recognized on a ratable basis over the twelve
month vesting period.
In February 2012, non-employee members of the Board received a total grant of 10,085 shares of restricted
stock for service for the period from January 31, 2012 through January 31, 2013. The shares of restricted stock
vested at the conclusion of the service period. Compensation was recognized on a ratable basis over the twelve
month vesting period.
Beginning in 2013, the annual retainer for non-employee members of the Board of Directors includes a
combined total of $144 of Chase Corporation common stock, in the form of restricted stock valued in conjunction
with the start of the new year of board service which generally coincides with the Company’s annual shareholder
meeting. The stock award vests one year from the date of grant. In February 2013, non-employee members of the
Board received a total grant of 7,706 shares of restricted stock for service for the period from January 31, 2013
through January 31, 2014. The shares of restricted stock vested at the conclusion of this service period.
Compensation was recognized on a ratable basis over the twelve month vesting period.
55
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands, except share and per share amounts
In February 2014, non-employee members of the Board received a total grant of 4,878 shares of restricted
stock for service for the period from January 31, 2014 through January 31, 2015. The shares of restricted stock
will vest at the conclusion of this service period. Compensation is being recognized on a ratable basis over the
twelve month vesting period.
Stock Options
In April 2011, the Board of Directors of the Company authorized a grant of stock options to certain
non-executive officer employees to purchase 15,201 shares of common stock in the aggregate with an exercise
price of $16.53 per share. The options vested in three equal annual allotments beginning on April 30, 2012 and
ending on April 30, 2014. The options will expire on April 30, 2021. Compensation expense was recognized over
the period of the award on an annual basis consistent with the vesting terms.
In August 2011, the Board of Directors of the Company approved the fiscal year 2012 LTIP for the executive
officers. The fiscal 2012 LTIP is an equity based plan with a grant date of September 1, 2011 and included options
to purchase 59,493 shares of common stock in the aggregate. Each of these options has an exercise price of
$12.77 per share, and vested in three equal annual allotments beginning on August 31, 2012 and ending on
August 31, 2014. The options will expire on August 31, 2021. Compensation expense was recognized over the
period of the award on an annual basis consistent with the vesting terms.
In August 2011, the Board of Directors of the Company authorized a grant of stock options with a grant date of
September 1, 2011 to certain non-executive officer employees to purchase 20,883 shares of common stock in the
aggregate with an exercise price of $12.77 per share. The options vested in three equal annual allotments
beginning on August 31, 2012 and ending on August 31, 2014. The options will expire on August 31, 2021.
Compensation expense was recognized over the period of the award on an annual basis consistent with the vesting
terms.
In March 2012, the Board of Directors of the Company authorized a grant of stock options to a non-executive
officer employee to purchase 6,630 shares of common stock with an exercise price of $14.62 per share. The
options will vest in three equal annual allotments beginning on March 8, 2013 and ending on March 8, 2015. The
options will expire on March 8, 2022. Compensation expense is being recognized over the period of the award on
an annual basis consistent with the vesting terms.
In October 2012, the Board of Directors of the Company approved the fiscal year 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 included 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.
In September 2013, the Board of Directors of the Company approved the fiscal year 2014 LTIP for the
executive officers and other members of management. The 2014 LTIP is an equity-based plan with a grant date of
September 1, 2013 and included options to purchase 25,969 shares of common stock in the aggregate with an
exercise price of $29.72 per share. The options will vest in three equal annual allotments beginning on August 31,
2014 and ending on August 31, 2016. The options will expire on August 31, 2023. Compensation expense is
recognized over the period of the award on an annual basis consistent with the vesting terms.
56
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands, except share and per share amounts
The following table summarizes information about stock options outstanding as of August 31, 2014:
Exercise Prices
Options Outstanding
Options Exercisable
Number
Outstanding
Weighted Avg.
Remaining
Contractual
Life
Weighted
Average
Exercise Price
Aggregate
Intrinsic
Value
Number
Weighted
Average
Exercisable Exercise Price
Aggregate
Intrinsic
Value
$11.15 . . . . . . . . . . . . . . . .
$12.70 . . . . . . . . . . . . . . . .
$12.77 . . . . . . . . . . . . . . . .
$14.62 . . . . . . . . . . . . . . . .
$16.00 . . . . . . . . . . . . . . . .
$16.53 . . . . . . . . . . . . . . . .
$29.72 . . . . . . . . . . . . . . . .
56,250
62,425
74,130
4,420
43,964
196,743
25,969
5.0 years
6.0 years
7.0 years
7.5 years
8.1 years
4.0 years
9.0 years
463,901
5.6 years
$11.15
12.70
12.77
14.62
16.00
16.53
29.72
$15.43
$1,370
1,424
1,685
92
857
3,732
150
56,250
62,425
47,333
—
14,655
196,743
—
$9,310
377,406
$11.15
12.70
12.77
14.62
16.00
16.53
29.72
$14.60
$1,370
1,423
1,076
—
286
3,732
—
$7,887
All stock option plans have been approved by the Company’s stockholders. Options are granted with an exercise
price that is equal to the closing market value of the Company’s common stock on the day preceding the grant
date.
A summary of the transactions of the Company’s stock option plans for the years ended August 31, 2014,
2013 and 2012 is presented below:
Officers
and
Employees
Weighted
Average
Exercise Price
Options outstanding as of August 31, 2011 . . . . . . . . . . . . . . . . . .
477,626
$14.34
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited or cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
87,006
—
(6,750)
12.91
—
16.53
Options outstanding at August 31, 2012 . . . . . . . . . . . . . . . . . . . .
557,882
$14.23
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited or cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
43,964
(49,042)
—
16.00
11.46
—
Options outstanding at August 31, 2013 . . . . . . . . . . . . . . . . . . . .
552,804
$14.48
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited or cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25,969
(114,872)
—
29.72
14.06
—
Options outstanding at August 31, 2014 . . . . . . . . . . . . . . . . . . . .
463,901
$15.43
Options exercisable at August 31, 2014 . . . . . . . . . . . . . . . . . . . .
377,406
$14.60
The weighted average grant date fair value of options granted in the years ended August 31, 2014, 2013 and
2012 was $10.52, $4.23 and $3.12 per share, respectively.
The total pretax intrinsic value of stock options exercised was $2,153 and $678 for the years ended
August 31, 2014 and 2013, respectively.
Excluding the common stock currently reserved for issuance upon exercise of the 463,901 outstanding options,
there are 1,267,007 shares of common stock available for future issuance under the Company’s equity
compensation plans.
57
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands, except share and per share amounts
The income tax benefit realized from stock options exercised, vesting of restricted stock and issuance of stock
pursuant to grants of restricted stock units was $1,324, $622 and $209 for the years ended August 31, 2014,
2013 and 2012, respectively.
As of August 31, 2014, 60,957 shares of restricted stock were outstanding with exercise prices ranging from
$16.00 - $29.72.
As of August 31, 2014, unrecognized expense related to all stock based compensation described above is
$690, which will be recognized over the next two fiscal years.
Note 11—Segment Data
The Company is organized into two operating segments, an Industrial Materials segment and a Construction
Materials segment. The segments are 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, laminates for the 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, cover tapes essential to delivering semiconductor components via tape and reel packaging, and wind energy
composite materials and elements. Additionally, the Industrial Materials segment includes a joint venture which
produces glass-based strength elements designed to allow fiber optic cables to withstand mechanical and
environmental strain and stress.
The Construction Materials segment comprises 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.
58
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands, except share and per share amounts
The following tables summarize information about the Company’s segments:
Years Ended August 31,
2014
2013
2012
Revenues
Industrial Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$169,657
54,349
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$224,006
Income before taxes
Industrial Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 40,015
8,157
Total for reportable segments . . . . . . . . . . . . . . . . . . . . . .
Corporate and common costs . . . . . . . . . . . . . . . . . . . . . . . .
48,172
(7,682)
$163,474
52,588
$216,062
$ 26,400
6,463
32,863
(7,053)
$ 95,988
52,931
$148,919
$ 17,643
4,913
22,556
(8,560)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 40,490
$ 25,810
$ 13,996
Includes the following costs by segment:
Industrial Materials
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction Materials
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
959
4,650
3,094
184
982
1,727
$
$
928
4,914
3,082
366
921
1,684
$
$
106
2,261
999
292
902
1,690
Total assets
Industrial Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$127,820
50,972
$133,110
48,573
Total for reportable segments . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate and common assets . . . . . . . . . . . . . . . . . . . . . . . . . .
178,792
66,753
181,683
42,677
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$245,545
$224,360
As of August 31,
2014
2013
Note 12—Export Sales and Foreign Operations
Export sales from continuing domestic operations to unaffiliated third parties were $21,212, $22,827 and
$21,204 for the years ended August 31, 2014, 2013 and 2012, respectively. Export sales had a slight decline in
fiscal 2014 as compared to fiscal 2013 primarily due to the prior year’s inclusion of some large export shipments of
our C.I.M. products that were not repeated in fiscal 2014.
The Company’s products are sold world-wide. For the years ended August 31, 2014, 2013 and 2012, sales
from its operations located in the United Kingdom accounted for 10%, 7% and 12%, respectively of the Company’s
total revenues. No other foreign geographic area accounted for more than 10% of total revenues for any of the
years ended August 31, 2014, 2013 and 2012.
As of August 31, 2014 and 2013, 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 $4,349 and $4,063, respectively, located in the United Kingdom. These balances
exclude goodwill and intangibles of $9,924 and $10,333, as of August 31, 2014 and 2013, respectively. No
59
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands, except share and per share amounts
foreign geographic area accounted for more than 10% of the Company’s total assets as of August 31, 2014 and
2013.
Note 13—Supplemental Cash Flow Data
Supplemental cash flow information for the years ended August 31, 2014, 2013 and 2012 is as follows:
Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$15,084
$9,913
$ 5,561
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1,224
$1,545
Non-cash Investing and Financing Activities
Common stock received for payment of stock option exercises . . . . . . . . . . . . .
Property, plant & equipment additions included in accounts payable . . . . . . . . . .
$ 1,550
91
$
$ 488
$ 112
$
$
$
352
—
117
2014
2013
2012
Sale of Insulfab product line
Current assets (excluding cash) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (3,153)
(1,062)
3
(5,706)
Cash received from sale of product line, net of transaction costs . . . . . . . . . .
$ 9,918
Acquisition of Neptco Inc
Current assets (excluding cash) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . .
Long term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . .
Minority interest of joint venture partner
Cash provided through operating cash and increase in debt . . . . . . . . . . . . . .
$ 24,948
18,657
19,668
23,165
(10,841)
(736)
(11,051)
(1,593)
$(62,217)
Note 14—Acquisitions
NEPTCO Incorporated
In the fourth quarter of fiscal 2012, Chase acquired 100% of the capital stock of 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.
The total acquisition cost, net of cash received, was $62,217, subject to the finalization of purchase
accounting, which was completed in the fourth quarter of fiscal 2013 and did not have a significant impact on the
financial statements of the Company. The acquisition was funded through a five year term debt bank financing
arrangement led and arranged by Bank of America, with participation from RBS Citizens.
The effective date for this acquisition was June 27, 2012 and the results of this acquisition have been included
in the Company’s financial statements since then. The acquisition was accounted for as a business combination
under ASC Topic 805, ‘‘Business Combinations.’’ In accordance with this accounting standard, the Company
expensed $3,206 of acquisition related costs during the year ended August 31, 2012.
60
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands, except share and per share amounts
The acquisition cost has been allocated to the acquired tangible and identifiable intangible assets and liabilities
assumed based on their fair values as of the date of the acquisition:
Assets & Liabilities
Current assets (net of cash acquired) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant & equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-controlling interest of joint venture partner . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount
$ 24,948
18,657
19,668
23,165
(10,841)
(736)
(11,051)
(1,593)
Total purchase price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 62,217
The excess of the purchase price over the net tangible and intangible assets acquired resulted in goodwill of
$19,668 that is largely attributable to the synergies and economies of scale from combining the operations and
technologies of Chase and NEPTCO, particularly as it pertains to the expansion of the Company’s product and
service offerings, the established workforce, and marketing efforts. This goodwill is not deductible for income tax
purposes.
All assets, including goodwill, acquired as part of NEPTCO are included in the Industrial Materials segment.
Identifiable intangible assets purchased with this transaction are as follows:
Intangible Asset
Amount
Useful life
Customer Relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trade names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Backlog . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid patent costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$15,330
4,988
2,267
20
560
10 years
6 years
8 years
4 months
10 years (1)
Total intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$23,165
(1) To be amortized once placed in service
All acquisitions have been accounted for as purchase transactions and the operations of the acquired entity or
assets are included in consolidated operations from the effective date.
Acquisition of outstanding non-controlling membership interest in NEPTCO JV LLC
On October 31, 2014, the Company purchased the 50% non-controlling membership interest of NEPTCO JV
LLC (the ‘‘JV’’) owned by its now-former joint venture partner, an otherwise unrelated party. The purchase
consideration due at the time of closing was not deemed to be material to the Company, and is subject to certain
contingent adjustments based on certain future events related to the JV. The Company does not believe that these
contingent adjustments will be material to the Company. The purchase was funded entirely with available cash on
hand. Because of the Company’s controlling financial interest, the JV’s assets, liabilities and results of operations
have been consolidated within the Company’s consolidated financial statements since June 27, 2012, the date the
Company acquired NEPTCO. Given the Company’s 100% ownership as of October 31, 2014, in subsequent periods
the Company will continue to fully consolidate assets, liabilities and results of operations, but will no longer record
an offsetting amount for a non-controlling interest. See Note 15 for additional information on the JV.
61
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands, except share and per share amounts
Note 15—Joint Venture
The NEPTCO JV LLC (‘‘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 was 50% owned by each member, was managed and operated on a day-to-day
basis by NEPTCO. The JV operates out of the Company’s Granite Falls, NC facility.
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 consolidated within the Company’s consolidated financial statements
since June 27, 2012, the date the Company acquired NEPTCO. An offsetting amount equal to 50% of net assets
and net income (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 JV.
At August 31, 3014 and 2013, the following amounts were consolidated in the Company’s balance sheets
related to the JV:
Assets
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities and net assets
August 31,
2014
2013
$ 282
1,495
1,397
255
350
559
$ 394
1,106
1,510
283
448
706
$4,338
$4,447
Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . . . . . . .
Due to Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 616
1,847
$ 679
1,677
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,463
$2,356
Net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,875
$2,091
Non-controlling interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 938
$1,046
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
retained 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.
See Note 14 for additional information regarding the Company’s October 2014 acquisition of the 50%
outstanding non-controlling membership interest in NEPTCO JV LLC.
Under 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 has agreed to purchase a minimum of 80% of its total glass fiber requirements from the other joint
venture partner. Additionally, the JV has agreed 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 $1,610 and $1,818 for the years ended August 31,
2014 and 2013, respectively. The JV had amounts due to the other joint venture partner of $394 and $378 at
August 31, 2014 and 2013, respectively.
62
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands, except share and per share amounts
Note 16—Fair Value Measurements
The Company generally 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 Company has determined that it does not have any financial liabilities measured at fair value
other than long-term debt and that its financial assets are currently all classified within Level 1 in the fair value
hierarchy. The financial assets classified as Level 1 as of August 31, 2014 and 2013 represent investments which
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 August 31, 2014 and 2013:
Fair value
measurement
date
Total
Fair value measurement category
Quoted prices
in active
markets
(Level 1)
Significant
other observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
Assets:
Restricted investments . . . . . . . . . .
Restricted investments . . . . . . . . . .
August 31, 2014
August 31, 2013
$1,256
$1,094
$1,216
$1,094
$40
$ —
$—
$—
The following table presents the fair values of the Company’s long-term debt as of August 31, 2014 and 2013
which is recorded at its carrying amount:
Fair value
measurement
date
Total
Fair value measurement category
Quoted prices
in active
markets
(Level 1)
Significant
other observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
Liabilities:
Long-term debt . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . .
August 31, 2014
August 31, 2013
$58,800
$64,400
$—
$—
$58,800
$64,400
$—
$—
The carrying value of the long-term debt approximates its fair value, as the interest rate is set based on the
movement of the underlying market rates.
63
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands, except share and per share amounts
Note 17—Net Income Per Share
The determination of earnings per share under the two-class method is as follows:
Years Ended August 31,
2014
2013
2012
Net income attributable to Chase Corporation . . . . . . . . . . . . . . . . .
Less: Allocated to participating securities . . . . . . . . . . . . . . . . . . . .
Available to common shareholders . . . . . . . . . . . . . . . . . . . . . . . .
$
$
26,631
449
26,182
$
$
17,214
396
16,818
$
$
9,338
295
9,043
Basic weighted averages shares outstanding . . . . . . . . . . . . . . . . . .
Additional dilutive common stock equivalents . . . . . . . . . . . . . . . . .
8,952,026
213,640
8,860,972
117,466
8,761,262
25,488
Diluted weighted averages shares outstanding . . . . . . . . . . . . . . . . .
9,165,666
8,978,438
8,786,750
Net income available to common shareholders, per common and
common equivalent share
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
2.92
2.86
$
$
1.90
1.87
$
$
1.03
1.03
For the year ended August 31, 2012, stock options to purchase 265,081 shares of common stock 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 common stock and thus would be anti-dilutive. No stock
options were excluded from the calculation for the years ended August 31, 2014 and 2013. Included in the
calculation of dilutive common stock equivalents are the unvested portion of restricted stock, restricted stock units
and stock options.
Note 18—Sale of Insulfab Product Line
On October 7, 2013, the Company sold substantially all of its property and assets, including intellectual
property, comprising the Insulfab(cid:3) product line, to an unrelated third party (‘‘Buyer’’). The Insulfab product line is
primarily focused on manufacturing high quality, engineered barrier laminates used in aerospace applications. The
sale proceeds of $7,394 were subject to certain post-closing adjustments based on the change in the final net
book value compared to the bid date net book value. In the quarter ending November 30, 2013, management
determined these post-closing adjustments resulted in an increase in the sale proceeds of $2,516 based on the
increase of inventory sold to the Buyer at closing. This adjustment was settled and paid by the Buyer to the
Company in the quarter ending February 28, 2014, net of amounts held in escrow.
This transaction resulted in a pre-tax book gain of $5,706 ($3,709 after-tax gain) which was recorded in the
quarter ending November 30, 2013. The portion of the sale price held in escrow of $739 is recorded as a current
asset (Due from sale of product line) as of August 31, 2014, and is available to resolve any submitted claims or
adjustments up to 18 months from the closing date of the Insulfab sale.
The following table summarizes information about the Insulfab product line as of October 7, 2013 and
August 31, 2013:
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property & equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
October 7, 2013
August 31, 2013
$3,153
1,062
(3)
$4,212
$ 885
1,060
(40)
$1,905
As a result of the efforts to market and sell this product line beginning in the fourth quarter of fiscal 2013, the
Company had classified the Insulfab assets (including inventory and equipment) as assets held for sale as of
August 31, 2013. This product line and related assets were part of the Company’s Industrial Materials segment.
64
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands, except share and per share amounts
Note 19—Contingencies
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 cashflows, 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 20—Related Party Agreements
As part of the Company’s purchase of NEPTCO in June 2012, it also acquired NEPTCO’s 50% ownership stake
in its financially-controlled joint venture, NEPTCO JV LLC (‘‘JV’’). The JV was originally formed by NEPTCO and a joint
venture partner, Owens Corning, in 2003, whereby each member’s fiber optic strength elements businesses were
combined. Prior to the Company’s October 31, 2014 purchase of the outstanding 50% non-controlling membership
interest from its now-former joint venture partner, this venture, which was 50% owned by each member, was
managed and operated on a day-to-day basis by NEPTCO. While operating under the joint ownership of the
members, the JV had agreed to purchase a minimum of 80% of its total glass fiber requirements from Owens
Corning. Additionally, the JV had agreed to purchase private-label products exclusively from an affiliate of the joint
venture partner; however, the JV was not subject to a minimum purchase requirement on private-label products.
These purchase agreements were terminated on October 31, 2014. Purchases from the joint venture partner
totaled $1,610 and $1,818 for the years ended August 31, 2014 and 2013, respectively. The JV had amounts due
to the other joint venture partner of $394 and $378 at August 31, 2014 and 2013, respectively. Please see
Notes 14 and 15 to the Company’s Consolidated Financial Statements for additional information on the JV.
Note 21—Selected Quarterly Financial Data (Unaudited)
The following table presents unaudited operating results for each of the Company’s quarters in the years ended
August 31, 2014 and 2013:
Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross Profit on Sales . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to Chase Corporation . . . . . . .
Net income available to common shareholders, per
common and common equivalent share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross Profit on Sales . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to Chase Corporation . . . . . . .
Net income available to common shareholders, per
common and common equivalent share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal Year 2014 Quarters
First
Second
Third
Fourth
Year
$53,655
18,177
$ 8,775
$50,412
16,461
$ 4,520
$56,973
19,905
$ 6,324
$59,994
21,298
$ 7,012
$221,034
75,841
$ 26,631
$ 0.96
$ 0.94
$ 0.50
$ 0.48
$ 0.69
$ 0.68
$ 0.77
$ 0.75
$
$
2.92
2.86
Fiscal Year 2013 Quarters
First
Second
Third
Fourth
Year
$52,976
15,705
$ 3,540
$47,714
14,247
$ 2,644
$55,096
18,264
$ 5,134
$57,862
19,398
$ 5,896
$213,648
67,614
$ 17,214
$ 0.39
$ 0.39
$ 0.29
$ 0.29
$ 0.57
$ 0.56
$ 0.65
$ 0.64
$
$
1.90
1.87
Note: Quarterly earnings per share amounts may not sum to earnings per share for the year due to rounding.
65
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands, except share and per share amounts
Note 22—Valuation and Qualifying Accounts
The following table sets forth activity in the Company’s accounts receivable reserve:
Year ended
Balance at
Beginning of
Year
Charges to
Operations
Deductions to
Reserves
Balance at
End of Year
August 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
August 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
August 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$696
$817
$473
$ 54
$135
$459
$ (80)
$(256)
$(115)
$670
$696
$817
The charges to operations for the fiscal year ended August 31, 2012 include $94 recorded as part of the
NEPTCO purchase accounting.
The following table sets forth activity in the Company’s warranty reserve:
Year ended
Balance at
Beginning of
Year
Charges to
Operations
Deductions to
Reserves
Balance at
End of Year
August 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
August 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
August 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$248
$249
$362
$ 20
—
$157
2
$
$
(1)
$(270)
$270
$248
$249
Note 23—Accumulated Other Comprehensive Income
The changes in accumulated other comprehensive income (loss), net of tax, were as follows:
Restricted
Investments
Change in Funded
Status of Pension
Plan
Foreign Currency
Translation
Adjustment
Total
Balance at August 31, 2012 . . . . . . . . . . . . . . . . .
$ 59
$(3,779)
$(1,310)
$(5,030)
Other comprehensive gains (losses) before
reclassifications . . . . . . . . . . . . . . . . . . . . . . . .
Reclassifications to net income of previously deferred
(gains) losses . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss)
. . . . . . . . . . . .
117
(32)
85
(898)
(419)
(1,200)
1,099
201
—
(419)
1,067
(133)
Balance at August 31, 2013 . . . . . . . . . . . . . . . . .
$144
$(3,578)
$(1,729)
$(5,163)
Other comprehensive gains (losses) before
reclassifications . . . . . . . . . . . . . . . . . . . . . . . .
Reclassifications to net income of previously deferred
(gains) losses . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss)
. . . . . . . . . . . .
106
(41)
65
Balance at August 31, 2014 . . . . . . . . . . . . . . . . .
$209
(1,796)
589
(1,207)
$(4,785)
2,055
—
2,055
365
548
913
$
326
$(4,250)
66
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In thousands, except share and per share amounts
The following table summarizes the reclassifications from accumulated other comprehensive income (loss) to
the consolidated statements of income:
Amount of Gain (Loss)
Reclassified from Accumulated
Other Comprehensive Income
(Loss) into Income
Year Ended
Year Ended
August 31,2014 August 31,2013
$ (63)
22
$ (41)
$ (51)
19
$ (32)
Location of Gain (Loss) Reclassified from
Accumulated Other Comprehensive Income (Loss)
into Income
Selling, general and administrative expenses
Gains on Restricted Investments:
Realized gain on sale of restricted
investments . . . . . . . . . . . . . . . .
Tax expense . . . . . . . . . . . . . . . . .
Gain net of tax . . . . . . . . . . . . . . . . .
Loss on Funded Pension Plan
adjustments:
Change in funded status of pension
plan . . . . . . . . . . . . . . . . . . . . .
$ 80
$ 521
Cost of products and services sold
Change in funded status of pension
plan . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .
Tax benefit
Loss net of tax . . . . . . . . . . . . . . . . .
Total net loss reclassified for the period .
$ 820
(311)
$ 589
$ 548
$1,169
(591)
$1,099
$1,067
Selling, general and administrative expenses
67
ITEM 9—CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A—CONTROLS AND PROCEDURES
DISCLOSURE CONTROLS AND PROCEDURES
The Company maintains disclosure controls and procedures that are designed to ensure that information
required to be disclosed in the Company’s reports under the Securities Exchange Act of 1934 (‘‘Exchange Act’’), as
amended, is recorded, processed, summarized and reported within the time periods specified in the Commission’s
rules and forms and that such information is accumulated and communicated to the Company’s management,
including its 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.
The Company carries out a variety of ongoing procedures, under the supervision and with the participation of
the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, to evaluate
the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on the
foregoing, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s
disclosure controls and procedures were effective at a reasonable assurance level as of the end of the period
covered by this report.
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal control over financial
reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under
the Exchange Act as a process designed by, or under the supervision of, our principal executive and principal
financial officers, or persons performing similar functions, and effected by our board of directors, management and
other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with U.S. GAAP.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
Under the supervision and with the participation of management, including the Chief Executive Officer and Chief
Financial Officer, the Company conducted an evaluation of the effectiveness of the Company’s internal control over
financial reporting based on the framework in ‘‘Internal Control—Integrated Framework (1992)’’ issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment,
management has concluded that the internal control over financial reporting was effective as of August 31, 2014.
PricewaterhouseCoopers LLP, the independent registered public accounting firm that audited and reported on
our consolidated financial statements contained herein, has audited the effectiveness of our internal control over
financial reporting as of August 31, 2014, and has issued an attestation report on the effectiveness of our internal
control over financial reporting included herein.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
Effective April 1, 2013, the Company began the process of implementing a single enterprise resource planning
(‘‘ERP’’) computer system world-wide. During the past 17 months, the Company expanded its existing ERP modules
to all of its domestic locations which resulted in changes to the Company’s processes and procedures affecting its
internal control over financial reporting. The Company expects this process to be completed by December 2014 as
it continues with its plan to deploy more effective and efficient processes to support the Company’s financial
reporting as it continues to grow in size and scale. Otherwise, there have not been any changes in the Company’s
internal control over financial reporting during its most recent fiscal year that have materially affected, or are
reasonably likely to materially affect, its internal control over financial reporting.
68
ITEM 9B—OTHER INFORMATION
On August 20, 2014, the Compensation and Management Development Committee of the Board of Directors
of Chase Corporation (the ‘‘Company’’) approved the Chase Corporation Annual Incentive Plan and the Chase
Corporation Long Term Incentive Plan, in each case for the Company’s fiscal year ending August 31, 2015.
Consistent with prior years, the Annual Incentive Plan provides participating executive team members the
opportunity for cash bonuses based on the Company achieving a preset annual goal or target relating to earnings
before interest, taxes, depreciation and amortization (EBITDA) for fiscal 2015. For each participating executive team
member, target awards are valued at a specified percentage of base salary. The threshold for any payments to be
made under the plan is 90% of the EBITDA target, at which point 50% of the target bonus would be paid. The
maximum award of 200% of the target would be paid if actual EBITDA under the plan equals or exceeds 120% of
the target.
Also consistent with prior years, the Long Term Incentive Plan provides the opportunity for participating
executive team members to participate in the long term growth of the Company through up to three types of equity
awards: performance-based restricted stock awards, time-based restricted stock awards, and stock option awards.
For each participating executive team member, total awards under the fiscal 2015 Long Term Incentive Plan are
valued at a specified percentage of base salary. For the President and Chief Operating Officer, the performance
share portion represents 50% of the total award (at target) and the time-based restricted stock and stock option
awards represents 25% each. For the Chief Financial Officer, the performance share portion represents 67% of the
total award (at target) and the time-based restricted stock awards represent the remaining 33%. The performance-
based restricted stock is granted subject to achieving certain preset annual goals relating to the Company’s earnings
per share (EPS) for fiscal 2015, and can be adjusted up or down depending on performance. For any of the
performance-based shares to vest, 90% of the EPS target must be met, at which point 50% of the award would
vest. The full award would vest at 100% of the EPS target, and the award may be adjusted upward to a maximum
of 200% of the target award at 120% of the EPS target. For purposes of the plan, EPS is determined using the
number of weighted average diluted shares outstanding on August 31, 2014, the last day of fiscal year 2014. The
time-based restricted stock awards will vest on the last day of the Company’s 2017 fiscal year if continued
employment conditions are met. Stock options are valued using a Black-Scholes calculation, and vest in three equal
annual installments beginning on the last day of fiscal 2015.
The above summaries of the Chase Corporation Annual Incentive Plan and the Chase Corporation Long Term
Incentive Plan are qualified in their entirety by the copies of such plans filed as exhibits to this Annual Report on
Form 10-K and incorporated herein by this reference.
69
ITEM 10—DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
PART III
The information required by Item 10 of Form 10-K, relating to Directors of the Company, compliance with the
reporting obligations under Section 16(a) of the Exchange Act, the Company’s code of ethics applicable to senior
management, procedures for shareholder nominations to the Company’s Board of Directors, and the Company’s
Audit Committee is incorporated by reference from the information contained in the Definitive Proxy Statement for
the Annual Meeting of Stockholders, which is expected to be filed within 120 days after the Company’s fiscal year
ended August 31, 2014. Information regarding the Company’s executive officers found in the section captioned
‘‘Executive Officers of the Registrant’’ in Item 4A of Part I hereof is also incorporated by reference into this Item 10.
ITEM 11—EXECUTIVE COMPENSATION
The information required by Item 11 of Form 10-K, relating to executive and director compensation and certain
matters relating to the Company’s Compensation and Management Development Committee, is incorporated by
reference from the information contained in the Definitive Proxy Statement for the Annual Meeting of Stockholders,
which is expected to be filed within 120 days after the Company’s fiscal year ended August 31, 2014.
ITEM 12—SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by Item 12 of Form 10-K, relating to the stock ownership of certain beneficial owners
and management, is incorporated by reference from the information contained in the Definitive Proxy Statement for
the Annual Meeting of Stockholders, which is expected to be filed within 120 days after the Company’s fiscal year
ended August 31, 2014.
The following table summarizes the Company’s equity compensation plans as of August 31, 2014. Further
details on the Company’s equity compensation plans are discussed in the notes to the consolidated financial
statements. The adoption of each of the Company’s equity compensation plans was approved by its shareholders.
Number of shares of Chase
common stock to be
issued upon the exercise
of outstanding options
Weighted average
exercise price
of outstanding
options
Number of shares of Chase
common stock remaining
available for future
issuance
2001 Senior Management Stock Plan . . .
2005 Equity Incentive Plan . . . . . . . . . .
2013 Equity Incentive Plan . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . .
254,136
209,765
—
463,901
$15.26
15.64
—
$15.43
—
67,007
1,200,000
1,267,007
ITEM 13—CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by Item 13 of Form 10-K, relating to transactions with related persons and the
independence of members of the Company’s Board of Directors, is incorporated by reference from the information
contained in the Definitive Proxy Statement for the Annual Meeting of Stockholders, which is expected to be filed
within 120 days after the Company’s fiscal year ended August 31, 2014.
ITEM 14—PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by Item 14 of Form 10-K, relating to fees paid to the Company’s independent
registered public accounting firm and pre-approval policies of the Company’s Audit Committee, is incorporated by
reference from the information contained in the Definitive Proxy Statement for the Annual Meeting of Stockholders,
which is expected to be filed within 120 days after the Company’s fiscal year ended August 31, 2014.
70
ITEM 15—EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)(1) and (2) Financial Statements and Schedules:
PART IV
The financial statements are set forth under Item 8 of this Annual Report on Form 10-K. Financial statement
schedules have been omitted since they are either not required, not applicable, or the information is otherwise
included.
(a)(3) Exhibit Index:
Exhibit
Number
3.1.1
Articles of Organization of Chase Corporation (incorporated by reference from Exhibit 3.1 to the
Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2004, filed on
November 24, 2004 (the ‘‘2004 Form 10-K’’)).
Description
3.1.2
Articles of Amendment to Articles of Organization of Chase Corporation (incorporated by reference from
Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended February 29,
2008, filed on April 9, 2008).
3.2 By-Laws (incorporated by reference from Exhibit 3.2 to the Company’s 2004 Form 10-K).
10.1
Amended and Restated Stock Agreement dated as of August 31, 2004, between the Company and
Peter R. Chase (incorporated by reference to Exhibit 10 to the Company’s current report on Form 8-K
filed on September 2, 2004).*
10.2 Chase Corporation Employee’s Supplemental Pension Plan effective January 1, 2008 (incorporated by
reference from Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended
May 31, 2008, filed on July 10, 2008).*
10.3 Chase Corporation Employee’s Supplemental Savings Plan effective January 1, 2008 (incorporated by
reference from Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended
May 31, 2008, filed on July 10, 2008).*
10.4 Chase Corporation Non-Qualified Retirement Savings Plan for the Board of Directors, amended and
restated effective January 1, 2009 (incorporated by reference from Exhibit 10.1 to the Company’s
Quarterly Report on Form 10-Q for the quarter ended February 28, 2009, filed on April 9, 2009).*
10.5.1 Severance Agreement between the Company and Peter R. Chase dated July 10, 2006 (incorporated by
reference from Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended
May 31, 2006, filed on July 17, 2006).*
10.5.2 Severance Agreement between the Company and Adam P. Chase dated October 1, 2008 (incorporated
by reference from Exhibit 10.6.3 to the Company’s Annual Report on Form 10-K for the fiscal year
ended August 31, 2009, filed on November 13, 2009 (the ‘‘2009 Form 10-K’’).*
10.5.3 Severance Agreement between the Company and Kenneth L. Dumas dated July 10, 2006 (incorporated
by reference from Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended
February 28, 2007, filed on April 16, 2007).*
10.5.4 Offer letter dated August 19, 2014 by and between Chase Corporation and Kenneth J. Feroldi.*
10.6.1 Chase Corporation 2001 Senior Management Stock Plan (incorporated by reference from Exhibit 10.44
to the Company’s 2004 Form 10-K).*
10.6.2
10.7.1
Form of award issued under Chase Corporation 2001 Senior Management Stock Plan (incorporated by
reference from Exhibit 10.45 to the Company’s 2004 Form 10-K).*
2005 Equity Incentive Plan of Chase Corporation (incorporated by reference from Exhibit 10.1 to the
Company’s current report on Form 8-K filed on February 9, 2006).*
71
Exhibit
Number
10.7.2
10.7.3
10.7.4
Description
Form of restricted stock unit award issued under the Chase Corporation 2005 Incentive Plan for
non-executive members of the Board of Directors (incorporated by reference from Exhibit 10.4 to the
Company’s Quarterly Report on Form 10-Q for the period ended February 28, 2007, filed on April 16,
2007).*
Form of restricted stock unit award issued under the Chase Corporation 2005 Incentive Plan for
members of Executive Management (incorporated by reference from Exhibit 10.5 to the Company’s
Quarterly Report on Form 10-Q for the period ended February 28, 2007, filed on April 16, 2007).*
Form of restricted stock agreement issued under the Chase Corporation 2005 Incentive Plan for
non-executive members of the Board of Directors (incorporated by reference from Exhibit 10.3 to the
Company’s Quarterly Report on Form 10-Q for the period ended February 29, 2008, filed on April 9,
2008).*
10.7.5
Form of restricted stock agreement issued under the Chase Corporation 2005 Incentive Plan for
members of Executive Management (incorporated by reference from Exhibit 10.1 to the Company’s
Quarterly Report on Form 10-Q for the period ended November 30, 2007, filed on January 9, 2008).*
10.7.6
Form of stock option award issued under the Chase Corporation 2005 Incentive Plan (incorporated by
reference from Exhibit 10.11.6 to the Company’s 2009 Form 10-K).*
10.8
2013 Equity Incentive Plan of Chase Corporation (incorporated by reference from Exhibit A to the
Company’s 2012 Proxy Statement filed on December 21, 2013).*
10.9.1 Split Dollar Agreement between Chase Corporation and Peter R. Chase dated January 10, 2005
(incorporated by reference from Exhibit 10.2 to the Company’s current report on Form 8-K filed on
January 14, 2005).*
10.9.2 Split Dollar Endorsement dated January 10, 2005 (incorporated by reference from Exhibit 10.3 to the
Company’s current report on Form 8-K filed on January 14, 2005).*
10.10.1
FY 2014 Chase Corporation Annual Incentive Plan (incorporated by reference from Exhibit 99.1 to the
Company’s current report on Form 8-K filed on October 11, 2013).*
10.10.2
FY 2014 Chase Corporation Long Term Incentive Plan (incorporated by reference from Exhibit 99.2 to
the Company’s current report on Form 8-K filed on October 11, 2013).*
10.10.3
FY 2015 Chase Corporation Annual Incentive Plan.*
10.10.4
FY 2015 Chase Corporation Long Term Incentive Plan.*
10.11.1
10.11.2
Endorsement Split-Dollar Agreement among the Company, Edward L. Chase, and Sarah Chase as
trustee of the ELC Irrevocable Life Insurance Trust (incorporated by reference from Exhibit 10.25 to the
Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 1998, filed on
November 27, 1998).
Amendment to Endorsement Split-Dollar Agreement between the Company and Sarah Chase as trustee
of the ELC Irrevocable Life Insurance Trust (incorporated by reference from Exhibit 10.2 to the
Company’s Quarterly Report on Form 10-Q for the period ended February 28, 2009, filed on April 9,
2009).
10.12
Asset Purchase Agreement dated December 18, 2009 between Chase Corporation and Grace
Construction Products Limited (incorporated by reference from Exhibit 10.1 to the Company’s Quarterly
Report on Form 10-Q for the quarter ended February 28, 2010, filed on April 9, 2010).
10.13.1 Credit Agreement dated as of June 27, 2012 by and among Chase Corporation, NEPTCO Incorporated,
Bank of America, N.A. and the Guarantors and Lenders party thereto (incorporated by reference from
Exhibit 10.1 to the Company’s current report on Form 8-K filed July 3, 2012).
72
Exhibit
Number
10.13.2
First Amendment dated November 14, 2012 to Credit Agreement dated June 27, 2012 by and among
Chase Corporation, NEPTCO Incorporated, Bank of America, N.A. and the Guarantors and Lenders party
thereto (incorporated by reference from Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q
for the quarter ended November 30, 2012, filed on January 9, 2013).
Description
21 Subsidiaries of the Registrant
23.1 Consent of Independent Registered Public Accounting Firm—PricewaterhouseCoopers LLP
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.
(b) See (a)(3) above.
(c) None.
73
Pursuant to the requirements of Section 13 or 15(d) 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.
SIGNATURES
Chase Corporation
By:
/s/ PETER R. CHASE
Peter R. Chase,
Chairman and Chief Executive Officer
November 14, 2014
By:
/s/ KENNETH J. FEROLDI
Kenneth J. Feroldi
Treasurer and Chief Financial Officer
November 14, 2014
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ PETER R. CHASE
Peter R. Chase
/s/ KENNETH J. FEROLDI
Kenneth J. Feroldi
/s/ ADAM P. CHASE
Adam P. Chase
/s/ MARY CLAIRE CHASE
Mary Claire Chase
/s/ LEWIS P. GACK
Lewis P. Gack
/s/ GEORGE M. HUGHES
George M. Hughes
/s/ RONALD LEVY
Ronald Levy
/s/ THOMAS WROE, JR.
Thomas Wroe, Jr.
Chairman and Chief Executive Officer (Principal
executive officer)
November 14, 2014
Treasurer and Chief Financial Officer (Principal
financial officer and principal accounting officer)
November 14, 2014
Director, President & Chief Operating Officer
November 14, 2014
Director
Director
Director
Director
Director
74
November 14, 2014
November 14, 2014
November 14, 2014
November 14, 2014
November 14, 2014
CHASE Corporation
Officers
Peter R. Chase
Chairman & Chief Executive Officer
Adam P. Chase
President & Chief Operating Officer
Kenneth J. Feroldi
Treasurer & Chief Financial Officer
George M. Hughes
Corporate Secretary
Legal Counsel
Hughes & Associates
P.O. Box 590321
Newton Center, MA 02459
Independent Registered
Public Accounting Firm
PricewaterhouseCoopers LLP
125 High Street
Boston, MA 02110
Registrar &
Transfer Agent
American Stock Transfer &
Trust Company
Operations Center
6201 15th Avenue
Brooklyn, NY 11219
CHASE CORPORATION
Executive Offices
Bethany House
26 Summer Street
Bridgewater, MA 02324
Phone (508) 819-4200 (cid:127) Fax (508) 697-6419
GLOBAL OPERATIONS CENTER
295 University Avenue
Westwood, MA 02090
Phone (781) 332-0700 (cid:127) Fax (781) 332-0701
Toll Free (800) 323-4182
Operating Facilities
OXFORD, MA
24 Dana Road
Oxford, MA 01540
Phone (508) 731-2710 (cid:127) Fax (508) 987-1092
PRODUCTS/SERVICES: Shielding & binding
tapes for electronic & telecommunication cable.
Specialty laminates for automotive, packaging
and medical products. Converting services
include specialized laminating, slitting and
traverse winding. Insulating, flame barrier,
binder and semi-conducting tapes for power
and telecommunications.
PITTSBURGH, PA
201 Zeta Drive and 128 First Street
Pittsburgh, PA 15238
Phone (412) 828-1500 (cid:127) Fax (412) 828-3487
PRODUCTS/SERVICES: Protective coatings for
underground gas, oil and water pipelines, as
well as waterproofing membranes and high
performance polymer additives for asphalt and
expansion joints and accessories, and private
label manufacturing. Water blocking
compounds for power and telecommunications.
HumiSeal(cid:3) insulating conformal coatings,
potting compounds and specialty accessory
products for the protection of printed circuit
assembly and electronic components.
EVANSTON, IL
1527 Lyons Street
Evanston, IL 60201
Phone (847) 866-8500 (cid:127) Fax (847) 866-8596
PRODUCTS/SERVICES: Innovative products for
the protection against corrosion for
underground gas, oil and water pipelines and
marine industries as well as private label
manufacturing.
HOUSTON, TX
C.I.M. Industries, Inc.
6900 Nelms Street
Houston, TX 77061
Phone (713) 242-9015 (cid:127) Fax (713) 242-9794
PRODUCTS/SERVICES: High performance
industrial coatings and linings providing a
seamless, impermeable, abrasion-resistant
barrier against water and chemicals. C.I.M.’s
polyurethane coatings have been keeping
liquids where they belong in a variety of
applications for over 30 years.
PAWTUCKET, RI
NEPTCO, INC.
30 Hamlet Street
P.O. Box 2323
Pawtucket, RI 02861
Phone (401) 722-5500 (cid:127) Fax (401) 728-9932
PARIS, FRANCE
4/6 Avenue Eiffel
78420 Carrieres-Sur-Seine France
78232 Le Pecq Cedex France
Phone +33 (0) 1 30 09 86 86 (cid:127)
Fax +33 (0) 1 09 86 87
PRODUCTS/SERVICES: HumiSeal insulating
conformal coatings, potting compounds and
specialty accessory products for the protection
of printed circuit assembly and electronic
components.
RYE, EAST SUSSEX, ENGLAND
Harbour Road, Rye
Rye, East Sussex TN31 7TE UK
Phone +44 (0) 1797 223561 (cid:127)
Fax +44 (0) 1797 224530
PRODUCTS/SERVICES: Waterproofing and
corrosion protection systems for oil, gas and
water pipelines as well as high-performance
tapes, epoxies and cathodic protection
accessory products.
SHAREHOLDER
INFORMATION
Common Stock
Common Stock of Chase Corporation is traded
on the NYSE MKT under the symbol ‘‘CCF’’.
Annual Meeting of
Shareholders
The Annual Meeting of Shareholders will be held
at 9:30 a.m. on Tuesday, February 3, 2015 at
Chase Corporation’s Global Operations Center,
295 University Avenue, Westwood, MA 02090.
When shares owned by one shareholder are
held in different forms of the same name
(e.g., John Doe, J. Doe) or when new accounts
are established for shares purchased at
different times, duplicate mailings of
shareholder information may result. The
Company, by law, is required to mail to each
name on the shareholder list unless the
shareholder requests that duplicate mailings be
eliminated or consolidates all accounts into
one. Such requests should be directed, in
writing, to the Shareholder Services
Department, American Stock Transfer & Trust
Company, Operations Center, 6201 15th Avenue,
Brooklyn, NY 11219.
Contact: investorrelations@chasecorp.com
PRODUCTS/SERVICES: Laminated film foils for
the electronics and cable industries.
LENOIR, NC
NEPTCO, INC.
2012 Hickory Boulevard
P.O. Box 1766
Lenoir, NC 28645
Phone (828) 728-5951 (cid:127) Fax (828) 728-5115
PRODUCTS/SERVICES: Laminated film foils for
the electronics and cable industries and cover
tapes essential to delivering semiconductor
components via tape and reel packaging.
GRANITE FALLS, NC
NEPTCO, INC.
3908 Hickory Boulevard
P.O. Box 800
Granite Falls, NC 28630
Phone (828) 396-2121 (cid:127) Fax (828) 396-6978
PRODUCTS/SERVICES: Pulling and detection
tapes used in the installation, measurement and
location of fiber optic cables, water and natural
gas lines. Constructed elements used to
provide integrity to structural components.
Flexible, rigid and semi-rigid fiber optic
strength elements designed to allow fiber optic
cables to withstand mechanical and
environmental strain and stress, produced by
NEPTCO’s joint venture.
SUZHOU, JIANGSU, CHINA
NEPTCO, INC.
D-10 #19 Datong Road
Suzhou New District Processing Zone
Suzhou, Jiangsu, China 215151
Phone 86-512-6269-6298 (cid:127)
SKYPE 828-398-0641
PRODUCTS/SERVICES: Cover tapes essential to
delivering semiconductor components via tape
and reel packaging.
WINNERSH, WOKINGHAM, ENGLAND
505 Eskdale Road
Winnersh
Wokingham
Berkshire RG41 5TU UK
Phone +44 (0) 1189 442 333 (cid:127)
Fax +44 (0) 1189 335 799
PRODUCTS/SERVICES: HumiSeal insulating
conformal coatings, potting compounds and
specialty accessory products for the protection
of printed circuit assembly and electronic
components.
C H A S E C O R P O R AT I O N B OA R D O F D I R E C TO R S
Thomas Wroe, Jr.
Chairman of the Board of Sensata Technologies
Chairman & CEO of Apex Tool Group
Ronald Levy
Chairman of the Compensation & Management
Development Committee of CHASE Corporation
Mary Claire Chase
President, Founder of Chase Partners
Peter R. Chase
Chairman & Chief Executive Officer CHASE Corporation
Adam P. Chase
President & Chief Operating Officer CHASE Corporation
George M. Hughes
Founder & Principal of Hughes & Associates
Corporate Secretary of CHASE Corporation
Lewis P. Gack
Managing Partner of LPG Consulting
Chairman of the Audit Committee of CHASE Corporation
C H A S E C O R P O R AT I O N A N N U A L R E P O R T 2 0 1 4
S H A P I N G T H E F U T U R E
Chase Corporation has evolved from manufacturing commodity
products to producing innovative, high reliability solutions.
A history of consistent strategic focus has been the platform for
year-over-year growth and expansion from domestic business to
global enterprise. Driving this has been our leadership team: the
resource that will continue to keep Chase brands at the forefront
of the specialty chemical industry.
The stage is set for continued growth; a transition from:
• Domestic business to global enterprise
• Product focus to market and customer focus
• Decentralized operations to integrated businesses
• Suppliers to partners
• Skilled workers to innovative teams.
Chase fosters an adaptive culture where talented people share
the Company’s core values and actively pursue innovative product
solutions for customers around the world.
At Chase Corporation we make a material difference by manufacturing
protective materials that are used in a wide variety of applications
where long lasting protection is critical to a product’s success and is
a material part of enhancing a product’s value to its user.
EXECUTIVE OFFICES:
Bethany House, 26 Summer Street, Bridgewater, Massachusetts 02324
Tel: 508-819-4200 • Fax: 508-697-6419
GLOBAL OPERATIONS CENTER:
295 University Avenue, Westwood, Massachusetts 02090
Tel: 781-332-0700 • Fax: 781-332-0701
www.chasecorp.com • NYSE MKT : CCF
Printed on recycled paper