A Clear Vision
Annual Report 2020 It was a year no one saw coming.
A year of unexpected challenges that tested the strength of every
business’ culture and strategy.
A year that reinforced the reliability and durability of Chase’s vision,
values and practices:
• Clear-eyed planning for economic and market challenges as
well as opportunities.
• A strong balance sheet providing financial stability and flexibility.
• A sharp focus on the markets we serve and the ability to
quickly adapt to changes.
• And a culture of responsibility to our people, our customers
and our investors.
In a year of turmoil, this Annual Report will clearly show you why
responsibility and reliability are at the heart of the Chase brand.
Fellow Shareholders,
These are unprecedented times.
We want to start by extending our gratitude to all Chase associates, their families and all essential workers. To a person,
and as a worldwide team, we could not be prouder of their hard work and dedication to ensuring that our customers and
suppliers receive our full support.
Going into the final month of our second quarter – February 2020 – the severity of coronavirus became crystal clear, with
the CDC ultimately declaring it a global pandemic in March 2020.
Was the pandemic unexpected? Yes. But expecting the unexpected is our business posture; how we operate and how we
respond to market disruptions.
We continuously assess the circumstance and develop strategic and tactical options. We evaluate our long-term strategies
and how they must adjust to the situation.
Financial stability and flexibility are core strategies, and we were and continue to be in a strong financial position.
The impact of COVID-19 was felt across nearly all industries. Despite decreased revenue in all of our operating segments;
the Company:
Increased relative gross margin
Completed the consolidation of its pulling and detection operations into its existing Hickory, NC location
Liquidated two real estate assets for gains
Achieved a year-over-year increase in cashflows from operations
Ended the fiscal year debt free and with a cash balance of $99.1 million
Maintained a fully available credit facility of $150 million
Recognizing the gravity of the pandemic, we first established a COVID-19 task force to ensure that our focus was crystal
clear on the health and well-being of our associates, strategic issues and the need to react quickly and decisively to the
changing landscape.
We built upon our strong employee health and safety culture foundation and long-standing programs by implementing
new COVID-19 protocols for essential workers including PPE (Personal Protective Equipment), and new guidelines specific
to the pandemic.
Our focus on Energy & Resources, Safety Performance and Environmental Impact will continue through our EHS
Sustainability initiative. We launched a new Responsibility section on our website to further bring light to the
environmental, social and governance ideals we strive for. These elements are consistent with our Mission, which guides us.
…We will grow our business responsibly by balancing short and long-term objectives, effectively
managing risk, implementing sustainable business practices and continuously improving our
operating performance. We will conduct business ethically, contribute to the communities in
which we operate, show respect for the environment, and treat our employees fairly.
Fulfilling our mission will create long-term value for our shareholders.
Annual Report 2020
Financial Highlights
(in millions, except per share figures)
Revenue
Gross Margin %
Net Income
Diluted EPS
Adjusted EBITDA
Free Cash Flow
Dividend Per Share
2020
261.2
2019
281.4
% Change
-7%
38.1%
36.0%
34.2
3.59
60.2
54.4
0.80
32.7
3.46
65.2
47.0
0.80
+4%
+4%
-8%
+16%
REVENUE (in millions of dollars)
FREE CASH FLOW (in millions of dollars)
$300
$250
$200
$150
$100
0
$80
$70
$60
$50
$40
$30
$20
0
2016
238.1
2017
252.6
2018
284.2
2019
281.4
2020
261.2
ADJUSTED EBITDA (in millions of dollars)
$55
$50
$45
$40
$35
$30
$25
0
$5.00
$4.50
$4.00
$3.50
$3.00
$2.50
$2.00
$1.50
0
2016
46.8
2017
48.7
2018
42.6
2019
47.0
2020
54.4
EARNINGS PER DILUTED SHARE (in dollars)
2016
64.0
2017
74.0
2018
75.2
2019
65.2
2020
60.2
2016
3.50(1)
2017
4.44(1)
2018
4.56(1)
2019
3.46
2020
3.59
1 Includes an after-tax gain of $0.07, $0.15 and $0.12 per share related
to sale of businesses in 2016, 2017 and 2018, respectively.
It is not just what we do, but how we do it that helps define Chase. Bringing meaning and substance to our Mission is an
established set of Core Values that define Chase’s culture and behaviors for our employees and stakeholders.
FISCAL YEAR 2020 SUMMARY
Our products and services are sold into numerous essential industries (healthcare, utilities, infrastructure and
telecommunications, among others), and our responsibility during this time has been to continue supplying our valued
customers, while protecting our employees. With minimal disruption, our operations remained online and productive.
So, in a year when the unexpected happened, our team responded with a disciplined approach and remained unrattled
by market disruptions. Organizational changes over the past few years have made Chase stronger and better prepared to
manage headwinds and respond to unplanned challenges in our markets.
RESPONSIBILITY DELIVERS RELIABILITY
In good times and bad, reliability has been a key product of the Chase brand. Driven by a culture
of individual and corporate responsibility, Chase has taken decisions and actions that enable us to
keep faith with all our stakeholders. We have protected our employees’ health and jobs, delivered
essential products to our customers around the world, and secured the investments for those who
have put their trust in us. We are clear that our success and the success of all those we work with
are connected, and only by being responsible can we earn their trust.
BUSINESS SEGMENTS
The Company is organized into three reportable operating segments: Adhesives, Sealants and Additives, Industrial Tapes,
and Corrosion Protection and Waterproofing.
Revenue from the Adhesives, Sealants and Additives segment decreased versus the prior year. Volume within the
electronic and industrial coatings product line decreased in North American, European, and Asian markets. This decrease
was attributable to the effects of the COVID-19 pandemic on the already strained automotive and industrial markets,
Annual Report 2020
and Asian headwinds. The Company’s specialty chemical intermediates product line sales, which have a North American
concentration, also experienced a volume drop compared to the prior year. Despite the revenue downturn, the segment
maintained its impressive 42% relative gross margin in the current year.
Sales decreased in the Industrial Tapes segment compared to the prior year, with the cable materials and specialty
products product lines driving the top-line decrease. A primary driver in the sales reduction in the specialty products
product line was the Company’s planned exit from providing transitional toll manufacturing services to the purchaser
of its former structural composites rod and fiber optical cable components businesses, with sales tapering in the first
quarter of fiscal 2020 and fully ending in the second quarter. The Company’s electronic materials packaging product
line, which services Asian markets, achieved volume growth over the prior year. The pulling and detection product line,
carried by 5G demand momentum in the North American utility and telecommunication markets, also achieved a year-
over-year increase in revenue. While total revenue for the Industrial Tapes segment was down on a year-over-year basis,
product mix and operational efficiencies contributed to its relative gross margin increasing 400 basis points to 32%
in the current year.
The Company’s Corrosion Protection and Waterproofing segment’s revenue decreased compared to the prior year.
The building envelope product line’s sales were unfavorable to the prior year, driving much of the segment’s overall results.
The coating and lining systems, bridge and highway and pipeline coatings product lines all saw volume increases over the
prior year. The pipeline coatings product line results were driven by increased sales by our Rye, U.K. facility, especially in
the fourth fiscal quarter of 2020 with sales into the Middle East. In spite of its net sales decrease, the segment’s relative
gross margin improved to 45% in Fiscal 2020, over the 43% achieved in the prior year.
MARKET KNOWLEDGE. STRATEGIC ROOTS.
Chase ends this difficult year healthy and strong. This is
once again the case because our business is based on two
qualities that are key to all our planning and execution.
First is broad expertise and flexibility in the markets we serve
that allow us to respond to challenges and opportunities to
maximize our assets and minimize liabilities.
Second is a strong corporate foundation and culture,
built over years of conservative business practices, that
can withstand the powerful winds of change and feed our
strategic growth. It is a highly disciplined approach that has
earned the confidence and appreciation of our stakeholders
year after year.
Though M&A activity scaled back industry wide over much of Fiscal 2020, we remained focused on the primary and vital
role growth through acquisition will continue to play in Chase’s future. In September 2020 (Fiscal 2021), we acquired
ABchimie, a Corbelin, France headquartered solutions provider for the cleaning and the protection of electronic
assemblies, with additional formulation, production, and research and development capabilities. This acquisition
demonstrated our commitment to inorganic growth initiatives and broadens our electronics coatings product portfolio
Annual Report 2020
within the Adhesives, Sealants and Additives reporting segment with high performance, environmentally friendly
technologies that are complementary to our existing product lines.
While M&A has been our primary strategic growth component, we believe there is some organic growth potential by
leveraging our trusted partnerships and a successful track record of supplying our proven technology to a diverse
range of industries. Electric vehicle (EV) and hybrid electric vehicle (HEV) market opportunities were a focus this
fiscal year with product development and specification work utilizing our Adhesives, Sealants and Additives technology
continuing despite the pandemic. While certain product demand has increased with 5G and broadband infrastructure
buildout, others have been negatively affected by unstable oil and gas demand. As we continue to review and refine our
product portfolio, we see more promise in the ability to leverage our channels to market and manufacturing footprint
across all reporting segments to generate shareholder value.
LOOKING AHEAD
Fiscal 2021 will continue to pose significant challenges and we are not planning on a return to “normal” soon. Our hope is
that a COVID-19 vaccine will be widely available around the world by late Fiscal 2021, though we are not factoring this into
our plans at this time. Could there be more “unexpected challenges”? Assuredly yes. We learned much in the last year and
are applying this to all activities going forward.
We are pleased with the response of our management, administrative, operations and commercial teams to adapt to the
“new normal”. Though revenue declined, we feel that we fared well in other important metrics.
We are confident that with the continued support of our shareholders, our Company will successfully face the year ahead.
Sincerely,
Adam P. Chase
President and Chief Executive Officer
Peter R. Chase
Executive Chairman
Christian J. Talma
Treasurer and Chief Financial Officer
Annual Report 2020
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, 2020
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
TO
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.)
295 University Avenue, Westwood, Massachusetts 02090
(Address of Principal Executive Offices) (Zip Code)
(781) 332-0700
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to section 12(b) of the Act:
Title of each class
Common stock, $.10 par value
Trading Symbol(s)
CCF
Name of each exchange on which registered
NYSE American
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 NO
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 NO
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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. YES NO
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YES NO
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”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
Emerging growth company ☐
Accelerated filer
Smaller reporting company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit
report. ☒
Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO
The aggregate market value of the common stock held by non-affiliates of the registrant, computed by reference to the closing price as of the last business
day of the Registrant’s most recently completed second fiscal quarter, February 29, 2020, was approximately $465,871,000.
As of October 31, 2020, the Company had outstanding 9,445,474 shares of common stock, $0.10 par value, which is its only class of common stock.
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, 2020, are incorporated by reference into Part III hereof.
Documents Incorporated By Reference:
CHASE CORPORATION
INDEX TO ANNUAL REPORT ON FORM 10-K
For the Year Ended August 31, 2020
Cautionary Note Concerning Forward-Looking Statements
Page No.
2
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
Item 16
SIGNATURES
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Information About our Executive Officers
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
Form 10-K Summary
3
11
17
17
18
18
18
19
21
22
40
41
103
103
106
106
106
106
106
107
108
111
112
1
Cautionary Note Concerning Forward-Looking Statements
This Annual Report on Form 10-K contains “forward-looking statements” within the meaning of Section 21E of
the Securities Exchange Act of 1934, as amended. These forward-looking statements, including without limitation
forward-looking statements made under the caption “Management’s Discussion and Analysis of Financial Condition and
Results of Operations,” involve risks and uncertainties. Any statements contained in this Annual Report that are not
statements of historical fact may be deemed to be forward-looking statements. Forward-looking statements include,
without limitation, statements as to our future operating results; seasonality expectations; plans for the development,
utilization or disposal of manufacturing facilities; future economic conditions; our expectations as to legal proceedings;
the effect of our market and product development efforts; and expectations or plans relating to the implementation or
realization of our strategic goals and future growth, including through potential future acquisitions. Forward-looking
statements may also include, among other things, statements relating to future sales, earnings, cash flow, results of
operations, use of cash and other measures of financial performance, statements relating to future dividend payments, as
well as expected impact of the coronavirus disease 2019 (COVID-19) pandemic on the Company's businesses. Forward-
looking statements may be identified through the use of words such as “believes,” “anticipates,” “may,” “should,” “will,”
“plans,” “projects,” “expects,” “expectations,” “estimates,” “predicts,” “targets,” “forecasts,” “strategy,” and other words
of similar meaning in connection with the discussion of future operating or financial performance. These statements are
based on current expectations, estimates and projections about the industries in which we operate, and the beliefs and
assumptions made by management. Because forward-looking statements relate to the future, they are subject to inherent
risks, uncertainties and changes in circumstances that are difficult to predict. Accordingly, the Company’s actual results
may differ materially from those contemplated by the forward-looking statements. Investors, therefore, are cautioned
against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees
or assurances of future performance. Readers should refer to the discussions under Item 1A “Risk Factors” of this
Annual Report on Form 10-K.
2
ITEM 1 – BUSINESS
Primary Operating Divisions and Facilities and Industry Segments
PART I
Chase Corporation (the “Company,” “Chase,” “we,” or “us”), a global specialty chemicals company founded in
1946, is a leading manufacturer of protective materials for high-reliability applications across diverse market sectors.
Our strategy is to maximize the performance of our core businesses and brands while seeking future opportunities
through strategic acquisitions. Through investments in facilities, systems and organizational consolidation we seek to
improve performance and gain economies of scale.
In the fourth quarter of our fiscal year 2019 (the prior year), we reorganized from two into three reportable
operating segments: an Adhesives, Sealants and Additives segment, an Industrial Tapes segment and a Corrosion
Protection and Waterproofing segment. The segments are distinguished by the nature of the products manufactured and
how they are delivered to their respective markets. The Adhesives, Sealants and Additives segment (whose operations
were formerly included within the Industrial Materials segment) offers innovative and specialized product offerings
consisting of both end-use products and intermediates that are used in, or integrated into, another company’s products.
Demand for the segment’s product offerings is typically dependent upon general economic conditions. This segment
leverages the core specialty chemical competencies of the Company, and serves diverse markets and applications. The
segment sells predominantly into the transportation, appliance, medical, general industrial and environmental market
verticals. The Industrial Tapes segment (whose operations were formerly included within the Industrial Materials
segment) features legacy wire and cable materials, specialty tapes, and other laminated and coated products. The
segment derives its competitive advantage through its proven chemistries, diverse specialty offerings and the reliability
its supply chain offers to end customers. These products are generally used in the assembly of other manufacturers’
products, with demand typically dependent upon general economic conditions. This segment sells mostly to established
markets, with some exposure to growth opportunities through further development of existing products. Markets served
include cable manufacturing, utilities and telecommunications, and electronics packaging. The Corrosion Protection and
Waterproofing segment (formerly known as the Construction Materials segment) is principally composed of project-
oriented product offerings that are primarily sold and used as “Chase” branded products. End markets include new and
existing infrastructure projects on oil, gas, water and wastewater pipelines, highways and bridge decks, water and
wastewater containment systems, and commercial buildings. The segment’s products include protective coatings for
pipeline applications, coating and lining systems for waterproofing and liquid storage applications, adhesives and
sealants used in architectural and building envelope waterproofing applications, high-performance polymeric asphalt
additives, and expansion joint systems for waterproofing applications in transportation and architectural markets. With
sales generally dependent on outdoor project work, the segment experiences highly seasonal sales patterns. Our
manufacturing facilities are distinct to their respective segments apart from our O’Hara Township, PA, Blawnox, PA and
Hickory, NC facilities, which produce products related to a combination of operating segments.
3
A summary of our operating structure as of August 31, 2020 is as follows:
ADHESIVES, SEALANTS AND ADDITIVES SEGMENT
Key Products
Protective conformal coatings under the brand name
HumiSeal®, moisture protective electronic coatings sold to the
electronics industry including circuitry used in automobiles,
industrial controls and home appliances.
Primary
Operating
Locations
Background/History
O'Hara
The HumiSeal business and product lines were acquired in the
Township, PA
early 1970s.
Advanced adhesives, sealants, and coatings for automotive and
industrial applications that require specialized bonding,
encapsulating, environmental protection, or thermal
management functionality.
Woburn, MA
Newark, CA
In September 2016, we acquired certain assets and the
operations of Resin Designs, LLC, and entered leases for their
existing manufacturing facilities in Massachusetts and
California.
Protective conformal coatings under the brand name
HumiSeal®, moisture protective electronic coatings sold to the
electronics industry including circuitry used in automobiles,
industrial controls and home appliances.
Winnersh,
Wokingham,
England
In October 2005, we acquired all of the capital stock of Concoat
Holdings Ltd. and its subsidiaries. In 2006 Concoat was
renamed HumiSeal Europe.
Paris, France
Pune, India
Polymeric microspheres, sold under the Dualite® brand, which
are utilized for weight and density reduction and sound
dampening across varied industries.
Greenville, SC
Polyurethane dispersions utilized for various coating products.
Superabsorbent polymers, sold through our Zappa Stewart
division, which are utilized for water and liquid management,
remediation and protection in diverse markets including wire
and cable, medical, environmental, infrastructure, energy and
consumer products.
Hickory, NC
McLeansville,
NC
In March 2007, we expanded our international presence with the
formation of HumiSeal Europe SARL in France. HumiSeal
Europe SARL operates a sales/technical service office and
warehouse near Paris, France. This business works closely with
the HumiSeal operation in Winnersh, Wokingham, England,
allowing direct sales and service to the French market.
In June 2016, we further expanded our international presence
through the purchase of Spray Products (India) Private Limited,
located in Pune, India. This business enhances the Company’s
ability to provide technical, sales, manufacturing, chemical
handling and packaging services in the region and works closely
with our HumiSeal manufacturing operation in Winnersh,
Wokingham, England. In December 2016, the business was
renamed HumiSeal India Private Limited.
In January 2015, we acquired two product lines from Henkel
Corporation. They, along with the Superabsorbents business
acquired in December 2017, comprise our specialty chemical
intermediates product line.
The Company currently contracts with manufacturing partners
to produce its polyurethane dispersions.
In December 2017, we acquired Stewart Superabsorbents, LLC
and its Zappa-Tec business (collectively “Zappa Stewart”).
4
INDUSTRIAL TAPES SEGMENT
Key Products
Specialty tapes and related products for the electronic and
telecommunications industries using the brand name Chase &
Sons®.
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 selling into energy-oriented and
communication markets, and to public utilities.
Primary
Operating
Locations
Oxford, MA
PaperTyger®, a trademark for laminated durable papers sold to
the envelope converting and commercial printing industries.
Background/History
In August 2011, we relocated our manufacturing processes that
had been previously conducted at our Webster, MA facility to
this location.
In December 2012, we relocated the majority of our
manufacturing processes that had been previously conducted at
our Randolph, MA facility to this location. Our Randolph
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 the fourth quarter of 2018, we moved the wire and cable
material manufacturing process that had been conducted at our
Pawtucket, RI facility to our Lenoir, NC and Oxford, MA
locations.
We acquired the Paper Tyger, LLC assets in 2003.
Chase BLH2OCK®, a water-blocking compound sold to the
wire and cable industry.
Blawnox, PA
In September 2012, we relocated our Chase BLH2OCK®
manufacturing processes that had been previously conducted at
our Randolph, MA facility to this location.
Laminated film foils for the electronics and cable industries and
cover tapes essential to delivering semiconductor components
via tape and reel packaging.
Lenoir, NC
Suzhou, China
In June 2012, we acquired all of the capital stock of NEPTCO
Incorporated, which operated facilities in Rhode Island, North
Carolina and China.
Pulling and detection tapes used in the installation, measurement
and location of fiber optic cable, and water and natural gas lines.
Hickory, NC
In October 2013, we moved the manufacturing processes that
had been conducted at our Taylorsville, NC facility to our
Lenoir, NC location.
In the fourth quarter of 2018, we moved the wire and cable
material manufacturing process that had been conducted at our
Pawtucket, RI facility to our Lenoir, NC and Oxford, MA
locations.
In the third quarter of 2019, we began relocating the pulling and
detection tapes manufacturing process from our Granite Falls,
NC location to our Hickory, NC location. This relocation was
completed in the second quarter of fiscal 2020.
5
Primary
Operating
Locations
Blawnox, PA
The Royston business was acquired in the early 1970s.
Background/History
CORROSION PROTECTION AND WATERPROOFING
SEGMENT
Key Products
Protective pipe-coating tapes and other protectants for valves,
regulators, casings, joints, metals, and concrete, which are sold
under the brand name Royston®, to oil companies, gas utilities
and pipeline companies.
Rosphalt50® is a polymer additive that provides long-term cost-
effective solutions in many applications such as waterproofing
of bridge decks and approaches, ramps, racetracks, airport
runways and taxiways and specialty road applications.
Waterproofing membranes for highway bridge deck metal-
supported surfaces.
Waterproofing sealants, expansion joints and accessories for the
transportation, industrial and architectural markets.
O'Hara
Township, PA
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
business.
Technologically advanced products, including the brand
Tapecoat®, 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
In November 2001, we acquired substantially all the assets of
Tapecoat, previously a division of T.C. Manufacturing Inc.
Specialized high-performance coating and lining systems used
worldwide in liquid storage and containment applications.
Houston, TX
In September 2009, we acquired all the outstanding capital stock
of C.I.M. Industries Inc. (“CIM”).
Waterproofing and corrosion protection systems for oil, gas and
water pipelines, and a supplier to Europe, the Middle East and
Southeast Asia.
Rye, East
Sussex, England
The ServiWrap® brand bitumen pipeline protection tapes and
products, which offer long-term corrosion protection for buried
pipelines in the most challenging natural environments.
Other Business Developments
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. This facility joins Chase's North American-based
Tapecoat® and Royston® brands to broaden the protective
pipeline coatings product line and better address global demand.
In December 2009, we acquired the full range of ServiWrap®
pipeline protection products (“ServiWrap”) from Grace
Construction Products Limited, a U.K.-based unit of W.R. Grace
& Co. ServiWrap products complement our portfolio of pipeline
protection tapes, coatings and accessories and extend our global
customer base.
On September 1, 2020 (subsequent to fiscal 2020), the Company acquired all the capital stock of ABchimie for
€18,000,000 (approximately $21,420,000 at the time of the transaction) net of cash and marketable securities acquired,
subject to final working capital adjustment, excluding acquisition-related costs of $274,000 and with a potential earn out
based on performance potentially worth an additional €7,000,000 (approximately $8,330,000 at the time of the
transaction). ABchimie is a Corbelin, France headquartered solutions provider for the cleaning and the protection of
electronic assemblies, with further formulation, production, and research and development capabilities. The transaction
was funded 100% with cash on hand. The financial results of the business will be included in the Company's fiscal 2021
financial statements within the Adhesives, Sealants and Additives operating segment in the electronic and industrial
coatings product line. The Company is currently in the process of finalizing purchase accounting, regarding a final
allocation of the purchase price to tangible and identifiable intangible assets assumed and anticipates completion within
fiscal 2021. The ABchimie acquisition does not represent a significant business combination so pro forma financial
information is not provided.
6
The Company’s second quarter of fiscal 2020 saw the beginning of the global spread of the coronavirus
pandemic (COVID-19), which subsequently grew to create significant volatility, uncertainty, and global economic
disruption. During the third fiscal quarter, the Company implemented changes to its cost structure designed to address
market changes brought on by COVID-19 and demonstrate its commitment to fiscal prudence: (a) the Company made a
targeted reduction in its global workforce, contemplated pre-pandemic but catalyzed by COVID-19, which resulted in
the recognition of $183,000 in severance costs during the period; and (b) the Company also instituted a temporary 20%
reduction in the base salaries of its named executive officers and select members of senior management, as well as the
cash compensation of the non-employee members of its Board of Directors. The reduction in force, which impacted
operations in the Company’s U.S. facilities, and the adjustments in compensation were both effective May 2020.
During the third quarter of fiscal 2019, Chase began moving the pulling and detection operations housed in its
Granite Falls, NC location to its Hickory, NC facility. This is in line with the Company’s ongoing initiative to
consolidate its manufacturing plants and streamline its existing processes. At the time, the pulling and detection
operations were the only Chase-owned production operations in Granite Falls, NC, with the remaining portions of the
building being either utilized for research and development or leased to a third party. The process of moving, including
moving internal research and development capabilities, was substantially completed during the second quarter of fiscal
2020. The Company recognized $559,000 in expense related to the move in the six-month period ended February 29,
2020, having recognized $526,000 in expense during the second half of fiscal 2019. No costs were recognized in the six
months ended August 31, 2020, and future costs related to this move are not anticipated to be significant to the
consolidated financial statements.
During the fourth quarter of fiscal 2019 (prior year), Chase commissioned engineering studies of certain legacy
operations, machinery and locations related to the Company’s ongoing facility rationalization and consolidation
initiative. Chase completed its review of the data and recommendations provided by the study in the fourth quarter of
fiscal 2020 (current year). Following the review, the Company wrote down the value of certain non-operating production
assets related to the pipeline coatings product line, within the Corrosion Protection and Waterproofing segment. Given
the nature and prospects of the equipment, the Company determined its then carrying value exceeded its fair value and
recognized an expense of $405,000 to write-down the value. Given the ongoing nature of the facility rationalization and
consolidation initiative, an estimate of future costs cannot currently be determined.
Products and Markets
Our principal products are specialty tapes, laminates, adhesives, sealants, coatings and chemical intermediates
which are sold by our salespeople, manufacturers' representatives and distributors. In our Adhesives, Sealants and
Additives segment, these products consist of:
(i)
(ii)
(iii)
moisture protective coatings, which are sold to the electronics industry for circuitry manufacturing,
including circuitry used in automobiles, industrial controls and home appliances;
advanced adhesives, sealants, and coatings for automotive and industrial applications that require
specialized bonding, encapsulating, environmental protection, or thermal management functionality;
polymeric microspheres utilized by various industries to allow for weight and density reduction and
sound dampening;
(iv)
polyurethane dispersions utilized for various coating products; and
(v)
superabsorbent polymers, which are utilized for water and liquid management, remediation and
protection in diverse markets including wire and cable, medical, environmental, infrastructure, energy
and consumer products.
7
In our Industrial Tapes segment, these products consist of:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
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;
laminated film foils, including EMI/RFI shielding tapes used in communication and local area network
(LAN) cable;
industrial coated or laminate products and custom manufacturing services sold into medical, consumer,
automotive, packaging, energy, telecommunications and other specialized markets;
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;
pulling and detection tapes used in the installation, measurement and location of fiber optic cable,
water and natural gas lines, and power, data, and video cable for commercial buildings; and
cover tapes with reliable adhesive and anti-static properties essential to delivering semiconductor
components via tape and reel packaging.
In our Corrosion Protection and Waterproofing segment, these products consist of:
(i)
protective coatings, tapes and protectants for pipelines, valves, casings and other metals, which are
sold to oil companies, gas companies and water/wastewater utilities for use in both the construction
and maintenance of oil, gas, water and wastewater pipelines;
(ii)
fluid-applied coating and lining systems for use in the water and wastewater industry;
(iii)
(iv)
waterproofing tapes and coatings used in waterproofing of the exterior of both commercial and
industrial structures;
waterproofing membranes for highway bridge deck metal-supported surfaces, and high-performance
polymeric asphalt additives, which are sold to municipal transportation authorities; and
(v)
expansion and control joint systems designed for roads, bridges, stadiums and airport runways.
There is some seasonality in selling products into the construction market, which most acutely effects our
Corrosion Protection and Waterproofing segment. Higher demand is often experienced when temperatures are warmer in
most of North America (April through October), with lower demand occurring when temperatures are colder (typically
our second fiscal quarter).
Human Capital Resources
As of October 31, 2020, we employed approximately 619 people (including union employees). 80% are U.S.
based and 20% international. 29% of our employees work in administrative, selling and research and development
functions, while 71% work in the manufacture of our products at our facilities. 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.
8
Backlog, Customers and Competition
As of October 31, 2020, the backlog of customer orders believed to be firm was approximately
$15,949,000. This compared with a backlog of $17,930,000 as of October 31, 2019. The decrease in backlog from the
prior year amount is believed to be primarily due to changes in customers’ ordering patterns in the current COVID-19
environment. During fiscal 2020, 2019 and 2018, 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
As of August 31, 2020, we owned the following trademarks that we believe were of material importance to our
business: Chase Corporation®, C-Spray (Logo), a trademark used in conjunction with most of the Company’s business
segment and product line marketing material and communications; HumiSeal®, a trademark for moisture protective
coatings sold to the electronics industry; Chase & Sons®, a trademark for barrier and insulating tapes sold to the wire and
cable industry; Chase BLH2OCK®, a trademark for a water-blocking compound sold to the wire and cable industry;
Rosphalt50®, a trademark for an asphalt additive used predominantly on bridge decks for waterproofing protection;
PaperTyger®, a trademark for laminated durable papers sold to the envelope converting and commercial printing
industries; DuraDocument®, a trademark for durable, laminated papers sold to the digital print industry; Defender® a
trademarked RFID protective material sold to the personal accessories and paper industries; Tapecoat®, a trademark for
corrosion preventive surface coatings and primers; Maflowrap®, a trademark for anti-corrosive tapes incorporating self-
adhesive mastic or rubber-backed strips, made of plastic materials; Royston®, a trademark for a corrosion-inhibiting
coating composition for use on pipes; Ceva®, a trademark for epoxy pastes/gels/mortars and elastomeric concrete used in
the construction industry; CIM® trademarks for fluid-applied coating and lining systems used in the water and
wastewater industry; ServiWrap® trademarks for pipeline protection tapes, coatings and accessories; NEPTCO®, a
trademark used in conjunction with most of NEPTCO’s products marketing material and communications; NEPTAPE®,
a trademark for coated shielding and insulation materials used in the wire and cable industry; Muletape®, a trademark for
pulling and installation tapes sold to the telecommunications industry; Trace-Safe®, a trademark for detection tapes sold
to the telecommunications and water and gas utilities industries; Dualite®, a trademark for polymeric microspheres
utilized for density and weight reduction and sound dampening by various industries; 4EvaSeal®, a trademark for
adhesive-backed tape utilized in various industries; Resin Designs®, a trademark for adhesives and sealants sold into the
microelectronics and semiconductor industries; SlickTape®, a trademark for a lubricated shielding tape sold to the wire
and cable industry; HighDraw®, a trademark for a highly extensible shielding tape sold to the wire and cable industry;
ZapZorb®, a trademark for environmental solidification products that are designed to meet the specific challenges posed
by a wide range of liquid-bearing waste streams; ZapLoc®, a trademark for medical waste solidifier products packaged in
bottles or larger packages; and ZapPak®, a trademark for medical waste solidifier products packaged in dissolvable film.
We do not have any other material trademarks, licenses, franchises, or concessions. While we do hold various patents, as
well as other trademarks, we do not believe that they are material to the success of our business.
9
Research and Development
We expensed approximately $4,007,000, $4,021,000 and $3,940,000 for Company-sponsored research and
development during fiscal 2020, 2019 and 2018, respectively, which was recorded within Research and Product
Development Costs. Research and development stayed consistent from fiscal 2019 to 2020 as the Company continued
focused development work on strategic product lines. The increase in expense from fiscal 2018 to 2019 came as the
Company recognized its first full fiscal year with the established research and development department of Zappa Stewart
(acquired in the second quarter of fiscal 2018).
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 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
website. 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 Shareholder and Investor Relations Department, at 295 University
Avenue, Westwood, Massachusetts 02090. Our internet website and the information contained on it or connected to it
are not part of nor 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.
10
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.
Operational and Competitive Risks
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.
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.
11
The Company’s results of operations have been adversely affected and could in the future be materially adversely
impacted by the coronavirus disease 2019 (COVID-19) pandemic.
The global spread of the coronavirus disease 2019 (COVID-19) pandemic has created significant volatility,
uncertainty and economic disruption. The Company experienced lower sales as a result of the economic disruption, and
it has initiated cost-saving measures, including a targeted workforce reduction, in response to the uncertainties associated
with the scope and duration of the pandemic. The extent to which the COVID-19 pandemic impacts the Company’s
business, operations and financial results in future periods will depend on numerous evolving factors that it may not be
able to accurately predict, including: the duration and scope of the pandemic; governmental, business and individuals’
actions that have been and continue to be taken in response to the pandemic; the impact of the pandemic on economic
activity and actions taken in response; the effect on its customers’ demand for its goods and services and its vendors
ability to supply it with raw materials; its ability to sell and provide goods and services, including as a result of travel
restrictions and people working from home; the ability of its customers to pay for goods and services; and any closures
of its customers’ offices and facilities. Customers may also slow down decision-making, delay planned work or seek to
terminate existing agreements.
Further, the effects of the pandemic may also increase the Company’s cost of capital or make additional capital,
including the refinancing of its credit facility, more difficult or available only on terms less favorable to it. A sustained
downturn may also result in the carrying value of the Company’s goodwill or other intangible assets exceeding their fair
value, which may require it to recognize an impairment to those assets. A sustained downturn in the financial markets
and asset values may have the effect of increasing the Company’s pension funding obligations in order to ensure that its
qualified pension plan continues to be adequately funded, which may divert cash flow from other uses. The effects of the
pandemic, including remote working arrangements for employees, may also impact the Company’s financial reporting
systems and internal control over financial reporting, including its ability to ensure information required to be disclosed
in its reports under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such
information is accumulated and communicated to its management, including its Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.
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 in order to reduce overhead costs. Despite our planning, we
may be unable to effectively leverage assets, personnel, and business processes in the transition of production among
manufacturing facilities. Uncertainty is inherent within the facility redesign and consolidation process, and unforeseen
circumstances could offset the anticipated benefits of these streamlining projects, disrupt service to customers, and
impact product quality.
12
Strategic Risks
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. We have historically financed larger acquisitions with additional borrowings under our bank credit
agreements. Our existing credit agreement places certain restrictions on our ability to acquire other businesses, and
imposes certain financial covenants on us that may limit our ability to borrow generally. If we incur additional
indebtedness in order to finance an acquisition, that indebtedness may reduce the availability of our cash flow to fund
future working capital, capital expenditures, and other general corporate purposes, may increase our vulnerability to
adverse economic conditions, and may expose us to the risk of increased interest rates. If we finance an acquisition
through the issuance of equity securities, the ownership interest of our existing shareholders would be proportionately
diluted.
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.
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.
International Risks
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. The ongoing negotiations to determine the terms
of the U.K.’s exit from the European Union (Brexit), pose risks of volatility in global markets and, given our exposure
and presence in the U.K., could specifically affect our operations and future financial results. Risks inherent in our
international operations also include, among others, the costs and difficulties of managing international operations,
adverse tax consequences, domestic and international tariffs and trade policies 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.
13
Current and threatened tariffs on goods from China and other countries could result in lower revenue, profits
and cash flows.
The Company imports raw materials from China, makes sales of finished goods into China and has
manufacturing operations in China. The Company works to lower the potential negative effects of the tariffs through
seeking alternative sources for our raw materials, when available and pragmatic, and, in certain cases, through altering
our manufacturing logistics by utilizing non-U.S. manufacturing where tariffs do not apply. While we also attempt to
pass on these additional costs to our customers, competitive factors (including competitors who import from other
countries not subject to such tariffs) may limit our ability to sustain price increases and, as a result, may adversely impact
our revenue, profits and cash flows. In addition, the imposition of tariffs may influence the sourcing habits of certain end
users of our products which, in turn, could have a direct impact on the requirements of our direct customers for our
products. Such an impact could adversely affect our revenue, profits and cash flows.
Industry Risks
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, among
others, the automotive, housing, construction, pipeline, energy, transportation infrastructure or 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 or foreign and domestic trade policy
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 (including changes in foreign currency exchange rates and
changes to federal, state, local and international tax laws or the application or enforcement practices of such laws) 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 and climate change, regional and global public
health crises, 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 cost of products and services
sold 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.
14
Other Risks
We are dependent on key personnel.
We depend significantly on our executive officers including our President and Chief Executive 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 personnel. The inability to satisfy such requirements could have a
negative impact on our ability to remain competitive in the future.
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 qualified pension plan. While these pension plan assets are considered non-financial assets
since they are not carried on our balance sheet (i.e. the balance sheet reflects only the net of plan assets and obligations),
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.
If we fail to maintain effective internal control over financial reporting, this may adversely affect investor
confidence in our company and, as a result, the value of our common stock.
We are required under Section 404 of the Sarbanes-Oxley Act to furnish a report by management on the
effectiveness of our internal control over financial reporting and to include a report by our independent auditors attesting
to such effectiveness. Any failure by us to maintain effective internal control over financial reporting could adversely
affect our ability to report accurately our financial condition or results of operations.
As discussed in our Annual Report on Form 10-K for the year ended August 31, 2018 (under "Controls and
Procedures"), our management concluded that, as of August 31, 2018, we had a material weakness in our internal
control over financial reporting related to our business combination processes. A material weakness is a deficiency, or a
combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a
material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.
We have remediated the identified material weakness, but no assurances can be given that management will not identify
in the future other internal control deficiencies that constitute a material weakness in our internal control over financial
reporting or that any such material weakness will be remediated in a timely fashion.
If we are unable to maintain effective internal control over financial reporting, or if our independent auditors
determine that we have a material weakness in our internal control over financial reporting, we could lose investor
confidence in the accuracy and completeness of our financial reports, the market price of our common stock could
decline, and we could be subject to sanctions or investigations by the SEC or other regulatory authorities. Failure to
remedy any material weakness in our internal control over financial reporting, or to implement or maintain other
effective control systems required of public companies, also could restrict our future access to the capital markets.
15
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. Notwithstanding efforts to ensure the integrity of our automated systems, 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 recordkeeping 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, pandemics, computer viruses, cyber-attacks, malware, ransomware, 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 business, results from operations, financial condition, cash flow or internal control over financial
reporting.
16
ITEM 1B – UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 2 – PROPERTIES
The principal properties of the Company as of August 31, 2020 are situated at the following locations and have
the following characteristics:
Location
Westwood, MA
Blawnox, PA
Evanston, IL
Granite Falls, NC
Square
Feet
20,200
Owned /
Leased
Leased
44,000
100,000
108,000
Owned
Owned
Owned
Greenville, SC
34,600
Leased
Hickory, NC
Houston, TX
Lenoir, NC
McLeansville, NC
Mississauga, Canada
Newark, CA
O’Hara Township, PA
Oxford, MA
Paris, France
Pune, India
Rotterdam, Netherlands
Rye, East Sussex, England
Suzhou, China
Winnersh, Wokingham,
England
Woburn, MA
180,000
Leased
45,000
Owned
110,000
41,000
2,500
32,500
109,000
Owned
Leased
Leased
Leased
Owned
73,600
Owned
1,900
Leased
4,650
2,500
36,600
48,000
18,800
Leased
Leased
Owned
Leased
Leased
34,000
Leased
Principal Use
Corporate headquarters, executive office and global operations center,
including research and development, sales and administrative services
Manufacture and sale of protective coatings and tape products
Manufacture and sale of protective coatings and tape products
Manufacture and sale of pulling and detection tapes, as well as
research and development services, (through the second quarter of
fiscal 2020, when operations were relocated to our Hickory, NC
facility). The building is currently being leased to a third party
Manufacture and sale of polymeric microspheres, as well as research
and development
Manufacture and sale of superabsorbent polymer products and pulling
and detection tapes, as well as research and development
Manufacture of coating and lining systems for use in liquid storage
and containment applications
Manufacture and sale of laminated film foils and cover tapes
Sales/technical service office and warehouse for superabsorbent
polymer products
Distribution center
Manufacture and sale of sealant systems
Manufacture and sale of protective electronic coatings, expansion
joints and accessories
Manufacture of tape and related products for the electronic and
telecommunications industries, as well as laminated durable papers
Sales/technical service office and warehouse allowing direct sales and
service to the French market
Manufacture, packaging and sale of protective electronic coatings
Distribution center
Manufacture and sale of protective coatings and tape products
Manufacture of packaging tape products for the electronics industries
Manufacture and sale of protective electronic coatings, as well as
research and development
Manufacture and sale of adhesive systems, as well as research and
development
The above facilities vary in age, are 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 believe that we could significantly add to our capacity by increasing
shift operations. Availability of machine hours through additional shifts would provide expansion of current production
volume without significant additional capital investment.
17
ITEM 3 – LEGAL PROCEEDINGS
The Company is involved from time to time in litigation incidental to the conduct of its business. Although the
Company does not expect that the outcome in any of these matters, individually or collectively, will have a material
adverse effect on its financial condition, results of operations or cash flows, litigation is inherently unpredictable.
Therefore, judgments could be rendered, or settlements agreed to, that could adversely affect the Company’s operating
results or cash flows in a particular period. The Company routinely assesses all 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 it
assesses the likelihood of loss as probable.
ITEM 4 – MINE SAFETY DISCLOSURES
Not applicable.
ITEM 4A – INFORMATION ABOUT OUR EXECUTIVE OFFICERS
The following table sets forth information concerning our Executive Officers as of October 31, 2020. Each of
our Executive Officers is selected by our Board of Directors and holds office until his successor is elected and qualified.
Age Offices Held and Business Experience during the Past Five Years
Name
Adam P. Chase
Peter R. Chase
48
72
Christian J. Talma
47
President of the Company since January 2008, Chief Executive Officer of the
Company since February 2015. Adam Chase was the Chief Operating Officer
of the Company from February 2007 to February 2015.
Chairman of the Board of the Company since February 2007, and Executive
Chairman of the Company since February 2015. Peter Chase was the Chief
Executive Officer of the Company from September 1993 to February 2015.
Peter Chase is the father of Adam Chase.
Chief Financial Officer of the Company since February 2019 and Chief
Accounting Officer from August 2018 to February 2019. Previously, Vice
President Operations Finance and Strategy for Haemonetics Corp. from 2016 to
2018. Prior to that, Christian Talma was employed at Siemens A.G., since 2002,
most recently as Head of North America Service Sales Finance.
18
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 American under the symbol CCF. As of October 31, 2020, there
were 320 shareholders of record of our Common Stock and we believe there were approximately 6,435 beneficial
shareholders who held shares in nominee name. On that date, the closing price of our common stock was $95.16 per
share as reported by the NYSE American.
Single annual cash dividend payments were declared and scheduled to be paid subsequent to each year ended
August 31, 2020, 2019 and 2018 in the amount of $0.80 per common share. Our revolving credit facility contains
financial covenants which may have the effect of limiting the amount of dividends that we can pay.
19
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 Henkel AG & Co KGaA, H.B. Fuller Company,
Intertape Polymer Group, Rogers Corporation and RPM International, Inc. Cumulative total returns are calculated
assuming that $100 was invested on August 31, 2015 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
August 2020
350.00
300.00
250.00
200.00
150.00
100.00
50.00
0.00
2015
2016
2017
2018
2019
2020
Chase Corporation
S&P 500 Index - Total Return
Peer Group
Chase Corp
S&P 500 Index
Peer Group Index
2015 2016 2017 2018 2019 2020
$ 100 $ 165 $ 243 $ 324 $ 264 $ 259
$ 100 $ 113 $ 131 $ 157 $ 161 $ 196
$ 100 $ 128 $ 133 $ 136 $ 114 $ 123
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.
20
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.”
2020
Fiscal Years Ended August 31,
2018
(In thousands, except per share amounts)
2019
2017
2016
Statement of Operations Data
Revenue
Net income
Net income available to common shareholders, per
common and common equivalent share:
Basic:
Net income per common and common equivalent share
Diluted:
Net income per common and common equivalent share
Balance Sheet Data
Total assets
Long-term debt, including current portion
Total stockholders' equity
Cash dividends paid per common and common
equivalent share
$ 261,162 $ 281,351 $ 284,188 $ 252,560 $ 238,094
$ 34,157 $ 32,711 $ 43,143 $ 42,014 $ 32,807
$
$
3.62 $
3.48 $
4.60 $
4.49 $
3.55
3.59 $
3.46 $
4.56 $
4.44 $
3.50
$ 346,830 $ 307,968 $ 316,469 $ 254,738 $ 262,819
$
— $ 43,400
— $ 25,000 $
$ 302,792 $ 271,227 $ 246,756 $ 210,929 $ 174,089
— $
$
0.80 $
0.80 $
0.80 $
0.70 $
0.65
21
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
Revenue
Net income
Increase (decrease) in revenue from prior year
Amount
Percentage
Increase (decrease) in net income from prior year
Amount
Percentage
Percentage of revenue:
Revenue
Cost of products and services sold
Selling, general and administrative expenses
Research and Product Development Costs
Other (income) expense, net
Income before income taxes
Income taxes
Net income
2020
2018
Years Ended August 31,
2019
(Dollars in thousands)
$ 281,351
$ 32,711
$ 284,188
$ 43,143
$ 261,162
$ 34,157
$ (20,189)
$
(7)%
(2,837)
$ 31,628
(1)%
13 %
$
1,446
$ (10,432)
$
(24)%
4 %
100 %
62
19
2
*
17 %
4
13 %
1,129
3 %
100 %
62
17
1
*
20 %
5
15 %
100 %
64
17
1
2
15 %
4
12 %
* denotes less than one percent
Note: Some percentage of revenue amounts may not sum due to rounding
Overview
Chase Corporation emphasized operational and financial discipline in fiscal 2020, a year which continued the
macrotrend revenue drag observed in the prior year, and ultimately saw the spread of the coronavirus pandemic
(COVID-19) across all geographies served by the Company. Domestic and international top-line headwinds attributable
to the pandemic affected all three of the Company’s operating segments, while the prior year tightness in Asian markets
persisted. Through this, the Company was able to increase its relative gross margin, complete the consolidation of its
pulling and detection operations into its existing Hickory, NC location, liquidate two real estate assets for gains and
achieve a year-over-year increase in cashflows from operations.
Chase Corporation’s balance sheet remained strong at August 31, 2020, with cash on hand of $99,068,000, a
current ratio of 7.7 and no outstanding principal balance owed on the Company’s $150,000,000 revolving credit facility.
The Company took advantage of its solid financial position with its September 2020 (fiscal 2021) cash on hand funded
purchase of ABchimie, a Corbelin, France headquartered solutions provider for the cleaning and the protection of
electronic assemblies, with further formulation, production, and research and development capabilities.
As an extension of the Company’s pre-existing facility consolidation and rationalization initiative, the Company
implemented certain changes in its cost structure in fiscal 2020 designed to address market dynamics brought on by
COVID-19. In the third fiscal quarter, these included: (a) a targeted 4.5% reduction in the Company’s global workforce,
contemplated pre-pandemic but catalyzed by COVID-19; and (b) the institution of a temporary 20% reduction in the
22
base salaries of named executive officers and select members of senior management, as well as the cash compensation of
the non-employee members of the Board. The Company remains profitable with sufficient cash on hand to continue to
meet its short- and long-term strategic objectives and implemented the aforementioned expense reductions as a
demonstration of fiscal prudence during these uncertain times.
Chase Corporation is a supplier of several essential industries, providing products to critical industries such as
healthcare, utilities, infrastructure and telecommunications, and throughout the COVID-19 effected period of fiscal 2020,
successfully maintained business continuity for the Company’s global customers. As of August 31, 2020, all the
Company’s facilities were operational, with only two facilities, Pune, India and Newark, CA, having experienced prior
temporary closures due to separate general government orders. However, given the magnitude of the uncertainty that
COVID-19 has broadly placed on global markets, the pandemic’s long-term effects on the Company’s results and the
Company’s ability to maintain current service levels cannot currently be estimated. The Company will continue to assess
the situation and take the appropriate actions to ensure it is in the strongest position possible.
During the second fiscal quarter of 2020, the relocation of the Company’s pulling and detection product line
production operations from the Granite Falls, NC facility to the existing Hickory, NC facility was completed. In the third
fiscal quarter of 2020, the Company completed the sale of its Pawtucket, RI location for a net gain. Also during the third
quarter, the administrative functions based in the Pawtucket, RI location were moved into the Company’s existing
Westwood, MA location. In the fourth fiscal quarter of 2020, the Company sold its Randolph, MA property for a net
gain.
Net cash provided by operating activities exceeded that of the prior year, with the Company’s cash position
continuing the positive trend seen in the latter half of fiscal 2019 (prior year) following the full payoff of its outstanding
debt. The Company held no outstanding balance on its $150,000,000 revolving credit facility as of August 31, 2020. The
revolving credit facility allows for the Company to pay down debt with excess cash, while retaining access to immediate
liquidity to fund future accretive activities, including mergers and acquisitions, as identified.
Revenue from the Adhesives, Sealants and Additives segment decreased versus the prior year. Sales volume
within the electronic and industrial coatings product line decreased in North American, European, and Asian markets.
This decrease was attributable to the effects of the COVID-19 pandemic on the already strained automotive and
industrial markets, and Asian headwinds. The Company’s specialty chemical intermediates product line sales, which
have a North American concentration, also experienced a volume drop as compared to the prior year.
Net sales decreased in the Industrial Tapes segment as compared to the prior year, with the cable materials and
specialty products product lines driving the top-line remission. A primary driver in the sales reduction in the specialty
products product line was the Company’s planned exit from providing transitional toll manufacturing services to the
common purchaser of its former structural composites rod and fiber optical cable components businesses, with sales
tapering in the first quarter of fiscal 2020 and fully ending in the second quarter. The Company’s electronic materials
product line, which sells nearly exclusively to Asian markets, achieved sales growth over the prior year. The pulling and
detection product line, carried by sales momentum in the North American utility and telecommunication markets, also
achieved a year-over-year increase in sales.
The Company’s Corrosion Protection and Waterproofing segment’s sales decreased compared to the prior year.
The building envelope product line’s sales were unfavorable to the prior year, driving the segment’s overall unfavorable
results. The coating and lining systems, bridge and highway and pipeline coatings product lines all saw sales increases
over the prior year. The pipeline coatings product line results were driven by increased sales by our Rye, U.K. facility,
especially in the fourth fiscal quarter of 2020 with sales into the Middle East.
Through mergers, acquisitions and divestitures, its marketing and product development efforts and its ability to
rationalize and consolidate its operations, the Company remains focused on its core strategies for sustainable long-term
growth.
23
The Company has three reportable operating segments summarized below:
Segment
Adhesives,
Sealants and
Additives
Industrial Tapes
Product Lines
Electronic and Industrial Coatings
Specialty Chemical Intermediates
Cable Materials
Specialty Products
Pulling and Detection
Electronic Materials
Structural Composites (1)
Corrosion
Protection and
Waterproofing
Coating and Lining Systems
Pipeline Coatings
Building Envelope
Bridge and Highway
Protective coatings, including moisture protective coatings
Manufacturing Focus and Products
and customized sealant and adhesive systems for
electronics; polyurethane dispersions, polymeric
microspheres and superabsorbent polymers.
Protective tape and coating products and services, including
insulating and conducting materials for wire and cable
manufacturers; laminated durable papers, packaging and
industrial laminate products and custom manufacturing
services; pulling and detection tapes used in the installation,
measurement and location of fiber optic cable and water and
natural gas lines; cover tapes essential to delivering
semiconductor components via tape and reel packaging; and
composite materials elements (now divested).
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; adhesives and sealants used in
architectural and building envelope waterproofing
applications; high-performance polymeric asphalt additives
and expansion and control joint systems for use in the
transportation and architectural markets.
(1) Product line was substantially divested with the sale of the structural composites rod business on April 20, 2018.
Custom manufacturing performed for the purchaser of the structural composites rod business subsequent to the sale
is included within the specialty products product line.
24
Results of Operations
Revenue and Income Before Income Taxes by Segment are as follows:
Revenue
Income Before
Income Taxes
% of
Revenue
(Dollars in thousands)
Fiscal 2020
Adhesives, Sealants and Additives
Industrial Tapes
Corrosion Protection and Waterproofing
$
$
96,208 $
118,960
45,994
261,162
Less corporate and common costs
Income before income taxes
$
Fiscal 2019
Adhesives, Sealants and Additives
Industrial Tapes
Corrosion Protection and Waterproofing
$
$
104,796 $
129,845
46,710
281,351
Less corporate and common costs
Income before income taxes
$
Fiscal 2018
Adhesives, Sealants and Additives
Industrial Tapes
Corrosion Protection and Waterproofing
$
$
101,690 $
130,598
51,900
284,188
Less corporate and common costs
Income before income taxes
$
25,953
31,237 (a)
16,638 (b)
73,828
(28,508) (c)
45,320
27,142 (d)
28,216 (e)
15,909 (f)
71,267
(27,714) (g)
43,553
35,190 (h)
30,886 (i)
18,178
84,254
(27,289) (j)
56,965
27 %
26 %
36 %
28 %
26 %
22 %
34 %
25 %
35 %
24 %
35 %
30 %
(a) Includes $559 in exit costs related to the movement of the pulling and detection business out of the Granite Falls,
NC location and into the Hickory, NC location during the first six months of fiscal 2020
(b) Includes $170 gain on the refund of a payment made in fiscal 2019 related to engineering studies performed to
assess potential operational changes and further plant rationalization and consolidation and an expense of $405 for
the write-down of certain assets under construction.
(c) Includes $150 of expense related to exploratory IT work performed to assess potential future upgrades to the
Company’s companywide ERP system, a $760 gain related to the April 2020 sale of the Company’s Pawtucket, RI
location, a $1,791 gain related to the August 2020 sale of the Company’s Randolph, MA property, $183 in
severance expense related to the May 2020 reduction in force, $85 in expenses related to the final transition out of
the Pawtucket, RI facility, $155 of pension-related settlement costs due to the timing of lump-sum distribution and
$274 in acquisition-related costs attributable to the September 2020 (fiscal 2021) acquisition of ABchimie
(d) Includes $2,410 of loss on impairment of goodwill related to the Company’s polyurethane dispersions business
(e) Includes $260 of expense related to the closure and exit of our Pawtucket, RI location recognized in the first quarter
of fiscal 2019, and $526 in exit costs related to the movement of the pulling and detection business out of the
Granite Falls, NC location and into the Hickory, NC location during the second half of fiscal 2019
(f) Includes $200 of expense related to engineering studies performed to assess potential future operational changes and
further plant rationalization and consolidation, see note (b)
(g) Includes $511 of pension-related settlement costs due to the timing of lump-sum distributions
(h) Includes $1,070 of expense related to inventory step-up in fair value attributable to the acquisition of Zappa Stewart
(i) Includes $1,085 gain on sale of license related to the structural composites product line recorded in the second
quarter of fiscal 2018, $1,480 gain on sale of business related to the April 2018 sale of the structural composites rod
business and $1,272 of expense related to the exit of our Pawtucket, RI location in the fourth quarter of fiscal 2018
(j) Includes $393 in acquisition-related expense attributable to the December 2017 acquisition of Zappa Stewart
25
Total Revenue
Total revenue in fiscal 2020 decreased $20,189,000 or 7% to $261,162,000 from $281,351,000 in the prior year.
Revenue in our Adhesives, Sealants and Additives segment decreased $8,588,000 or 8% to $96,208,000 for the
year ended August 31, 2020 compared to $104,796,000 in fiscal 2019. The decreases in revenue from the Adhesives,
Sealants and Additives segment in fiscal 2020 was primarily due to the electronic and industrial coatings product line’s
$6,276,000 sales volume-driven decrease. North American, European, and Asian automotive and industrial weakness,
exacerbated by COVID-19, affected revenue, including the royalty received from the Company’s licensed manufacturer
in Asia. Also contributing to the segment’s sales decline was a decrease in revenue from the North American focused
specialty chemical intermediates product line, totaling $2,312,000 in fiscal 2020.
Revenue in our Industrial Tapes segment decreased $10,885,000 or 8% to $118,960,000 for the year ended
August 31, 2020 compared to $129,845,000 in fiscal 2019. The decrease in revenue for the segment was primarily due to
the following: (a) a sales volume demand decrease of $7,880,000 from the North American focused cable materials
product line; and (b) revenue reduction of $4,979,000 for the specialty products product line, as the Company ended its
arrangement to provide low-margin transitional toll manufacturing services in the second quarter of fiscal 2020.
Offsetting the overall sales decreases for the current year were (a) an entirely volume-driven sales increase of $169,000
in the electronic materials product line, which has a near exclusively Asian end-market; and (b) the pulling and detection
tapes product line achieving predominately volume-driven revenue growth of $1,805,000, with sales primarily into the
North American telecommunication and utility industries.
Revenue from our Corrosion Protection and Waterproofing segment decreased $716,000 or 2% to $45,994,000
for the year ended August 31, 2020 compared to $46,710,000 for fiscal 2019. The segment’s sales decrease in the
current year was driven by the building envelope product line’s sales decline of $1,717,000. Partially offsetting the
segment’s top-line decline were: (a) the coating and lining systems product line’s $668,000 volume- and price-driven
sales increase; (b) the bridge and highway product line’s $244,000 revenue increase; and (c) the pipeline coatings
product line’s $89,000 year-over-year increase, driven by increased sales by our Rye, U.K. facility, especially in the
fourth fiscal quarter of 2020.
Royalties and commissions in the Adhesive, Sealants and Additives and Industrial Tapes segments totaled
$3,420,000, $4,512,000 and $5,226,000 for the years ended August 31, 2020, 2019 and 2018, respectively. The decrease
in royalties and commissions in fiscal 2020 compared to both fiscal 2019 and 2018 was primarily due to decreased sales
of electronic and industrial coatings products by our licensed manufacturer in Asia.
Export sales from domestic operations to unaffiliated third parties were $30,067,000, $30,582,000 and
$42,883,000 for the years ended August 31, 2020, 2019 and 2018, respectively. The decrease in export sales in fiscal
2020 against fiscal 2019 reflects the overall year-over-year decrease in sales results. The decrease in export sales in fiscal
2019 against fiscal 2018 resulted from decreased export sales into China and Europe.
26
Total revenue in fiscal 2019 decreased $2,837,000 or 1% to $281,351,000 from $284,188,000 in fiscal 2018.
Revenue in our Adhesives, Sealants and Additives segment increased $3,106,000 or 3% to $104,796,000 for the year
ended August 31, 2019 compared to $101,690,000 in fiscal 2018. The increase in revenue from our Adhesives, Sealants
and Additives segment in fiscal 2019 was primarily due to an increase in revenue from our specialty chemical
intermediates product line totaling $7,083,000, which included the first full year of operations from the December 2017
acquired Zappa Stewart business. The segment’s net sales increase was negatively affected by our electronic and
industrial coatings product line’s $3,977,000 sales-volume-driven decrease, with headwinds seen most acutely in Asian
markets in the second half of the fiscal 2019. These headwinds also manifested in a decreased royalty received from our
licensed manufacturer in Asia.
Revenue in our Industrial Tapes segment decreased $753,000 or 1% to $129,845,000 for the year ended August
31, 2019 compared to $130,598,000 in fiscal 2018. The decrease in revenue from our Industrial Tapes segment in fiscal
2019 was primarily due to: (a) a sales volume decrease of $5,077,000 from our structural composite products (following
the Company’s divestiture of the structural composites rod business in April 2018, product sales revenue for wind energy
products significantly declined, and the Company has recognized wind-energy-related revenue, including royalty
revenue and revenue for transitional custom manufacturing services performed for the buyer, in our specialty products
product line since the sale); and (b) an entirely volume-driven sales decrease of $2,608,000 in our electronic materials
product line, which has a near exclusively Asian end-market. These decreases were partially offset by: (a) a sales
increase of $3,500,000 from our pulling and detection products, from volume and price-driven sales growth into large
scale utility and telecommunications infrastructure build in North America; (b) an increase in revenue from our cable
materials products of $2,880,000 on both volume and price; and (c) a sales volume increase of $552,000 for our specialty
products, which, subsequent to the sale of our fiber optic cable components business in April 2017 and our structural
composites rod business in April 2018, includes revenue from the manufacturing services provided by the Company to
the common purchaser of the divested businesses (totaling $2,062,000 for fiscal 2019).
Revenue from our Corrosion Protection and Waterproofing segment decreased $5,190,000 or 10% to
$46,710,000 for the year ended August 31, 2019 compared to $51,900,000 for fiscal 2018. The decreased revenue for
our Corrosion Protection and Waterproofing segment in fiscal 2019 was primarily due to a decrease in sales totaling
$4,680,000 in our pipeline coatings products. Our U.K.-produced water and wastewater pipeline products experienced
the sharpest decline attributed to tight credit markets in the Middle East regions they sell into, while our U.S.-produced
oil and gas pipeline products had sales levels only slightly below fiscal 2018 levels. Our bridge and highway products
failed to repeat the large eastern U.S. bridge work laden fiscal year 2018 sales levels in fiscal 2019 and were off by
$2,353,000 year-over-year. Partially countering the overall decrease in revenue for the segment were: (a) a $952,000
increase in our building envelope product sales, driven predominantly by an increase in sales volume; and (b) coating
and lining systems products, which had a revenue increase of $891,000.
Cost of Products and Services Sold
Cost of products and services sold decreased $18,548,000 or 10% to $161,615,000 for the fiscal year ended
August 31, 2020 compared to $180,163,000 in fiscal 2019. As a percentage of revenue, cost of products and services
sold decreased to 62% in fiscal 2020 compared to 64% for fiscal 2019.
The following table summarizes the relative percentages of cost of products and services sold to revenue for our
three operating segments:
Cost of products and services sold
Adhesives, Sealants and Additives
Industrial Tapes
Corrosion Protection and Waterproofing
Total Company
Fiscal Years Ended August 31,
2019
2018
2020
58 %
68 %
55 %
62 %
58 %
72 %
57 %
64 %
52 %
71 %
57 %
62 %
Cost of products and services sold in our Adhesives, Sealants and Additives segment was $55,902,000 for the
fiscal year ended August 31, 2020 compared to $60,345,000 in fiscal 2019. As a percentage of revenue, cost of products
and
27
services sold in this segment was consistent at 58% in both fiscal 2020 and fiscal 2019. Cost of products and services
sold in our Industrial Tapes segment was $80,351,000 for the fiscal year ended August 31, 2020 compared to
$93,299,000 in fiscal 2019. As a percentage of revenue, cost of products and services sold in this segment decreased to
68% in fiscal 2020 compared to 72% for fiscal 2019. Cost of products and services sold in our Corrosion Protection and
Waterproofing segment was $25,362,000 for the fiscal year ended August 31, 2020 compared to $26,519,000 in fiscal
2019. As a percentage of revenue, cost of products and services sold in this segment decreased to 55% in fiscal 2020
compared to 57% in fiscal 2019. As a percentage of revenue, cost of products and services overall decreased primarily
due to: (a) production efficiencies recognized, most acutely seen at our Oxford, MA and Lenoir, NC locations following
the consolidation of our former Pawtucket, RI cable materials plant, and benefiting our Industrial Tapes segment; (b)
more favorable sales mix, most specifically obtained in our Industrial Tapes segment, as our lower margin products
constituted a comparatively lower portion of total sales; and (c) the full period effects of price increases the Company
instituted during fiscal 2019 (prior year) to address inflation then seen in raw material costs.
With the composition of our finished goods and the markets we serve, the costs of certain commodities
(including petroleum-based solvents, films, yarns, polymers and nonwovens, aluminum and copper foils, specialty
papers, and various resins, adhesives and inks) both directly and indirectly affect the purchase price of our raw materials
and the market demand for our product offerings. The Company diligently monitors raw material and commodities
pricing across all its product lines in its efforts to preserve margins.
Cost of products and services sold in our Adhesives, Sealants and Additives segment was $60,345,000 for the
fiscal year ended August 31, 2019 compared to $53,324,000 in fiscal 2018. As a percentage of revenue, cost of products
and services sold in this segment increased to 58% for fiscal 2019 compared to 52% in fiscal 2018. Cost of products and
services sold in our Industrial Tapes segment was $93,299,000 for the fiscal year ended August 31, 2019 compared to
$92,418,000 in fiscal 2018. As a percentage of revenue, cost of products and services sold in this segment increased to
72% in fiscal 2019 compared to 71% for fiscal 2018. Cost of products and services sold in our Corrosion Protection and
Waterproofing segment was $26,519,000 for the fiscal year ended August 31, 2019 compared to $29,394,000 in fiscal
2018. As a percentage of revenue, cost of products and services sold in this segment was consistent at 57% in both fiscal
2019 and fiscal 2018. As a percentage of revenue, cost of products and services overall increased in 2019 compared to
2018 primarily due to: (a) a less favorable sales mix, most specifically felt in our Adhesives, Sealants and Additives
segment, as our lower margin products constituted a comparatively higher portion of total sales; (b) increasing supply
and demand imbalances and tariffs causing rising raw material costs; and (c) production inefficiencies and additional
costs to maintain service levels in the first half of fiscal 2019 at our Oxford, MA and Lenoir, NC locations following the
consolidation of our Pawtucket, RI operations.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $657,000 or 1% to $49,364,000 during fiscal 2020
compared to $48,707,000 in fiscal 2019. As a percentage of revenue, selling, general and administrative expenses
increased to 19% of total revenue in fiscal 2020 compared to 17% for fiscal 2019. The year-over-year increase in
expenses is primarily attributable to $1,107,000 of additional corporate development and due diligence costs, beyond that
included in acquisition-related costs, increased non-cash stock-based compensation expense of $1,032,000 given
increased restricted stock and stock option grants in fiscal 2020, which were partially offset by decreased amortization
expense of $869,000, as certain intangible assets related to prior acquisitions became fully amortized. The Company
continues to closely monitor spending with an emphasis on controlling costs and leveraging existing resources.
During fiscal 2019, selling, general and administrative expenses increased $1,004,000 or 2% to $48,707,000
compared to $47,703,000 in fiscal 2018. As a percentage of revenue, selling, general and administrative expenses stayed
consistent at 17% of total revenue for both fiscal 2019 and fiscal 2018. The year-over-year increase in expenses is
primarily attributable to: (a) increased amortization expense of $638,000, primarily related to intangible assets acquired
in our December 31, 2017 acquisition of Zappa Stewart; and (b) increased selling and commission expense of $252,000,
principally related to sales growth on our highest commissionable products in the current year, coupled with the addition
of a full year of the established sales force of Zappa Stewart.
28
Research and Product Development Costs
Research and Product Development Costs decreased $14,000 or less than one percent to $4,007,000 during
fiscal 2020, compared to $4,021,000 in fiscal 2019. Research and development stayed relatively consistent from fiscal
2019 to 2020 as the Company continued focused development work on strategic product lines.
During fiscal 2019, Research and Product Development expense increased $81,000 or 2% to $4,021,000
compared to $3,940,000 in fiscal 2018. This increase in expense from fiscal 2018 to 2019 came as the Company
recognized its first full fiscal year with the established research and development department of Zappa Stewart (acquired
in the second quarter of fiscal 2018).
Operations Optimization Costs
During the third fiscal quarter of 2020, the Company implemented changes in its cost structure designed to
address market changes brought on, in part, by COVID-19. These changes included a targeted reduction of
approximately 4.5% of the Company’s global workforce. This reduction, which was contemplated pre-pandemic but
catalyzed by COVID-19, resulted in the recognition of $183,000 in severance costs during the third quarter of fiscal
2020. The reduction in force, which impacted operations in the Blawnox, PA, Hickory, NC, Lenoir, NC, Evanston, IL,
Oxford, MA and Westwood, MA facilities, was effective May 2020.
During the first quarter of fiscal 2020, the Company commissioned third party led studies regarding the
potential upgrading of the Company’s current worldwide ERP system. Chase is currently reviewing the data and
recommendations provided by the study and may further utilize third-party engineering, IT and other professional
services firms in the future for similar work, as well as work around the Company’s facilities rationalization and
consolidation initiative. The Company recognized $150,000 in expense related to these services in the first quarter of
fiscal 2020. Given the ongoing nature of the review, an estimate of future costs, including costs that could be capitalized,
cannot currently be determined.
During the third quarter of fiscal 2019, Chase began moving the pulling and detection operations housed in its
Granite Falls, NC location to its Hickory, NC facility. This is in line with the Company’s ongoing initiative to
consolidate its manufacturing plants and streamline its existing processes. At the time, the pulling and detection
operations were the only Chase-owned production operations in Granite Falls, NC, with the remaining portions of the
building being either utilized for research and development or leased to a third party. The process of moving, including
moving internal research and development capabilities, was substantially completed during the second quarter of fiscal
2020. The Company recognized $559,000 in expense related to the move in the six-month period ended February 29,
2020, having recognized $526,000 in expense during the second half of fiscal 2019. No costs were recognized in the six
months ended August 31, 2020, and future costs related to this move are not anticipated to be significant to the
Consolidated Financial Statements.
During the fourth quarter of fiscal 2019 (prior year), Chase commissioned engineering studies of certain legacy
operations, machinery and locations related to the Company’s ongoing facility rationalization and consolidation
initiative. Chase completed its review of the data and recommendations provided by the study in the fourth quarter of
fiscal 2020 (current year). The Company recognized $200,000 in expense related to these services in fiscal 2019, and a
gain of $170,000 in fiscal 2020, as certain amounts expensed in fiscal 2019 were refunded. Chase may utilize third party
engineering, IT and other professional services firms in the future for similar optimization-related work. Given the
ongoing nature of the facility rationalization and consolidation initiative, an estimate of future costs cannot currently be
determined.
29
On June 25, 2018, the Company announced to its employees the planned closing of its Pawtucket, RI
manufacturing facility effective August 31, 2018. This is in line with the Company’s ongoing efforts to consolidate its
manufacturing plants and streamline its existing processes. The manufacture of products previously produced in the
Pawtucket, RI facility was substantially moved to Company facilities in Oxford, MA and Lenoir, NC during a two-
month transition period. In the fourth quarter of fiscal 2018, the Company expensed $1,272,000 related to the closure.
The Company also recognized $260,000 in expense related to the move in the three-month period ended November 30,
2018, with no additional expense recognized in the remainder of fiscal 2019. The Company completed the sale of its
Pawtucket, RI location to a third-party in April 2020, for net proceeds totaling $1,810,000. This transaction resulted in a
gain of $760,000 which was recorded during the third quarter of fiscal 2020. Also, during the third quarter of fiscal 2020,
the Company recognized $85,000 in final Pawtucket, RI transition and exit costs, with no further costs related to this
initiative anticipated in future periods.
Acquisition-Related Costs
In fiscal 2020, the Company incurred $274,000 of costs related to our acquisition of ABchimie. This
acquisition was accounted for as a business combination in accordance with applicable accounting standards, and all
related professional service fees (including banking, legal, accounting and actuarial fees) were expensed as incurred
within the second, third and fourth quarters of fiscal 2020. The transaction was consummated at the beginning of fiscal
2021.
In fiscal 2018, the Company incurred $393,000 of costs related to our acquisition of Zappa Stewart. This
acquisition was accounted for as a business combination in accordance with applicable accounting standards, and all
related professional service fees (including banking, legal, accounting and actuarial fees) were expensed as incurred
within the second fiscal quarter of 2018.
Gain on Sale of Real Estate
In August 2020, the Company finalized the sale of its Randolph, MA property for net proceeds of $1,805,000.
This transaction resulted in a gain of $1,791,000 which was recorded during the quarter ended August 31, 2020 (fiscal
2020).
In April 2020, the Company finalized the sale of its Pawtucket, RI location for net proceeds of $1,810,000. This
transaction resulted in a gain of $760,000 which was recorded during the quarter ended May 31, 2020 (fiscal 2020).
Both properties were classified as assets held for sale as of August 31, 2019 (prior year).
Write-down of certain assets under construction
In the fourth quarter of fiscal 2020, given the results and recommendations of a commissioned engineering
study, the Company wrote down the value of certain non-operating production assets related to the pipeline coatings
product line, within the Corrosion Protection and Waterproofing segment. Given the nature and prospects of the
equipment, the Company determined its then carrying value exceeded its fair value and recognized an expense of
$405,000 related to the machinery.
30
Loss on Impairment of Goodwill
The ordering patterns of the polyurethane dispersions reporting unit’s customers during the three-month period
ended February 28, 2019 (fiscal 2019), especially those in the automotive industry, combined with a decrease in the
reporting unit’s backlog of customer orders believed to be firm as of February 28, 2019 indicated an impairment in the
carrying value of the reporting unit might have occurred. As such, the Company performed an impairment test on the
long-lived assets related to the polyurethane dispersions reporting unit, then part of the Adhesives, Sealants and
Additives operating segment, in accordance with ASC Topic 350, “Intangibles — Goodwill and Other” and ASC Topic
360, “Disclosure — Impairment or Disposal of Long-Lived Assets.” As a result of impairment testing, which included
first testing long-lived assets other than goodwill for impairment under applicable guidance, the Company recorded a
charge of $2,410,000 to loss on impairment of goodwill within the consolidated statement of operations during the
quarter ended February 28, 2019.
Interest Expense
Interest expense decreased $273,000 or 53% to $246,000 in fiscal 2020 compared to $519,000 in fiscal 2019.
Interest expense decreased $653,000 or 56% to $519,000 in fiscal 2019 compared to $1,172,000 in fiscal 2018. The
decrease in interest expense in fiscal 2020 and 2019 is the result of the decreased average outstanding balance of Chase’s
revolving debt facility, following the $65,000,000 draw on the facility in December 2017 (fiscal 2018) to substantially
fund the Company’s acquisition of Zappa Stewart and subsequent incremental principal payments made.
In fiscal 2018, subsequent to the December 2017 borrowing, the Company made $40,000,000 in payments
against the principal. In fiscal 2019, Chase made an additional $25,000,000 in principal payments, paying off the
outstanding balance in full as of August 31, 2019.
Gain on Sale of License
In November 2017 (fiscal 2018), the Company entered an agreement with an unrelated party to sell a license,
including certain intellectual property, and sell certain construction in process assets, both related to the manufacturing of
certain structural composite materials. In the second fiscal quarter of 2018, the transaction was finalized for gross
consideration of $1,111,000 comprising cash proceeds of $1,000,000 and foreign tax consideration paid by the purchaser
on Chase’s behalf of $111,000. This transaction resulted in a gain of $1,085,000, which was recorded as a gain on sale of
license during the fiscal quarter ended February 28, 2018.
In relation to this license agreement, the purchaser also entered into a royalty agreement with the Company. The
purchaser will make royalty payments to Chase based on the volume of future sales of certain structural composite
material manufactured by the purchaser. Revenue recognized related to this royalty agreement was not material in fiscal
2019 or 2018, and this royalty agreement was terminated in fiscal 2019.
31
Gain on Sale of Businesses
On April 20, 2018, Chase finalized an agreement with an unrelated party to sell all inventory, operational
machinery and equipment and intangible assets of the Company’s structural composites rod business, as well as a license
related to the production and sale of rod, for proceeds of $2,232,000, net of transaction costs and following certain
working capital adjustments. This business, which was part of the structural composites product line within the Industrial
Tapes segment, had limited growth and profitability prospects as part of the Company, and was outside the areas Chase
has identified for strategic emphasis. The resulting pre-tax gain on sale of $1,480,000 was recognized in the third quarter
of fiscal 2018 as a gain on sale of businesses within the Consolidated Statement of Operations. Chase received
$2,075,000, net of transaction costs, in the third quarter of fiscal 2018, with the remaining $157,000 received in the
fourth quarter of fiscal 2018 as a result of a working capital true-up. Chase will provide certain transitional
manufacturing and administrative support to the purchaser for which the Company will receive additional consideration
upon the performance of services.
In relation to this transaction, the purchaser entered into a royalty agreement with the Company. The purchaser
will make royalty payments to Chase based on future sales of certain structural composite material manufactured by the
purchaser. Royalty revenue recognized in 2019 and 2018 related to this agreement was not material, and this royalty
agreement was terminated in fiscal 2019.
Other Income (Expense)
Other expense was $1,675,000 in fiscal 2020 compared to other expense of $992,000 in fiscal 2019, an increase
of $683,000. Other income (expense) primarily includes foreign exchange gains (losses) caused by changes in exchange
rates on transactions or balances denominated in currencies other than the functional currency of our subsidiaries, non-
service cost components of periodic pension expense (including pension-related settlement costs due to the timing of
lump-sum distributions), interest income, rental income and other non-trade/non-royalty/non-commission receipts. The
increase in total other expense in fiscal 2020 compared to fiscal 2019 was largely due to the recognition of a larger
foreign exchange loss in fiscal 2020 as compared to fiscal 2019.
Other expense was $992,000 in fiscal 2019 compared to other expense of $172,000 in fiscal 2018, an increase
of $820,000. The increase in total other expense in fiscal 2019 compared to fiscal 2018 was largely due to the
recognition of $511,000 in pension-related settlement costs in fiscal 2019, while no such expense was recognized in
fiscal 2018.
32
Income Taxes
Our effective tax rate for fiscal 2020 was 24.6% as compared to 24.9% and 24.3% in fiscal 2019 and 2018,
respectively.
The current and prior years’ effective tax rates were most prominently affected by the passage of the Tax Cuts
and Jobs Act (the “Tax Act”) in December 2017 and discrete tax benefits related to stock-based compensation,
recognized in relation to the Company’s early adoption of ASU 2016-09 and described in more detail below. For fiscal
2020 and 2019, the Company utilized the new 21% Federal tax rate enacted by the Tax Act. During fiscal 2018, Chase
utilized a blended rate of 25.7%, based on a combination of four months of operations under the old 35% corporate
income tax rate, and eight months at the new 21% rate. Please see Note 7 — “Income Taxes” to the Consolidated
Financial Statements for further discussion of the effects of the Tax Act.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted in
response to the COVID-19 pandemic. The CARES Act, among other things, included a technical correction to the Tax
Act which will allow accelerated deductions for qualified improvement property. The Company is currently evaluating
the impact of the CARES Act, but at present does not expect that the qualified improvement property correction nor
other provisions of the CARES Act would result in a material tax benefit to us in future periods. The CARES Act had no
material effect on the effective tax rate for fiscal 2020.
The Company early adopted ASU No. 2016-09, “Compensation – Stock Compensation (Topic 718),
Improvements to Employee Share-Based Payment Accounting”, during the first fiscal quarter of 2017. During the fiscal
years ended August 31, 2020, 2019 and 2018, the Company recognized excess tax benefits from stock-based
compensation of $149,000, $157,000 and $1,921,000, respectively, within income tax expense on the Consolidated
Statements of Operations. The current year and prior year decrease in the benefit resulted from a decrease in certain
stock option exercise activity in fiscal 2020 and 2019 as compared to fiscal 2018. The Company anticipates the potential
for increased periodic volatility in future effective tax rates based on the continued application of ASU No. 2016-09.
Net Income
Net income increased $1,446,000 or 4% to $34,157,000 compared to $32,711,000 in fiscal 2019. The increase
in net income in fiscal 2020 was primarily due to: (a) a nonrecurring impairment of goodwill charge recognized in the
prior year; (b) the gain on sale of the Pawtucket, RI and Randolph, MA locations: and (c) a lower pension expense.
Partially offsetting this increase were: (a) acquisition-related costs; (b) a write-down of certain assets under construction;
and (c) a larger foreign exchange loss in the current year.
Net income in fiscal 2019 decreased $10,432,000 or 24% to $32,711,000 compared to $43,143,000 in fiscal
2018. The decrease in net income in 2019 was primarily due to: (a) a lower gross profit on sales; (b) a loss on
impairment of goodwill; (c) increased amortization expense recognized in the current period and related to our December
2017 acquisition of Zappa Stewart; (d) nonrecurring gains on sales of both a business and a license in the prior year
period; and (e) increased pension-related settlement costs due to the timing of lump-sum disbursements in fiscal 2019.
33
Liquidity and Sources of Capital
Our cash balance increased $51,297,000 to $99,068,000 at August 31, 2020 from $47,771,000 at August 31,
2019. The increased cash balance was primarily attributable to cash from operations of $55,734,000, partially offset by a
cash dividend payment of $7,539,000. Of the above noted amounts, $42,615,000 and $17,235,000 were held outside the
U.S. by Chase Corporation and our foreign subsidiaries as of August 31, 2020 and 2019, respectively. Given our cash
position and borrowing capability in the United States and the potential for increased investment and acquisitions in
foreign jurisdictions, prior to the second quarter of fiscal 2018, we did not have a history of repatriating a significant
portion of our foreign cash. With the passage of the Tax Cuts and Jobs Act (the “Tax Act”) in the second fiscal quarter of
2018, significant changes in the Internal Revenue Code were enacted, changing the U.S. taxable nature of previously
unrepatriated foreign earnings. Following the passage of the Tax Act, the Company repatriated $10,499,000 in U.K.
foreign earnings in fiscal 2018 and $17,230,000 in fiscal 2019. No additional amounts were repatriated in fiscal year
2020. We do not currently take the position that undistributed foreign subsidiaries’ earnings are considered to be
permanently reinvested. See Note 7 — “Income Taxes” to the Consolidated Financial Statements included in this Report
for further discussion of the effects of the Tax Act.
Our cash balance increased $12,943,000 to $47,771,000 at August 31, 2019 from $34,828,000 at August 31,
2018. The increased cash balance was primarily attributable to cash from operations of $49,535,000, partially offset by:
(a) $25,000,000 in principal debt pay down on debt incurred to acquire Zappa Stewart in the prior year; and (b) a cash
dividend payment of $7,522,000.
Cash provided by operations was $55,734,000 for the year ended August 31, 2020 compared to $49,535,000 in
fiscal 2019. Cash provided by operations during fiscal 2020 was primarily due to operating income and decreased levels
of accounts receivable (resulting from lower sales) and inventory.
Cash provided by operations was $49,535,000 for the year ended August 31, 2019 compared to $46,071,000 in
fiscal 2018. Cash provided by operations during fiscal 2019 was primarily due to operating income and decreased
accounts receivable, which contracted on lower sales levels. Partially offsetting the overall increase of cash provided by
operations were decreased payables.
The ratio of current assets to current liabilities was 7.7 as of August 31, 2020 compared to 6.0 as of August 31,
2019. The increase in our current ratio in fiscal 2020 was primarily attributable to increased cash and cash equivalents,
primarily generated by cash flow from operations.
Cash provided by investing activities was $2,077,000 for the year ended August 31, 2020 compared to
$2,166,000 in cash used in investing activities in fiscal 2019. During fiscal 2020, cash provided by investing activities
was largely due to the net cash received for the sales of the Pawtucket, RI and Randolph, MA locations, partially offset
by cash spent on capital purchases of machinery and equipment.
Cash used in investing activities was $2,166,000 for the year ended August 31, 2019 compared to $73,766,000
in fiscal 2018. During fiscal 2019, cash used in investing activities was primarily due to cash spent on capital purchases
of machinery and equipment, partially offset by the final escrow payment received by the Company for our April 2017
sale of the fiber optic cable components business.
Cash used in financing activities was $8,420,000 for the year ended August 31, 2020 compared to $33,450,000
used in financing activities in fiscal 2019 and $14,423,000 provided by financing activities in fiscal 2018. During fiscal
2019 and 2018, Chase repaid $25,000,000 and $40,000,000, respectively, on the $65,000,000 it borrowed on its
revolving debt facility to substantially fund its purchase of Zappa Stewart in fiscal 2018. Chase also paid annual
dividends of $7,539,000, $7,522,000 and $7,497,000 in 2020, 2019 and 2018, respectively.
On November 12, 2020, we announced a cash dividend of $0.80 per share (totaling approximately $7,556,000)
to shareholders of record on November 27, 2020 and payable on December 7, 2020.
34
On November 13, 2019, we announced a cash dividend of $0.80 per share (resulting in payment of $7,539,000)
to shareholders of record on November 26, 2019 and payable on December 4, 2019.
On November 13, 2018, we announced a cash dividend of $0.80 per share (resulting in payment of $7,522,000)
to shareholders of record on November 23, 2018 and payable on December 5, 2018.
On December 15, 2016, we entered an Amended and Restated Credit Agreement (the “Credit Agreement”) with
Bank of America, acting as administrative agent, and with participation from Citizens Bank and JPMorgan Chase Bank
(collectively with Bank of America, the “Lenders”). The Credit Agreement is initially an all-revolving credit facility with
a borrowing capacity of $150,000,000, which can be increased by an additional $50,000,000 at the request of the
Company and the individual or collective option of any of the Lenders. The Credit Agreement contains customary
affirmative and negative covenants that, among other things, restrict our ability to incur additional indebtedness and
require certain lender approval for acquisitions by us and our subsidiaries over a certain size. It also requires us to
maintain certain financial ratios on a consolidated basis, including a consolidated net leverage ratio (as defined in the
facility) of no more than 3.25 to 1.00, and a consolidated fixed charge coverage ratio (as defined in the facility) of at
least 1.25 to 1.00. We were in compliance with our debt covenants as of August 31, 2020 and 2019. The applicable
interest rate for the Credit Agreement is based on the effective LIBOR plus an additional amount in the range of 1.00%
to 1.75%, depending on our consolidated net leverage ratio or, at our option, at the bank’s base lending rate. At both
August 31, 2020 and 2019, there was no outstanding principal balance, and as such, no applicable interest rate. The
Credit Agreement was used to refinance our previously existing credit facility, which consisted of a $70,000,000 five-
year term loan entered into in June 2012 in connection with our acquisition of NEPTCO, together with a $15,000,000
revolving line of credit, each bearing interest at LIBOR plus an additional amount in the range of 1.75% to 2.25%,
depending on our leverage ratio. The Credit Agreement also provides for additional liquidity to finance potential
acquisitions, working capital, capital expenditures, and other general corporate purposes.
The Company has several ongoing capital projects, as well as its facility rationalization and consolidation
initiative, which are important to its long-term strategic goals. Machinery and equipment may be added as needed to
increase capacity or enhance operating efficiencies in the Company’s production facilities.
During the third fiscal quarter of 2020, Company implemented changes in its cost structure designed to address
market changes brought on, in part, by COVID-19. These changes included a targeted reduction of approximately 4.5%
of the Company’s global workforce. During fiscal 2019, the Company announced it had begun moving the production of
its pulling and detection products from its Granite Falls, NC location to its Hickory, NC location, with completion of the
move occurring in the first half of fiscal 2020. During fiscal 2018, the Company announced the planned closing of its
Pawtucket, RI manufacturing facility effective August 31, 2018. The manufacturing of products previously produced in
the Pawtucket, RI facility was moved to Company facilities in Oxford, MA and Lenoir, NC, and the facility was
subsequently sold in fiscal 2020. During the fourth quarter of fiscal 2019, the Company commissioned engineering
studies to assess potential future operational changes and further plant rationalization and consolidation. These actions
are in line with the Company’s ongoing efforts to consolidate its manufacturing plants and streamline its processes. A
total of all potential future costs arising from any further plant rationalization and consolidation cannot be estimated at
this time.
We may acquire companies or other assets in future periods which are complementary to our business. We
believe that our existing resources, including cash on hand and the Credit Agreement, 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 assurance that additional financing, if needed, 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.
35
Contractual Obligations
The following table summarizes our contractual cash obligations at August 31, 2020 and the effect such
obligations are expected to have on our liquidity and cash flow in future periods (dollars in thousands):
Contractual Obligations
Total
2021
2022
2023
2024
2025 and
thereafter
Payments Due
Operating leases
Total (1) (2) (3)
$ 8,978 $ 2,085
$ 1,500 $ 1,346 $ 1,360
$ 2,687
$ 8,978 $ 2,085
$ 1,500 $ 1,346 $ 1,360
$ 2,687
(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 $1,941,000 as of August 31, 2020 have been excluded 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, 2020, we had recognized an accrued benefit plan liability of $12,495,000 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.
(3) Purchase orders or contracts for normal purchases of raw materials and other goods and services are not included in
the table above. The Company does not have significant agreements for the purchase of raw materials or other goods
specifying minimum quantities or set prices that exceed expected requirements or extend beyond one year.
Recently Issued Accounting Standards
For discussion of the newly issued accounting pronouncements see “Recently Issued Accounting Standards”
and “Recently Adopted Accounting Standards” in Note 1 — “Summary of Significant Accounting Policies” to the
Consolidated Financial Statements included in this Report.
36
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 require
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.
Inventory
We value inventory at the lower of cost or net realizable value 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.
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.
37
Goodwill, Intangible Assets, and Other Long-Lived Assets
Long-lived assets consist of goodwill, identifiable intangible assets, trademarks, and patents and property, plant,
and equipment. Intangible assets and property, plant, and equipment, excluding goodwill, are amortized 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. In fiscal 2017, we early adopted Accounting Standards Update
(“ASU”) No. 2017-04 “Intangibles — Goodwill and Other Topics (Topic 350): Simplifying the Test for Goodwill
Impairment.” 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 historical or projected future operating results. If after completing this
assessment, it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying
value, we then assess goodwill for impairment by comparing the fair value of the reporting unit to its carrying amount. If
the fair value of a reporting unit is less than its carrying value, an impairment loss, limited to the amount of goodwill
allocated to that reporting unit, is recorded. Fair values for reporting units are determined based on the income approach
(discounted cash flow method).
Revenue
Effective September 1, 2018 (fiscal 2019), the Company adopted accounting standard ASU No. 2014-09,
“Revenue from Contracts with Customers" (ASC 606) using the modified retrospective method for contracts that were
not completed as of August 31, 2018. We recognized the cumulative effect of initially applying the new revenue standard
as an adjustment to the opening balance of retained earnings, whereby the cumulative impact of all prior periods is
recorded in retained earnings or other impacted balance sheet line items upon adoption. The comparative information
(for all periods prior to September 1, 2018) has not been adjusted and continues to be reported under ASU No. 2009-13
“Revenue Recognition” (ASC 605). The impact on the Company’s consolidated balance sheet and statements of
operations, equity and cash flows as of the adoption date as a result of applying ASC 606 have been reflected within
those respective financial statements. The Company’s accounting policy has been updated to align with ASC 606.
The adoption of ASC 606 represents a change in accounting principle that provides enhanced revenue
recognition disclosures. The Company accounts for revenue from contracts with customers when: (a) there is approval
and commitment from both parties; (b) the rights of the parties are identified; (c) payment terms are identified; (d) the
contract has commercial substance; and (e) collectability of consideration is probable. Revenue is primarily derived from
customer purchase orders, master sales agreements, and negotiated contracts, all of which represent contracts with
customers. See Note 26 to the Consolidated Financial Statements included in this Report for more information on our
accounting for revenue.
Uncertain Tax Positions
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. 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. Our assessment is based on 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.
38
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 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. Since we early adopted ASU No. 2016-09, “Compensation – Stock Compensation (Topic 718), Improvements
to Employee Share-Based Payment Accounting,” in fiscal 2017, we have elected to account for forfeitures as they occur.
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 who are members of the International Association of Machinists and Aerospace Workers
Union whose contract was amended 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.
Through our wholly-owned subsidiary NEPTCO, we had another defined benefit pension plan which covered
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 could enter the plan and the benefits of current participants were frozen as of that date.
The benefits were based on years of service and the employee’s average compensation during the earlier of five years
before retirement, or October 31, 2006. In August 2019, the Board of Directors voted to terminate the NEPTCO defined
benefit plan. The Company established November 15, 2019 as the plan termination date, subsequent to which it
performed the administrative actions required to carry out the termination, inclusive of making full payouts to (or setting
up annuities for) all participants. No balance related to the NEPTCO defined benefit plan was carried on the Company’s
consolidated balance sheet as of August 31, 2020.
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, 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.
39
ITEM 7A – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We limit the amount of credit exposure to any one issuer. At August 31, 2020, 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 and Asian operations are subject to currency exchange fluctuations. We continue
to review our policies and procedures to control this exposure while maintaining the benefit from these operations and
sales not denominated in U.S. dollars. The effect of an immediate hypothetical 10% change in the exchange rate between
the British pound or euro and the U.S. dollar would not have a material effect on the Company’s overall liquidity. As of
August 31, 2020, the Company had cash balances in the following foreign currencies (with USD equivalents in
thousands):
Currency Code
EUR
GBP
CAD
INR
CNY
Currency Name USD Equivalent at August 31, 2020
25,926
11,408
1,450
355
350
$
Euro
British Pound $
Canadian Dollar $
Indian Rupee $
Chinese Yuan $
The Company will continue to review its current cash balances denominated in foreign currency considering
current tax guidelines, including the impact of the Tax Act to the U.S. Internal Revenue Code, working capital
requirements, infrastructure improvements and potential acquisitions. The increased euro denominated balance at August
31, 2020 was done in preparation of the September 1, 2020 (fiscal 2021) purchase of ABchimie. See Note 1 —
“Summary of Significant Accounting Policies” and Note 14 — “Acquisitions” to the Consolidated Financial Statements
for additional information regarding our fiscal 2021 purchase of ABchimie.
The Company recognized a foreign currency translation gain for the year ended August 31, 2020 in the amount
of $3,163,000 related to our European and Indian operations, which is recorded in accumulated other comprehensive
income (loss) within our consolidated statement of equity. The functional currency for all our other operations is the
U.S. Dollar. 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. There was no outstanding balance of long-term debt at August 31, 2020 and 2019. See “Item 7 —
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Sources of
Capital,” Note 6 — “Long-Term Debt” 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.
40
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:
Reports of Independent Registered Public Accounting Firms
Consolidated Balance Sheets as of August 31, 2020 and 2019
Consolidated Statements of Operations for each of the three fiscal years in the period ended August 31, 2020
Consolidated Statements of Comprehensive Income for each of the three fiscal years in the period ended
August 31, 2020
Consolidated Statements of Equity for each of the three fiscal years in the period ended August 31, 2020
Consolidated Statements of Cash Flows for each of the three fiscal years in the period ended August 31,
2020
Notes to Consolidated Financial Statements
Page No.
42
44
45
46
47
48
49
41
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
Chase Corporation
Opinion on the financial statements
We have audited the accompanying consolidated balance sheets of Chase Corporation (a Massachusetts
corporation) and subsidiaries (the “Company”) as of August 31, 2020 and 2019, the related consolidated statements of
operations, comprehensive income, equity, and cash flows for each of the two years in the period ended August 31, 2020,
and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements
present fairly, in all material respects, the financial position of the Company as of August 31, 2020 and 2019, and the
results of its operations and its cash flows for each of the two years in the period ended August 31, 2020, in conformity
with accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (“PCAOB”), the Company’s internal control over financial reporting as of August 31, 2020, based on
criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (“COSO”), and our report dated November 12, 2020 expressed an
unqualified opinion.
Basis for opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express
an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material
misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits
provide a reasonable basis for our opinion.
/s/ GRANT THORNTON LLP
We have served as the Company’s auditor since 2019.
Boston, Massachusetts
November 12, 2020
42
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Chase Corporation
Opinion on the Financial Statements
We have audited the consolidated statements of operations, of comprehensive income, of equity and of cash
flows of Chase Corporation and its subsidiaries (the “Company”) for the year ended August 31, 2018, including the
related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated
financial statements present fairly, in all material respects, the results of operations and cash flows of the Company for
the year ended August 31, 2018 in conformity with accounting principles generally accepted in the United States of
America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a
public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and
are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit of these consolidated financial statements in accordance with the standards of the
PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement, whether due to error or fraud.
Our audit included performing procedures to assess the risks of material misstatement of the consolidated
financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated
financial statements. Our audit also included evaluating the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that
our audit provides a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Boston, Massachusetts
November 27, 2018, except for the change in composition of reportable segments discussed in Note 11 to the
consolidated financial statements, as to which the date is November 13, 2019
We served as the Company's auditor from 2003 to 2018.
43
CHASE CORPORATION
CONSOLIDATED BALANCE SHEETS
In thousands, except share and per share amounts
August 31,
2020
August 31,
2019
ASSETS
Current Assets
Cash and cash equivalents
Accounts receivable, less allowance for doubtful accounts of $438 and $739
Inventory
Prepaid expenses and other current assets
Assets held for sale
Prepaid income taxes
Total current assets
Property, plant and equipment, less accumulated depreciation of $52,283 and $49,730
Other Assets
Goodwill
Intangible assets, less accumulated amortization of $78,351 and $65,862
Cash surrender value of life insurance
Restricted investments
Deferred income taxes
Operating lease right-of-use asset (Note 8)
Other assets
Total assets
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable
Accrued payroll and other compensation
Accrued expenses
Total current liabilities
Operating lease long-term liabilities (Note 8)
Deferred compensation
Accumulated pension obligation
Other liabilities
Accrued income taxes
Commitments and contingencies (Notes 6, 8, 21)
Equity
$
$
$
$
$
$
99,068
36,993
39,058
2,470
—
231
177,820
25,574
82,402
41,200
4,450
1,619
4,929
8,821
15
346,830
12,525
5,751
4,867
23,143
6,395
1,629
10,930
—
1,941
First Serial Preferred Stock, $1.00 par value: Authorized 100,000 shares; none issued
Common stock, $.10 par value: Authorized 20,000,000 shares; 9,439,082 shares at August 31, 2020
and 9,400,748 shares at August 31, 2019 issued and outstanding
Additional paid-in capital
Accumulated other comprehensive loss
Retained earnings
Total equity
Total liabilities and equity
$
—
944
16,674
(13,092)
298,266
302,792
346,830
$
See accompanying notes to the Consolidated Financial Statements.
47,771
39,324
42,354
2,418
1,064
1,451
134,382
29,326
81,986
52,704
4,450
1,260
3,804
—
56
307,968
12,105
6,300
4,035
22,440
—
1,275
10,485
217
2,324
—
940
14,351
(14,324)
270,260
271,227
307,968
44
CHASE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
In thousands, except share and per share amounts
2020
Years Ended August 31,
2019
2018
$
Revenue
Sales
Royalties and commissions
Costs and Expenses
Cost of products and services sold
Selling, general and administrative expenses
Research and product development costs
Operations optimization costs (Note 20)
Acquisition-related costs (Note 14)
Gain on sale of real estate (Note 19)
Write-down of certain assets under construction (Note 20)
Loss on impairment of goodwill (Note 4)
Operating income
Interest expense
Gain on sale of license (Note 15)
Gain on sale of businesses (Note 18)
Other income (expense)
Income before income taxes
Income taxes (Note 7)
Net income
$
257,742
3,420
261,162
161,615
49,364
4,007
807
274
(2,551)
405
—
47,241
(246)
—
—
(1,675)
45,320
11,163
$
276,839
4,512
281,351
180,163
48,707
4,021
986
—
—
—
2,410
45,064
(519)
—
—
(992)
43,553
10,842
278,962
5,226
284,188
175,136
47,703
3,940
1,272
393
—
—
—
55,744
(1,172)
1,085
1,480
(172)
56,965
13,822
43,143
$
34,157
$
32,711
$
Net income available to common shareholders, per common and
common equivalent share (Note 17)
Basic
Diluted
Weighted average shares outstanding
Basic
Diluted
$
$
3.62
3.59
$
$
3.48
3.46
$
$
4.60
4.56
9,359,940
9,439,750
9,334,232
9,379,207
9,296,648
9,366,071
Annual cash dividends declared per share
$
0.80
$
0.80
$
0.80
See accompanying notes to the Consolidated Financial Statements.
45
CHASE CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
In thousands, except share and per share amounts
Net income
Other comprehensive income (loss):
Net unrealized gain on restricted investments, net of tax
Change in funded status of pension plans, net of tax
Foreign currency translation adjustment
Total other comprehensive income (loss)
Years Ended August 31,
2019
2020
2018
$
34,157 $
32,711 $
43,143
115
(658)
3,163
2,620
28
(475)
(1,541)
(1,988)
5
385
743
1,133
Comprehensive income
$
36,777 $
30,723 $
44,276
See accompanying notes to the Consolidated Financial Statements.
46
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S
CHASE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
In thousands
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
Adjustments to reconcile net income to net cash provided by operating
activities
2020
Years Ended August 31,
2019
2018
$
34,157
$
32,711
$
43,143
Gain on sale of real estate
Gain on sale of license
Loss on impairment of goodwill
Write-down of certain assets under construction
Gain on sale of businesses
Depreciation
Amortization
Cost of sale of inventory step-up
(Recovery) provision for allowance for doubtful accounts
Stock-based compensation
Realized gain on restricted investments
Pension curtailment and settlement loss
Deferred taxes
Increase (decrease) from changes in assets and liabilities
Accounts receivable
Inventory
Prepaid expenses and other assets
Accounts payable
Accrued compensation and other expenses
Accrued income taxes
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment
Cost to acquire intangible assets
Payments for acquisitions
Proceeds from sale of real estate
Proceeds from sale of license
Proceeds from sale of businesses
Changes in restricted investments
Proceeds from settlement of life insurance policies
Net cash provided by (used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on debt
Payments of principal on debt
Dividend paid
Proceeds from exercise of common stock options
Payments of taxes on stock options and restricted stock
Net cash (used in) provided by financing activities
INCREASE IN CASH & CASH EQUIVALENTS
Effect of foreign exchange rates on cash
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
CASH AND CASH EQUIVALENTS, END OF PERIOD
$
(2,551)
—
—
405
—
4,015
11,576
—
(307)
3,208
(37)
155
(769)
3,092
3,562
43
260
(1,865)
790
55,734
(1,371)
—
—
3,615
—
—
(167)
—
2,077
—
—
(7,539)
—
(881)
(8,420)
49,391
1,906
47,771
99,068
$
—
—
2,410
—
—
4,762
12,445
—
183
2,176
(11)
511
(2,312)
4,858
(2,864)
356
(5,493)
(1,536)
1,339
49,535
(2,488)
(36)
—
—
—
400
(122)
80
(2,166)
—
(25,000)
(7,522)
182
(1,110)
(33,450)
13,919
(976)
34,828
47,771
$
—
(1,085)
—
—
(1,480)
5,817
11,807
1,070
101
2,128
(97)
—
(2,473)
(2,968)
(8,845)
569
2,847
(501)
(3,962)
46,071
(3,488)
(18)
(73,469)
—
1,000
2,232
(23)
—
(73,766)
65,000
(40,000)
(7,497)
192
(3,272)
14,423
(13,272)
746
47,354
34,828
See Note 13 for supplemental cash flow information including non-cash financing and investing activities
See accompanying notes to the Consolidated Financial Statements.
48
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
Our principal products are specialty tapes, laminates, adhesives, sealants, coatings and chemical intermediates
that are sold by our salespeople, manufacturers' representatives and distributors. In our Adhesives, Sealants and
Additives segment, these products consist of:
(i)
(ii)
(iii)
moisture protective coatings, which are sold to the electronics industry for circuitry manufacturing,
including circuitry used in automobiles, industrial controls and home appliances;
advanced adhesives, sealants, and coatings for automotive and industrial applications that require
specialized bonding, encapsulating, environmental protection, or thermal management functionality;
polymeric microspheres utilized by various industries to allow for weight and density reduction and
sound dampening;
(iv)
polyurethane dispersions utilized for various coating products; and
(v)
superabsorbent polymers, which are utilized for water and liquid management, remediation and
protection in diverse markets including wire and cable, medical, environmental, infrastructure, energy
and consumer products.
In our Industrial Tapes segment, these products consist of:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
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;
laminated film foils, including EMI/RFI shielding tapes, used in communication and local area
network (LAN) cable;
industrial coated or laminate products and custom manufacturing services sold into medical, consumer,
automotive, packaging, energy, telecommunications and other specialized markets;
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;
pulling and detection tapes used in the installation, measurement and location of fiber optic cable,
water and natural gas lines, and power, data and video cable for commercial buildings; and
cover tapes with reliable adhesive and anti-static properties essential to delivering semiconductor
components via tape and reel packaging.
49
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
In our Corrosion Protection and Waterproofing segment, these products consist of:
(i)
protective coatings, tapes and protectants for pipelines, valves, casings and other metals, which are
sold to oil companies, gas companies and water/wastewater utilities for use in both the construction
and maintenance of oil, gas, water and wastewater pipelines;
(ii)
fluid applied coating and lining systems for use in the water and wastewater industry;
(iii)
(iv)
waterproofing tapes and coatings used in waterproofing of the exterior of both commercial and
industrial structures;
waterproofing membranes for highway bridge deck metal supported surfaces, which are sold to
municipal transportation authorities, and high-performance polymeric asphalt additives; and
(v)
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. All
intercompany transactions and balances have been eliminated in consolidation. The Company uses the U.S. dollar as the
functional currency for financial reporting. Certain reclassifications have been made to the prior year amounts to
conform to the current year’s presentation.
Other Business Developments
On September 1, 2020 (subsequent to fiscal 2020), the Company acquired all the capital stock of ABchimie for
€18,000 (approximately $21,420 at the time of the transaction) net of cash and marketable securities acquired, subject to
final working capital adjustment, excluding acquisition-related costs of $274 and with a potential earn out based on
performance potentially worth an additional €7,000 (approximately $8,330 at the time of the transaction). ABchimie is a
Corbelin, France headquartered solutions provider for the cleaning and the protection of electronic assemblies, with
further formulation, production, and research and development capabilities. The transaction was funded 100% with cash
on hand. The financial results of the business will be included in the Company's fiscal 2021 financial statements within
the Adhesives, Sealants and Additives operating segment in the electronic and industrial coatings product line. The
Company is currently in the process of finalizing purchase accounting, regarding a final allocation of the purchase price
to tangible and identifiable intangible assets assumed and anticipates completion within fiscal 2021. The ABchimie
acquisition does not represent a significant business combination so pro forma financial information is not provided.
The second, third and fourth fiscal quarters of 2020 saw the global spread of the coronavirus pandemic
(COVID-19), which grew to create significant volatility, uncertainty and global economic disruption. During the third
fiscal quarter, the Company implemented changes to its cost structure designed to address market changes brought on by
COVID-19 and demonstrate its commitment to fiscal prudence: (a) the Company made a targeted reduction in its global
workforce, contemplated pre-pandemic but catalyzed by COVID-19, which resulted in the recognition of $183 in
severance costs during the period; and (b) the Company also instituted a temporary 20% reduction in the base salaries of
its named executive officers and select members of senior management, as well as the cash compensation of the non-
employee members of its Board of Directors. The reduction in force, which impacted operations in the Company’s U.S.
facilities, and the adjustments in compensation, were both effective May 2020.
During the first quarter of fiscal 2020, the Company commissioned third party led studies regarding the
potential upgrading of the Company’s current worldwide ERP system. Chase Corporation is currently reviewing the data
and recommendations provided by the study and may further utilize third-party engineering, IT and other professional
50
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
services firms in the future for similar work, as well as work around the facilities rationalization and consolidation
initiative. The Company recognized $150 in expense related to these services in the first quarter of fiscal 2020, with no
expense recognized in the second, third or fourth fiscal quarters. Given the ongoing nature of the review, an estimate of
future costs, including those that may be capitalized, cannot currently be determined.
During the third quarter of fiscal 2019, the Company began moving the pulling and detection operations housed
in its Granite Falls, NC location to its Hickory, NC facility. This is in line with the Company’s ongoing initiative to
consolidate its manufacturing plants and streamline its existing processes. At the time, the pulling and detection
operations were the only Chase-owned production operations in Granite Falls, NC, with the remaining portions of the
building being either utilized for research and development or leased to a third party. The process of moving, including
moving internal research and development capabilities, was substantially completed during the second quarter of fiscal
2020. The Company recognized $559 in expense related to the move in the six-month periods ended February 29, 2020,
having recognized $526 in expense during the second half of fiscal 2019. No costs were recognized in the six months
ended August 31, 2020, and future costs related to this move are not anticipated to be significant to the consolidated
financial statements.
During the fourth quarter of fiscal 2019 (prior year), Chase Corporation commissioned engineering studies of
certain legacy operations, machinery and locations related to the Company’s ongoing facility rationalization and
consolidation initiative. Chase completed its review of the data and recommendations provided by the study in the fourth
quarter of fiscal 2020 (current year). The Company recognized $200 in expense related to these services in fiscal 2019,
and a gain of $170 in fiscal 2020, as certain amounts expensed in fiscal 2019 were refunded. Also in the fourth quarter of
fiscal 2020 and related to the recommendations of the commissioned engineering studies, the Company wrote down the
value of certain non-operating production assets related to the pipeline coatings product line, within the Corrosion
Protection and Waterproofing segment. Given the nature and prospects of the equipment, the Company determined its
then carrying value exceeded its fair value and recognized an expense of $405 related to the machinery. Chase may
utilize third party engineering, IT and other professional services firms in the future for similar optimization-related
work. Given the ongoing nature of the facility rationalization and consolidation initiative, an estimate of future costs
cannot currently be determined.
On June 25, 2018, the Company announced to its employees the planned closing of its Pawtucket, RI
manufacturing facility effective August 31, 2018. This is in line with the Company’s ongoing efforts to consolidate its
manufacturing plants and streamline its existing processes. The manufacture of products previously produced in the
Pawtucket, RI facility was substantially moved to Company facilities in Oxford, MA and Lenoir, NC during a two-
month transition period. In the fourth quarter of fiscal 2018, the Company expensed $1,272 related to the closure. The
Company also recognized $260 in expense related to the move in the three-month period ended November 30, 2018,
with no additional expense recognized in the remainder of fiscal 2019. The Company completed the sale of its
Pawtucket, RI location to a third party in the third quarter of fiscal 2020 for net proceeds totaling $1,810, recognizing a
gain on sale of real estate of $760. Also, during the third quarter of fiscal 2020, the Company recognized $85 in final
Pawtucket, RI transition and exit costs, with no further costs related to this initiative anticipated in future periods.
On April 20, 2018, Chase Corporation finalized an agreement with an unrelated party to sell all inventory,
operational machinery and equipment and intangible assets of the Company’s structural composites rod business, as well
as a license related to the production and sale of rod, for proceeds of $2,232, net of transaction costs and following
certain working capital adjustments. This business, which was part of the structural composites product line within the
Industrial Tapes segment, had limited growth and profitability prospects as part of the Company, and was outside the
areas Chase has identified for strategic emphasis. The resulting pre-tax gain on sale of $1,480 was recognized in the third
quarter of fiscal 2018 as a gain on sale of businesses within the consolidated statement of operations. Chase received
$2,075, net of transaction costs, in the third quarter of fiscal 2018, with the remaining $157 received in the fourth quarter
of fiscal 2018 as a result of a working capital true-up. Chase Corporation will provide certain transitional manufacturing
51
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
and administrative support to the purchaser for which the Company will receive additional consideration upon the
performance of services.
On December 29, 2017, Chase Corporation entered an agreement to acquire Stewart Superabsorbents, LLC
(“SSA, LLC”), an advanced superabsorbent polymer (SAP) formulator and solutions provider, with operations located in
Hickory and McLeansville, NC. The transaction closed on December 31, 2017. In its final fiscal year before its
acquisition, SSA, LLC, and its then recently-acquired Zappa-Tec business (collectively “Zappa Stewart”) had combined
revenue in excess of $24,000. This acquisition proved to be immediately accretive to the Company’s earnings in the
period of acquisition, after adjusting for nonrecurring costs associated with the transaction and financing. The business
was acquired for a purchase price of $73,469 after final working capital adjustments and excluding acquisition-related
costs. As part of this transaction, Chase Corporation acquired all assets of the business, and entered multiyear leases at
both locations. The Company expensed $393 of acquisition-related costs during the second quarter of fiscal 2018. The
purchase was funded from a combination of Chase’s existing revolving credit facility and available cash on hand. Zappa
Stewart’s protective materials technology complements Chase’s current specialty chemicals offerings. This acquisition is
aligned with the Company’s core strategies and extends its reach into growing medical, environmental and consumer
applications. The Company finalized purchase accounting in the first quarter of fiscal 2019, without any adjustment to
amounts recorded at August 31, 2018. Following the effective date of the acquisition the financial results of Zappa
Stewart’s operations have been included in the Company’s financial statements in the specialty chemical intermediates
product line, contained within the Adhesives, Sealants and Additives operating segment.
The Company has evaluated events and transactions subsequent to the balance sheet date. Based on this
evaluation, and other than: (a) the cash dividend announced on November 12, 2020 of $0.80 per share to shareholders of
record on November 27, 2020 and payable on December 7, 2020; and (b) the acquisition of ABchimie discussed in Note
14, 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 (U.S. GAAP) 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 revenue 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 deposit 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 an original maturity of three months or less from the 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 factors, the current business environment and its historical experience. Receivables are written off
against these reserves in the period they are determined to be uncollectable.
52
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
Inventory
The Company values inventory at the lower of cost or net realizable value 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 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.
Goodwill
The Company accounts for goodwill in accordance with ASC Topic 350, “Intangibles — Goodwill and Other.”
The Company performs impairment reviews annually each fourth quarter and whenever events or circumstances indicate
the carrying value of goodwill may not be recoverable.
During the three-month period ended February 28, 2019, the ordering patterns of the polyurethane dispersions
reporting unit’s customers, especially those in the automotive industry, combined with a decrease in the reporting unit’s
backlog of customer orders believed to be firm as of February 28, 2019, indicated that an impairment in the carrying
value of the reporting unit might have occurred. The Company performed an impairment test on the indefinite-lived and
long-lived assets related to the polyurethane dispersions reporting unit, now part of the Adhesives, Sealants and
Additives operating segment and reporting unit (part of the former Industrial Materials segment during the second fiscal
quarter of 2019), in accordance with ASC Topic 350, “Intangibles — Goodwill and Other” and ASC Topic 360,
“Disclosure — Impairment or Disposal of Long-Lived Assets.” As a result of impairment testing, which included first
testing long-lived assets other than goodwill for impairment under applicable guidance, the Company recorded a charge
of $2,410 to loss on impairment of goodwill within the consolidated statement of operations during the quarter ended
February 28, 2019. The polyurethane dispersions reporting unit’s fair value was determined based on the income
approach (discounted cash flow method).
In fiscal 2017, we early adopted Accounting Standards Update (“ASU”) No. 2017-04 “Intangibles — Goodwill
and Other Topics (Topic 350): Simplifying the Test for Goodwill Impairment.” 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 historical
or projected future operating results. If after completing this assessment, it is determined that it is more likely than not
that the fair value of a reporting unit is less than its carrying value, we then assess goodwill for impairment by comparing
the fair value of the reporting unit to its carrying amount. If the fair value of a reporting unit is less than its carrying
value, an impairment loss, limited to the amount of goodwill allocated to that reporting unit, is recorded. Fair values for
reporting units are determined based on the income approach (discounted cash flow method).
For the annual fiscal 2020 fourth quarter review, no goodwill impairment, nor at-risk reporting units, was
indicated as of August 31, 2020. For the annual fiscal 2020 goodwill impairment test, we performed a qualitative
assessment of goodwill impairment and concluded that it was more likely than not that our reporting units' fair values
exceeded their carrying values (i.e. indicated no impairment of goodwill). Accordingly, it was not necessary for us to
perform the quantitative analysis.
53
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
Intangible Assets
Intangible assets consist of patents, 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 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 a separate plan
covering selected employees. Participants may elect to defer a portion of their compensation for payment in a future tax
year. 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 restricted investments under the plans were $1,619 and $1,260 at
August 31, 2020 and 2019, respectively, and corresponding deferred compensation liabilities were $1,629 and $1,275 at
August 31, 2020 and 2019, respectively. The Company accounts for the restricted investments as available for sale by
recording net unrealized gains or losses in other comprehensive income as a component of stockholders’ equity.
Revenue
Effective September 1, 2018, the Company adopted accounting standard ASU No. 2014-09, “Revenue from
Contracts with Customers” (ASC 606) using the modified retrospective method for contracts that were not completed as
of August 31, 2018. We recognized the cumulative effect of initially applying the new revenue standard as an adjustment
to the opening balance of retained earnings, whereby the cumulative impact of all prior periods is recorded in retained
earnings or other impacted balance sheet line items upon adoption. The comparative information (for all periods prior to
September 1, 2018) has not been adjusted and continues to be reported under ASU No. 2009-13 “Revenue Recognition”
(ASC 605). The impact on the Company’s consolidated balance sheets, and statements of operations, equity or cash
flows as of the adoption date as a result of applying ASC 606 have been reflected within those respective financial
statements. The Company’s accounting policy has been updated to align with ASC 606.
The adoption of ASC 606 represents a change in accounting principle that provides enhanced revenue
recognition disclosures. The Company accounts for revenue from contracts with customers when: (a) there is approval
and commitment from both parties; (b) the rights of the parties are identified; (c) payment terms are identified; (d) the
contract has commercial substance; and (e) collectability of consideration is probable. Revenue is primarily derived from
customer purchase orders, master sales agreements, and negotiated contracts, all of which represent contracts with
customers. See Note 26 to the consolidated financial statements for more information on our accounting for revenue.
54
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
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 $4,007, $4,021 and $3,940 for the years ended August 31, 2020, 2019 and 2018, respectively, and was
recorded within Research and product development costs on the consolidated statements of operations.
Pension Plans
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, ASC Topic 718 “Compensation –
Stock Compensation” (“ASC 718”), 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.
Stock-based compensation expense recognized in fiscal years 2020, 2019 and 2018 was $3,208, $2,176 and
$2,128, respectively.
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, 2020, 2019 and 2018:
Expected dividend yield
Expected life
Expected volatility
Risk-free interest rate
2020
0.7 %
6.0 years
31.0 %
1.4 %
2019
0.7 %
6.0 years
31.4 %
2.7 %
2018
0.9 %
6.0 years
34.7 %
1.9 %
Expected volatility is determined by looking at a combination of historical volatility over the past six years as
well as implied future volatility.
55
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
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 British pound as the functional currency. 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. The financial position and results of the Company’s HumiSeal India Private Limited business in
India are measured using the Indian rupee as the functional currency. The functional currency for all our other operations
is the U.S. dollar. Revenue and expenses of these international businesses have been translated at average exchange
rates. Foreign currency translation gains and losses are determined using current exchange rates for monetary items and
historical exchange rates for other balance sheet items, and are recorded as a change in other comprehensive income (a
component of stockholders’ equity). Transaction gains and losses generated from the remeasurement of assets and
liabilities denominated in currencies other than the functional currency of these international operations are included in
other income (expense) on the consolidated statements of operations and were gains (losses) of ($911), ($48) and $85 for
the fiscal years ended August 31, 2020, 2019 and 2018, respectively.
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, including information on the effects of the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) on our financial
position and results of operations, including adjustments that were recorded during fiscal 2018 and 2019 related to the
Tax Act.
Net Income Per Share
The Company has unvested share-based payment awards with a right to receive nonforfeitable dividends, which
are considered participating securities under ASC Topic 260, “Earnings Per Share” (“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.
56
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
Segments
ASC Topic 280 “Segment Reporting” of the Financial Accounting Standards Board (“FASB”) codification
establishes standards for reporting information about operating segments. In the fourth quarter of its 2019 fiscal year
(prior year), the Company reorganized into three reportable operating segments, an Adhesives, Sealants and Additives
segment, an Industrial Tapes segment and a Corrosion Protection and Waterproofing segment. The segments are
distinguished by the nature of the products manufactured and how they are delivered to their respective markets.
The Adhesives, Sealants and Additives segment offers innovative and specialized product offerings consisting
of both end-use products and intermediates that are used in, or integrated into, another company’s products. Demand for
the segment’s product offerings is typically dependent upon general economic conditions. The Adhesives, Sealants and
Additives segment leverages the core specialty chemical competencies of the Company, and serves diverse markets and
applications. The segment sells predominantly into the transportation, appliances, medical, general industrial and
environmental market verticals. The segment’s products include moisture protective coatings and customized sealant and
adhesive systems for electronics, polymeric microspheres, polyurethane dispersions and superabsorbent polymers.
Beginning December 31, 2017, the Adhesives, Sealants and Additives segment includes the acquired operations of
Zappa Stewart, within the specialty chemical intermediates product line.
The Industrial Tapes segment features legacy wire and cable materials, specialty tapes, and other laminated and
coated products. The segment derives its competitive advantage through its proven chemistries, diverse specialty
offerings and the reliability its supply chain offers to end customers. These products are generally used in the assembly
of other manufacturers’ products, with demand typically dependent upon general economic conditions. The Industrial
Tapes segment sells mostly to established markets, with some exposure to growth opportunities through further
development of existing products. Markets served include cable manufacturing, utilities and telecommunications, and
electronics packaging. The segment’s offerings include insulating and conducting materials for wire and cable
manufacturers, laminated durable papers, laminates for the packaging and industrial laminate markets, custom
manufacturing services, pulling and detection tapes used in the installation, measurement and location of fiber optic
cable and water and natural gas lines, and cover tapes essential to delivering semiconductor components via tape and reel
packaging.
The Corrosion Protection and Waterproofing segment is principally composed of project-oriented product
offerings that are primarily sold and used as “Chase” branded products. End markets include new and existing
infrastructure projects on oil, gas, water and wastewater pipelines, highways and bridge decks, water and wastewater
containment systems, and commercial buildings. The segment’s products include protective coatings for pipeline
applications, coating and lining systems for waterproofing and liquid storage applications, adhesives and sealants used in
architectural and building envelope waterproofing applications, high-performance polymeric asphalt additives, and
expansion joint systems for waterproofing applications in transportation and architectural markets. With sales generally
dependent on outdoor project work, the segment experiences highly seasonal sales patterns.
Recently Issued Accounting Standards
In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update
("ASU") No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial
Instruments,” which modifies the measurement approach for credit losses on financial assets measured on an amortized
cost basis from an 'incurred loss' method to an 'expected loss' method. In November 2019, the FASB issued ASU 2019-
11, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses.” ASU 2019-11 is an accounting
pronouncement that amends ASU 2016-13. The ASU 2019-11 amendment provides clarity and improves the codification
to ASU 2016-13. The pronouncements are concurrently effective for fiscal years beginning after December 15, 2019 and
interim periods within those fiscal years (effective fiscal 2021). The Company is currently evaluating the effects of this
pronouncement on its consolidated financial statements.
57
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
Recently Adopted Accounting Standards
Fiscal 2020
In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” Under the new guidance, lessees
are required to recognize the following for all leases (with the exception of short-term leases) at the commencement date:
(a) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted
basis; and (b) a right-of-use asset, which represents the lessee’s right to use, or control the use of, a specified asset for the
lease term. In July 2018, the FASB issued ASU 2018-11, “Leases (Topic 842) Targeted Improvements.” The updated
guidance provided an optional transition method, which allows for the application of the standard as of the adoption date
with no restatement of prior period amounts. The Company adopted the standard on September 1, 2019 (start of fiscal
2020) under the optional transition method described above. Consequently, historical financial information was not
updated, and the disclosures required under the new standard are not provided for dates and periods prior to September 1,
2019.
The new standard provides several optional practical expedients in transition. The Company has elected to
apply the “package of practical expedients” which allows it to not reassess i) whether existing or expired arrangements
contain a lease, ii) the lease classification of existing or expired leases, or iii) whether previous initial direct costs would
qualify for capitalization under the new lease standard. In preparation for adoption of the standard, the Company
enhanced its internal controls to enable the preparation of financial information including the assessment of the impact of
the standard. The initial adoption of the ASU resulted in the recognition of additional lease liabilities of $9,644 ($2,071
short-term and $7,573 long-term) and right-of-use assets of $10,200 as of September 1, 2019 on the consolidated balance
sheet as it relates to the Company’s operating leases. The new standard did not have a material impact on the Company’s
consolidated statement of operations or cash flows.
In February 2018, the FASB issued ASU 2018-02, “Income Statement - Reporting Comprehensive Income
(Topic 220) - Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” This ASU was
issued to address a narrow-scope financial reporting issue that arose as a result of the enactment of the Tax Cuts and Jobs
Act (“Tax Reform”) on December 22, 2017. The objective of ASU 2018-02 is to address the tax effects of items within
accumulated other comprehensive income (referred to as “stranded tax effects”) that do not reflect the appropriate tax
rate enacted in the Tax Reform. As a result, the ASU 2018-02 allows a reclassification from accumulated other
comprehensive income to retained earnings for stranded tax effects resulting from the newly enacted federal corporate
income tax rate. The amount of the reclassification would be the difference between the historical corporate income tax
rate of 35 percent and the current enacted corporate income tax rate of 21 percent. ASU 2018-02 is effective for fiscal
years beginning after December 15, 2018, with early adoption permitted, including adoption in an interim period. The
amendments in this ASU may be applied retrospectively to each period in which the effect of the change in the U.S.
Federal corporate income tax rate in the Tax Reform is recognized. Therefore, the Company adopted ASU 2018-02 in
the first quarter of the year ending August 31, 2020, and has elected to reclassify the income tax effects of the Tax
Reform related to its pension funding from accumulated other comprehensive loss to retained earnings.
Fiscal 2019
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606).” The
amended guidance establishes a single comprehensive model for companies to use in accounting for revenue arising
from contracts with customers and supersedes most of the existing revenue recognition guidance, including industry-
specific guidance.
The amended guidance clarifies that an entity recognizes revenue to depict the transfer of promised goods or
services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange
58
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
for those goods or services. In applying the amended guidance, an entity will (1) identify the contract(s) with a customer;
(2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction
price to the contract’s performance obligations; and (5) recognize revenue when (or as) the entity satisfies a performance
obligation. ASC 606 was effective for the Company’s interim and annual reporting periods beginning September 1, 2018
(fiscal 2019), and could have been adopted using either a full retrospective or modified retrospective transition method.
The Company adopted the amended guidance and all related amendments using the modified retrospective
approach on September 1, 2018. The Company recognized the cumulative effect of initially applying the new revenue
standard to all open contracts requiring recognition over time that were not completed on the date of adoption as an
adjustment to the opening balance of retained earnings.
At the adoption date, the cumulative impact of revenue that would have been recognized over time was $80.
The related adoption impact to retained earnings was $22, net of tax. The impact to net sales and net income as a result
of applying ASC 606 was an increase of $67 and $5, respectively, for the year ended August 31, 2019. See Note 26 —
“Revenue from Contracts with Customers” for further discussion of the effects of adoption.
In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230).” This ASU
provides guidance on the presentation and classification of specific cash flow items to improve consistency within the
statement of cash flows. The Company adopted ASU No. 2016-15 on September 1, 2018, and the adoption did not have
a material effect on its financial statements and related disclosures.
In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the
Definition of a Business.” The new guidance dictates that when substantially all of the fair value of the gross assets
acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, it should
be treated as an acquisition or disposal of an asset. The Company adopted the ASU on September 1, 2018. The adoption
had no material effect on the financial statements and related disclosures in fiscal 2020 and 2019. The effect ASU No.
2017-01 will have on the financial statements and related disclosures of the Company in future periods will be dependent
on the nature of potential future acquisitions and divestitures.
In March 2017, the FASB issued ASU No. 2017-07, “Compensation — Retirement Benefits (Topic 715):
Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” This ASU
applies to all employers that offer to their employees defined benefit pension plans, other postretirement benefit plans, or
other types of benefits accounted for under Topic 715, Compensation — Retirement Benefits. The ASU requires that an
employer report the service cost component in the same line item or items as other compensation costs arising from
services rendered by the pertinent employees during the period. The other components of net benefit cost are required to
be presented in the income statement separately from the service cost component and outside a subtotal of income from
operations, if one is presented. If a separate line item or items are used to present the other components of net benefit
cost, that line item or items must be appropriately described. If a separate line item or items are not used, the line item or
items used in the income statement to present the other components of net benefit cost must be disclosed. The ASU also
allows only the service cost component to be eligible for capitalization when applicable (e.g., as a cost of internally
manufactured inventory or a self-constructed asset). The Company adopted ASU No. 2017-07 on September 1, 2018,
which resulted in the reclassification of $654 and $1,065, previously reported in selling, general and administrative
expense, to other income (expense) for the years ended August 31, 2018 and 2017 (prior years), respectively.
Fiscal 2018
The Company did not adopt any new accounting standards in fiscal 2018.
59
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
Note 2—Inventory
Inventory consisted of the following as of August 31, 2020 and 2019:
August 31,
2020
August 31,
2019
Raw materials
Work in process
Finished goods
Total Inventory
Note 3—Property, Plant and Equipment
$
$
18,993 $
7,761
12,304
39,058 $
Property, plant and equipment consisted of the following as of August 31, 2020 and 2019:
Land and improvements
Buildings
Machinery and equipment
Leasehold improvements
Construction in progress
Accumulated depreciation
Property, plant and equipment, net
Note 4—Goodwill and Intangible Assets
2020
2019
$
$
4,997 $
17,992
51,942
2,212
714
77,857
(52,283)
25,574 $
The changes in the carrying value of goodwill, by operating segment, were as follows:
20,325
8,748
13,281
42,354
6,079
17,900
51,934
1,828
1,315
79,056
(49,730)
29,326
Balance at August 31, 2018
Loss on impairment of polyurethane dispersions business
Foreign currency translation adjustment
(2,410)
(287)
—
—
Adhesives,
Sealants
and
Additives
Industrial
Tapes
$ 52,787 $ 21,215 $
$ 50,090 $ 21,215 $
397
—
$ 50,487 $ 21,215 $
Corrosion
Protection and
Waterproofing Consolidated
10,694 $ 84,696
(2,410)
(300)
81,986
416
82,402
—
(13)
10,681 $
19
10,700 $
Balance at August 31, 2019
Foreign currency translation adjustment
Balance at August 31, 2020
60
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 has identified a total of three
reporting units, corresponding to its three reportable 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,
including the anticipated future impact of the coronavirus disease 2019 (COVID-19) pandemic. When testing, fair values
of the reporting units and the related implied fair values of their respective goodwill are established using discounted
cash flows.
In fiscal 2017, we early adopted Accounting Standards Update (“ASU”) No. 2017-04 “Intangibles — Goodwill
and Other Topics (Topic 350): Simplifying the Test for Goodwill Impairment.” 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 historical
or projected future operating results. If after completing this assessment, it is determined that it is more likely than not
that the fair value of a reporting unit is less than its carrying value, we then assess goodwill for impairment by comparing
the fair value of the reporting unit to its carrying amount. If the fair value of a reporting unit is less than its carrying
value, an impairment loss, limited to the amount of goodwill allocated to that reporting unit, is recorded. Fair values for
reporting units are determined based on the income approach (discounted cash flow method).
During the three-month period ended February 28, 2019, the ordering patterns of the polyurethane dispersions
reporting unit’s customers, especially those in the automotive industry, combined with a decrease in the reporting unit’s
backlog of customer orders believed to be firm as of February 28, 2019, indicated that an impairment in the carrying
value of the reporting unit might have occurred. The Company performed an impairment test on the indefinite-lived and
long-lived assets related to the polyurethane dispersions reporting unit, now part of the Adhesives, Sealants and
Additives operating segment and reporting unit (part of the former Industrial Materials segment during the second fiscal
quarter of 2019), in accordance with ASC Topic 350, “Intangibles — Goodwill and Other” and ASC Topic 360,
“Disclosure — Impairment or Disposal of Long-Lived Assets.” As a result of impairment testing, which included first
testing long-lived assets other than goodwill for impairment under applicable guidance, the Company recorded a charge
of $2,410 to loss on impairment of goodwill within the consolidated statement of operations during the quarter ended
February 28, 2019. The polyurethane dispersions reporting unit’s fair value was determined based on the income
approach (discounted cash flow method).
The Company performs impairment reviews annually each fourth quarter and whenever events or circumstances
indicate the carrying value of goodwill may not be recoverable. For the annual fiscal 2020 goodwill impairment test, we
performed a qualitative assessment of goodwill impairment and concluded that it was more likely than not that our
reporting units' fair values exceeded their carrying values (i.e. indicated no impairment of goodwill). Accordingly, it was
not necessary for us to perform the quantitative analysis.
As of August 31, 2020 and 2019, the Company had a total goodwill balance of $82,402 and $81,986,
respectively, related to its acquisitions, of which $31,591 and $34,778, respectively, remained deductible for income
taxes.
61
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
Intangible assets subject to amortization consisted of the following as of August 31, 2020 and 2019:
Weighted Average
Amortization Period
Gross Carrying Accumulated Net Carrying
Value
Amortization Value
August 31, 2020
Patents and agreements
Formulas and technology
Trade names
Customer lists and relationships
August 31, 2019
Patents and agreements
Formulas and technology
Trade names
Customer lists and relationships
14.6 years $
7.8 years
5.8 years
9.1 years
$
$
1,760
10,250
8,575
98,966
119,551 $
1,705
9,121
7,781
59,744
78,351
14.6 years $
7.8 years
5.8 years
9.1 years
$
$
1,760
10,164
8,503
98,139
118,566 $
1,693
7,969
7,261
48,939
65,862
$
$
$
$
55
1,129
794
39,222
41,200
67
2,195
1,242
49,200
52,704
Aggregate amortization expense related to intangible assets for the years ended August 31, 2020, 2019 and 2018
was $11,576, $12,445 and $11,807, respectively. As of August 31, 2020 estimated amortization expense for the next five
fiscal years is as follows:
Years ending August 31,
2021
2022
2023
2024
2025
11,066
10,036
6,768
5,560
3,961
Note 5—Cash Surrender Value of Life Insurance
The Company recognized cash surrender value of a life insurance policy with the following carrier as of
August 31, 2020 and 2019:
John Hancock
Cash surrender value of life insurance policies
2020
4,450 $
4,450 $
2019
4,450
4,450
$
$
The policy is subject to periodic review. The Company currently intends to maintain the policy through the life
or retirement of the insured, and records at the premium paid balance.
62
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
Note 6—Long-Term Debt
Long-term debt consisted of the following at August 31, 2020 and 2019:
All-revolving credit facility with a borrowing capacity of $150,000
Long-term debt
2020
2019
$
$
—
—
$
$
—
—
On December 15, 2016, the Company entered an Amended and Restated Credit Agreement (the “Credit
Agreement”) with Bank of America, acting as administrative agent, and with participation from Citizens Bank and
JPMorgan Chase Bank (collectively with Bank of America, the “Lenders”). The Credit Agreement is initially an all-
revolving credit facility with a borrowing capacity of $150,000, which can be increased by an additional $50,000 at the
request of the Company and the individual or collective option of any of the Lenders. The Credit Agreement contains
customary affirmative and negative covenants that, among other things, restrict our ability to incur additional
indebtedness and require certain lender approval for acquisitions by the Company and its subsidiaries over a certain size.
It also requires us to maintain certain financial ratios on a consolidated basis, including a consolidated net leverage ratio
(as defined in the facility) of no more than 3.25 to 1.00, and a consolidated fixed charge coverage ratio (as defined in the
facility) of at least 1.25 to 1.00. We were in compliance with our debt covenants as of August 31, 2020 and 2019. The
Credit Agreement is guaranteed by all of Chase Corporation’s direct and indirect domestic subsidiaries, which
collectively had a carrying value of $246,096 at August 31, 2020. The Credit Agreement was entered both to refinance
our previously existing term loan and revolving line of credit, and to provide for additional liquidity to finance potential
acquisitions, working capital, capital expenditures, and for other general corporate purposes.
The applicable interest rate for the revolver portion of the Credit Agreement (the “Revolving Facility”) and any
Term Loan (defined below) is based on the effective London Interbank Offered Rate (LIBOR) plus an additional amount
in the range of 1.00% to 1.75%, depending on the consolidated net leverage ratio of Chase Corporation and its
subsidiaries. At August 31, 2020 and 2019, there was no outstanding principal balance, and therefore no applicable
interest rate. The Credit Agreement has a five-year term with interest payments due at the end of the applicable LIBOR
period (but in no event less frequently than the three-month anniversary of the commencement of such LIBOR period)
and principal payment due at the expiration of the agreement, December 15, 2021. The Company may elect a base rate
option for all or a portion of the Revolving Facility, in which case, interest payments shall be due with respect to such
portion of the Revolving Facility on the last business day of each quarter.
Subject to certain conditions set forth in the Credit Agreement, the Company may elect to convert all or a
portion of the outstanding Revolving Facility into a term loan (each, a “Term Loan”), which shall be payable quarterly in
equal installments sufficient to amortize the original principal amount of such Term Loan on a seven year amortization
schedule; provided, however, that the final principal repayment installment shall be repaid on December 15, 2021 and in
any event shall be in an amount equal to the aggregate principal amount of all Term Loans outstanding on such date.
Prepayment is allowed by the Credit Agreement at any time during the term of the agreement, subject to customary
notice requirements.
63
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
In December 2017 (fiscal year 2018), the Company utilized $65,000 of the Credit Agreement to finance the
majority of the acquisition cost of Zappa Stewart. See Note 14 to the consolidated financial statements for additional
information on this acquisition. The Company paid down $40,000 of the outstanding balance in fiscal 2018, and made
additional principal payments totaling $25,000 in fiscal 2019, resulting in an outstanding balance of $0 at August 31,
2020 and 2019.
Note 7—Income Taxes
On December 22, 2017 (fiscal 2018), President Trump signed into law the Tax Cuts and Jobs Act of 2017 (the
"Tax Act"). The Tax Act impacted the U.S. statutory Federal tax rate that the Company will use going forward, reducing
it from 35% to 21%. As the Company has an August 31 fiscal year-end, the lower corporate income tax rate was phased
in, resulting in a U.S. statutory Federal rate of 25.7% for our fiscal year ended August 31, 2018, and a rate of 21% for
fiscal 2019 and 2020.
To transition to the reduced U.S. corporate tax rate, we were required to make an adjustment to our net U.S.
deferred tax assets. During fiscal 2018, predominantly in the three months ended February 28, 2018 (the second fiscal
quarter of 2018), the Company recorded initial provisional adjustments to the U.S. deferred tax assets and liabilities and
uncertain tax positions resulting in a net discrete tax expense of $681 recorded to the consolidated statement of
operations. This net discrete tax expense recorded in fiscal 2018 is the result of the following: (a) a $379 tax benefit
resulting from the remeasurement and reclassification of our then existing deferred tax liability related to unrepatriated
foreign earnings to accrued income tax balance (discussed in more detail below); (b) a $917 tax expense for the
remeasurement of the remaining net U.S. deferred tax assets in recognition of the new lower Federal rate; and (c) a $143
tax expense recorded as the result of remeasuring the Federal benefit on our uncertain tax positions. During fiscal 2019,
no additional transitional adjustments were made related to the adoption of the Tax Act in the quarters ended November
30, 2018, May 31, 2019 and August 31, 2019, and only immaterial adjustments were made in the quarter ended February
28, 2019. During fiscal 2020, no additional transitional adjustments were made.
The Tax Act includes a transition tax or “toll charge,” which is a one-time tax charge on unrepatriated foreign
earnings. The calculation of accumulated foreign earnings requires an analysis of each foreign entity’s financial results
going back to 1986. During fiscal 2018, the Company recorded a provisional transition tax adjustment associated with
its accumulated unrepatriated foreign earnings reducing long-term deferred tax liabilities by $2,298 and increasing short
and long-term accrued income taxes by $153 and $1,766, respectively (the short-term payable representing eight percent
of the total amount due, the amount payable within the first year as per the Tax Act). The difference between the
decrease in the deferred tax liabilities for unrepatriated foreign earnings and the increase in accrued income taxes, $379,
was recorded as a discrete tax benefit in fiscal 2018. During fiscal 2019 (prior year), the Company paid the entire long-
term and short-term toll charge balances that had been accrued at August 31, 2018.
Under the guidance set forth in the SEC's Staff Accounting Bulletin No. 118 (“SAB 118”), the Company may
record provisional amounts for the impact of the Tax Act. For the second quarter of fiscal 2018, the Company made a
provisional and reasonable estimate of the effects of the Tax Act on its existing deferred tax balances, including a
provisional adjustment for the toll charge, and made provisional adjustments to these initially recorded amounts in the
third and fourth quarters of fiscal 2018. The Company made complete and final adjustments during the quarter ended
February 28, 2019 (the second quarter of fiscal 2019), which were not material in nature.
64
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
In fiscal 2019, the Company began recognizing an additional component of total Federal tax expense, the tax on
Global Intangible Low-Taxed Income (“GILTI”) provision of the Tax Act, which became applicable to the Company in
fiscal 2019. The Company elected to account for GILTI as a period cost, and therefore included GILTI expense in the
effective tax rate calculation. This provision did not have a material effect on the effective tax rate for the years ended
August 31, 2020 and 2019.
The Company concluded that the Base Erosion and Anti Abuse Tax (“BEAT”) provision of the Tax Act, which
also became applicable to the Company in fiscal 2019, had no effect on our effective tax rate for fiscal 2019 or 2020.
Additionally, the Company has deferred the application of Foreign-Derived Intangible Income (“FDII”) for 2019 and
2020, in anticipation of further guidance and the establishment of industry standards by the U.S. Treasury Department
and trade associations.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted in
response to the COVID-19 pandemic. The CARES Act, among other things, included a technical correction to the Tax
Act which will allow accelerated deductions for qualified improvement property. The Company is currently evaluating
the impact of the CARES Act, but at present does not expect that the qualified improvement property correction nor
other provisions of the CARES Act would result in a material tax benefit to us in future periods. The CARES Act had no
material effect on the effective tax rate for fiscal 2020.
Domestic and foreign pre-tax income for the years ended August 31, 2020, 2019 and 2018 was:
United States
Foreign
Year Ended August 31,
2019
37,088 $
6,465
43,553 $
2020
42,027 $
3,293
45,320 $
2018
48,962
8,003
56,965
$
$
The provision (benefit) for income taxes for the years ended August 31, 2020, 2019 and 2018 was:
Current:
Federal
State
Foreign
Total current income tax provision
Deferred:
Federal
State
Foreign
Total deferred income tax benefit
Year Ended August 31,
2019
2020
2018
$
9,157 $
1,813
962
11,932
9,880 $
1,699
1,575
13,154
12,872
1,662
1,761
16,295
(520)
(184)
(65)
(769)
(1,699)
(529)
(84)
(2,312)
(2,214)
(263)
4
(2,473)
Total income tax provision
$
11,163 $
10,842 $
13,822
65
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
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 of income before taxes for fiscal 2020, 2019 and 2018, net of offsets generated by federal, state and foreign
tax benefits, was 24.6%, 24.9% and 24.3%, 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, 2020, 2019 and 2018:
Federal statutory rates
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
Stock Compensation
Permanent items
Tax effect of undistributed earnings
Other
Change in valuation allowance
Deferred income tax remeasurement
Year Ended August 31,
2019
2018
2020
21.0 %
21.0 %
25.7 %
3.0 %
0.0 %
0.0 %
(1.1) %
0.5 %
(0.1) %
(0.3) %
0.9 %
0.3 %
0.4 %
0.0 %
0.0 %
2.1 %
0.0 %
0.1 %
1.0 %
0.0 %
(0.3) %
(0.4) %
1.1 %
0.6 %
(0.4) %
0.1 %
0.0 %
1.9 %
(1.6)%
(0.3)%
1.1 %
0.0 %
(0.2)%
(3.4)%
0.9 %
(0.8)%
(0.8)%
0.1 %
1.7 %
Effective income tax rate
24.6 %
24.9 %
24.3 %
66
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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:
Deferred tax assets:
Allowance for doubtful accounts
Inventories
Accruals
Warranty reserve
Pension accrual
Deferred compensation
Foreign currency loss on previously taxed income
Loan finance costs
Restricted stock grants
Non-qualified stock options
Right-of-use asset
Foreign net operating loss, net of valuation allowance
Other
Deferred tax liabilities:
Prepaid liabilities
Lease liability
Depreciation and amortization
Net deferred tax assets (liabilities)
$
As of August 31,
2020
2019
309 $
994
504
14
2,749
391
96
7
823
211
2,354
247
572
9,271
432
1,193
541
22
2,623
300
96
34
456
258
—
—
353
6,308
(16)
(2,693)
(1,633)
(4,342)
4,929 $
(8)
—
(2,496)
(2,504)
3,804
$
As of August 31, 2020, the Company had $727 of gross foreign operating loss carry forwards to offset future
taxable income, the net balance of which was included within deferred income taxes. The net operating losses will begin
to expire in fiscal year ending August 31, 2027.
Chase Corporation is required to apply a valuation allowance to reduce the deferred tax assets reported if based
on the weight of the evidence it is more likely than not that some portion or all of the deferred tax assets will not be
realized. As of August 31, 2020, the Company determined that a valuation allowance was not needed.
Consistent with the Company’s practice prior to the passage of the Tax Act, we do not currently take the
position that undistributed foreign subsidiaries’ earnings are considered to be permanently reinvested.
67
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
A summary of the Company’s adjustments to its uncertain tax positions, included within long-term accrued
income taxes on the consolidated balance sheet, in fiscal years ended August 31, 2020, 2019 and 2018 are as follows:
Balance, at beginning of the year
Increase for tax positions related to the current year
(Decrease) increase for tax positions related to prior years
Increase for interest and penalties
Decrease for lapses of statute of limitations
Balance, at end of year
2020
2,324 $
101
(609)
125
—
1,941 $
2019
1,889 $
55
300
106
(26)
2,324 $
2018
1,257
47
595
71
(81)
1,889
$
$
The unrecognized tax benefits mentioned above include an aggregate of $1,002 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 $125, 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 change 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 material items.
The Company is subject to U.S. Federal income tax, as well as to income tax of multiple state, local 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 2016. For foreign jurisdictions, the statute of limitations remains open in the U.K. for fiscal years
subsequent to 2016 and in France for fiscal years subsequent to 2019.
Note 8—Leases
Effective September 1, 2019 (the start of fiscal 2020), the Company adopted ASU 2016-02, Leases (Topic 842),
using the modified retrospective approach and utilizing the effective date as its date of initial application. As a result,
prior periods are presented in accordance with the previous guidance in ASC 840, Leases (“ASC 840”). The Company
has elected to apply the ‘package of practical expedients’ which allows it to not reassess i) whether existing or expired
arrangements contain a lease, ii) the lease classification of existing or expired leases, or iii) whether previous initial
direct costs would qualify for capitalization under the new lease standard.
At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease
based on the unique facts and circumstances present in the arrangement. Leases with a term greater than one year are
recognized on the balance sheet as right-of-use (ROU) assets and short-term and long-term lease liabilities, as applicable.
The Company does not have any financing leases that are material in nature.
Operating lease liabilities and their corresponding right-of-use assets are initially recorded based on the present
value of lease payments over the expected remaining lease term. The interest rate implicit in lease contracts is typically
not readily determinable. As a result, the Company utilizes its incremental borrowing rate to discount lease payments,
which reflects the fixed rate at which the Company believes it could borrow on a collateralized basis the amount of the
lease payments in the same currency, for a similar term, in a similar economic environment.
The Company has elected not to recognize leases with an original term of one year or less on the balance sheet.
The Company typically only includes an initial lease term in its assessment of a lease arrangement. Options to renew a
lease are not included in the Company’s assessment unless there is reasonable certainty that the Company will renew.
68
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
The following table presents the right-of-use asset and short-term and long-term lease liabilities amounts
recorded on the consolidated balance sheet as of August 31, 2020:
Assets
Operating lease right-of-use asset
Liabilities
Current (accrued expense)
Operating lease long-term liabilities
Total lease liability
August 31,
2020
$
8,821
$
$
1,865
6,395
8,260
69
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
Lease cost
The components of lease costs for the year ended August 31, 2020 are as follows:
Operating lease cost (a)
Year Ended
August 31, 2020
$
3,783
(a) Includes short-term leases and variable lease costs (e.g. common area maintenance), which are immaterial.
Maturity of lease liability
The maturity of the Company's lease liabilities on August 31, 2020 was as follows:
Year ending August 31,
2021
2022
2023
2024
2025 and thereafter
Less: Interest
Present value of lease liabilities
$
Future Operating
Lease Payments
2,085
1,500
1,346
1,360
2,687
(718)
8,260
$
The weighted average remaining lease term and discount rates are as follows:
Lease Term and Discount Rate
Weighted average remaining lease term (years)
Operating leases
Weighted average discount rate (percentage)
Operating leases
Other Information
Supplemental cash flow information related to leases is as follows:
Operating cash outflows from operating leases
Total cash paid for amounts included in the measurement of lease liabilities
August 31,
2020
5.5
3.1 %
Year Ended
August 31, 2020
2,444
2,444
$
$
70
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
Minimum lease payments under operating leases prior to adoption of ASU 2016-02 were as follows:
Future Operating
Year ending August 31,
2020
2021
2022
2023
2024
2025 and thereafter
Total future minimum lease payments
$
Lease Payments
2,468
2,059
1,371
1,187
1,200
2,608
10,893
$
Total rental expense for all operating leases amounted to $3,783, $3,734 and $3,114 for the years ended
August 31, 2020, 2019 and 2018, respectively.
Note 9—Benefits and Pension Plans
401(k) Plans
The Company has a defined contribution plan adopted pursuant to section 401(k) of the Internal Revenue Code
of 1986 (the “Chase 401(k) Plan”). 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.
Through our wholly-owned subsidiary NEPTCO, the Company had two additional 401(k) savings plans, one for
union employees and one for nonunion employees. Under these plans, substantially all employees of NEPTCO were
eligible to participate by making pre-tax contributions to these plans. Participants could elect to defer between 1% and
10% of their annual compensation. The Company could contribute $0.75 for each $1.00 of participant deferrals up to 6%
of the nonunion participant’s compensation. The Company could match union employee contributions by $0.50 for each
$1.00 of participant deferrals up to 6% of the participant’s compensation. The nonunion plan was merged into the Chase
401(k) Plan effective January 1, 2018 and the union plan was merged into the Chase 401(k) Plan effective November 15,
2018.
The Company’s contribution expense for all 401(k) plans was $852, $787 and $702 for the years ended
August 31, 2020, 2019 and 2018, respectively.
Non-Qualified Deferred Savings Plans
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 plans was $1,629 and $1,275 on August 31, 2020 and
2019, respectively.
71
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
Pension Plans
The Company has noncontributory 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, 2020.
Effective December 1, 2008, a “soft freeze” in the Qualified Plan was adopted whereby no new employees
hired would be admitted to the Qualified Plan, with the exception of employees who were members 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 admitted to the plan prior to the
applicable soft freeze dates continue to accrue benefits as detailed in the plan agreements.
Through our wholly-owned subsidiary NEPTCO, the Company had a third defined benefit pension plan
(“NEPTCO Pension Plan”) covering our union employees at our Pawtucket facility. This plan was frozen effective
October 31, 2006, and as a result, no new participants could enter the plan and the benefits of current participants were
frozen as of that date. The benefits were 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 consisted of separate
pooled investment accounts with a trust company. The measurement date for the NEPTCO Pension Plan was historically
the same as the Company’s fiscal year end.
In August 2019, the Board of Directors approved a plan to terminate the NEPTCO Pension Plan. The Company
established November 15, 2019 as the plan termination date and during fiscal 2020 performed the administrative actions
required to carry out the termination. In relation to the Company’s intention to terminate the plan in less than one year
following the prior year balance sheet date, the liability associated with the NEPTCO Pension Plan was classified as a
current liability, within accrued payroll and other compensation, on the consolidated balance sheet as of August 31, 2019
(prior year). No balance related to the NEPTCO defined benefit plan was carried on the Company’s consolidated balance
sheet as of August 31, 2020.
72
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
The following tables reflect the status of the Company’s pension plans for the years ended August 31, 2020
2019 and 2018:
Change in benefit obligation
Projected benefit obligation at beginning of year
Service cost
Interest cost
Actuarial (gain) loss
Settlements
Benefits paid
Projected benefit obligation at end of year
Change in plan assets
Fair value of plan assets at beginning of year
Actual return on plan assets
Employer contribution
Settlements
Benefits paid
Fair value of plan assets at end of year
Funded status at end of year
Amounts recognized in consolidated balance sheets
Noncurrent assets
Current liabilities
Noncurrent liabilities
Net amount recognized in consolidated balance sheets
Actuarial present value of benefit obligation and funded
status
Accumulated benefit obligations
Projected benefit obligations
Plan assets at fair value
Amounts recognized in accumulated other comprehensive
income
Prior service cost
Net actuarial loss
Adjustment to pre-tax accumulated other comprehensive
income
2020
Year Ended August 31,
2019
2018
20,087 $
295
451
2,253
—
(2,423)
20,663 $
7,859 $
868
1,864
—
(2,423)
8,168 $
21,860
283
696
995
—
(3,747)
20,087
9,855
181
1,570
—
(3,747)
7,859
$
$
$
$
22,673
283
629
17
—
(1,742)
21,860
9,003
509
2,085
—
(1,742)
9,855
(12,495) $
(12,228)
$
(12,005)
2020
Year Ended August 31,
2019
2018
— $
(1,565)
(10,930)
(12,495) $
— $
(1,743)
(10,485)
(12,228) $
301
(1,570)
(10,736)
(12,005)
18,307 $
20,663 $
8,168 $
18,244 $
20,087 $
7,859 $
20,075
21,858
9,855
44 $
10,595
47 $
9,638
54
9,377
$
$
$
$
$
$
$
$
$
$
$
$
10,639 $
9,685 $
9,431
73
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
2020
Year Ended August 31,
2019
2018
Other changes in plan assets and benefit obligations
recognized in other comprehensive income
Net (gain)/loss
Amortization of loss
Supplemental plan assumption change
Amortization of prior service cost
Effect of settlement on accumulated other comprehensive
income
Total recognized in other comprehensive income
$
711 $
(664)
1,065
(3)
(155)
954
1,863 $
(472)
(620)
(3)
(511)
257
Net periodic pension cost
1,178
1,537
(704)
(484)
676
(3)
—
(515)
937
Total recognized in net periodic pension cost and other
comprehensive income
$
2,132 $
1,794 $
422
Estimated amounts that will be amortized from
accumulated comprehensive income over the next fiscal
year
Prior service cost
Net actuarial loss
$
3 $
656
3 $
500
3
475
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.
74
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
Components of net periodic pension cost for the fiscal years ended August 31, 2020, 2019 and 2018 included
the following:
Components of net periodic benefit cost
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost
Amortization of accumulated loss
Curtailment and settlement loss
Net periodic benefit cost
2020
2019
2018
$
$
295 $
451
(390)
3
664
155
1,178 $
283 $
696
(428)
3
472
511
1,537 $
283
629
(462)
3
484
—
937
Weighted average assumptions used to determine benefit obligations as of August 31, 2020, 2019 and 2018 are
as follows:
Discount rate
Qualified plan
Supplemental plan
NEPTCO plan
Rate of compensation increase
Qualified and Supplemental plan
NEPTCO plan
2020
2019
2018
1.92 %
1.65 %
— %
3.50 %
— %
2.58 %
2.37 %
2.29 %
3.50 %
— %
3.80 %
3.57 %
3.59 %
3.50 %
— %
Weighted average assumptions used to determine net periodic benefit cost for the years ended August 31, 2020,
2019 and 2018 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
Qualified and Supplemental plan
NEPTCO plan
2020
2019
2018
2.58 %
2.37 %
2.29 %
5.60 %
— %
5.60 %
3.50 %
— %
3.80 %
3.57 %
3.59 %
5.40 %
— %
5.40 %
3.50 %
— %
3.30 %
2.73 %
2.95 %
5.40 %
— %
5.20 %
3.50 %
— %
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. The discount rate is determined by matching the expected payouts from the respective plans to the
spot rates inherent in the FTSE Pension Discount Curve (formerly 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.
75
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
The Company estimates that each 100-basis point reduction in the discount rate would result in additional
(decreased) net periodic pension cost, the Company’s primary pension obligation, of approximately $41 for the Qualified
Plan and ($57) 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 $68 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 plan’s 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 both domestic and foreign equity investments 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 5.25%. 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,
2020, 2019 and 2018:
Asset Category
Equity securities
Debt securities
Other
Total
Target
Allocation
Range
10-80 %
20-70 %
0-100 %
100 %
Percentage of Plan Assets as of August 31,
2019
2020
2018
49 %
51 %
— %
100 %
44 %
56 %
— %
100 %
46 %
54 %
— %
100 %
76
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
NEPTCO Pension Plan Assets
Prior to the NEPTCO Pensions Plan’s termination and full payout in fiscal 2020, the investment policy for the
NEPTCO Pension Plan was based on ERISA standards for prudent investing. The fundamental goal underlying the
investment policy was to ensure that the assets of the plans were invested in a prudent manner to meet the obligations of
the plan as these obligations come due. The primary investment objectives included maximization of return within
reasonable and prudent levels of risk, provision of returns comparable to returns for similar investment options,
provision of exposure to a wide range of investment opportunities in various asset classes and vehicles, control of
administrative and management costs, and provision of appropriate diversification within investment vehicles.
The primary policy objectives were met by investing assets to achieve a reasonable tradeoff between return and
risk relative to the plan’s obligations. This included 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 were invested in a diversified mix of fixed income, and both domestic and
foreign equity investments. The ongoing monitoring of investments was a regular and disciplined process and confirmed
that the criteria remain satisfied. The process of monitoring investment performance relative to specified guidelines was
consistently applied.
Historically, 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.
Given the plan’s termination and full payout in 2020, the plan no longer holds assets as of August 31, 2020. The
NEPTCO Pension Plan had the following target allocation and weighted average asset allocations as of August 31, 2020,
2019 and 2018:
Asset Category
Equity securities
Debt securities
Other
Total
Target
Allocation
Range
10-80 %
20-70 %
0-100 %
100 %
Percentage of Plan Assets as of August 31,
2019
2020
2018
— %
— %
— %
— %
44 %
56 %
— %
100 %
46 %
54 %
— %
100 %
77
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
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, 2020 and 2019 by asset category:
Fair value measurements at
August 31, 2020
Significant
Fair value measurements at
August 31, 2019
Significant
Quoted prices
in active
markets
(Level 1)
other
Significant
observable unobservable
inputs
(Level 2)
inputs
(Level 3)
August 31,
2019
Quoted prices
in active
markets
(Level 1)
August 31,
2020
other
Significant
observable unobservable
inputs
(Level 2)
Asset Category
Equity securities
Debt securities
$
3,986 $
4,182
3,986 $
4,182
— $
—
— $
—
3,474 $
4,385
3,474 $
4,385
— $
—
Total
$
8,168 $
8,168 $
— $
— $
7,859 $
7,859 $
— $
inputs
(Level 3)
—
—
—
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.
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, and giving consideration to the termination
of the NEPTCO Pension plan:
Year ending August 31,
2021
2022
2023
2024
2025
2026-2030
Pension Benefits
2,996
$
1,759
2,507
1,948
1,788
5,393
$
The Company contributed $1,864, $1,570 and $2,085 to fund its obligations under the pension plans for the
years ended August 31, 2020, 2019 and 2018, respectively, including final cash outlays related to the termination of the
NEPTCO plan in fiscal 2020. The Company plans to make the necessary contributions during fiscal 2021 to ensure its
pension plans continue to be adequately funded given the current market conditions and does not anticipate a material
change from amounts contributed during the current fiscal year.
78
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
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 was initially
1,200,000. Additional shares may become available in connection with share splits, share dividends or similar
transactions. As of August 31, 2020, 949,398 shares remained available for future grant 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.
The Company is no longer granting equity awards under the 2005 Plan. Options to purchase 39,473 shares of common
stock remained outstanding under the 2005 as of August 31, 2020.
Restricted Stock
Employees and Executive Management
During the third quarter of fiscal 2015, 16,000 restricted shares were issued to non-executive members of
management; 15,000 with a vesting date of April 16, 2020 and 1,000 with a vesting date of January 31, 2018.
Compensation expense was being recognized on a ratable basis over the vesting period.
In August 2015, the Board of Directors of the Company approved the fiscal year 2016 Long Term Incentive
Plan (“LTIP”) for the executive officers and other members of management. The 2016 LTIP was an equity-based plan
with a grant date of September 1, 2015. 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 6,962 shares in
the aggregate, subject to adjustment based on fiscal 2016 results, with a vesting date of August 31, 2018 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 7,683 shares in the aggregate, with a vesting date of August
31, 2018, for which compensation expense was recognized on a ratable basis over the vesting period.
Based on the fiscal year 2016 financial results, 6,277 additional shares of restricted stock (total of 13,239
shares) were earned and granted subsequent to the end of fiscal year 2016 in accordance with the performance
measurement criteria. No further performance-based measurements apply to this award.
During the first quarter of fiscal 2016, an additional grant of 5,000 restricted shares was made to a non-
executive member of management with a vesting date of October 20, 2020. Compensation expense is being recognized
on a ratable basis over the vesting period.
In August 2016, the Board of Directors of the Company approved the fiscal year 2017 LTIP for the executive
officers and other members of management. The 2017 LTIP was an equity-based plan with a grant date of September 1,
2016. 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 5,399 shares in the aggregate, subject to
adjustment based on fiscal 2017 results, with a vesting date of August 31, 2019, for which compensation expense was
79
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
recognized on a ratable basis over the vesting period based on quarterly probability assessments; and (b) a time-based
restricted stock grant of 5,367 shares in the aggregate, with a vesting date of August 31, 2019, for which compensation
expense was recognized on a ratable basis over the vesting period.
Based on the fiscal year 2017 financial results, 5,399 additional shares of restricted stock (total of 10,798
shares) were earned and granted subsequent to the end of fiscal year 2017 in accordance with the performance
measurement criteria. No further performance-based measurements apply to this award.
In August 2016, the Board of Directors of the Company approved equity retention agreements with certain
executive officers. The equity-based retention agreements had a grant date of September 1, 2016. In addition to the stock
option component described below, the equity retention agreements contain a time-based restricted stock grant of 16,312
shares in the aggregate, with 7,768 shares having a vesting date of August 31, 2019, and 8,544 shares initially having a
vesting date of August 31, 2021. The latter award was amended in August 2017 to vest in five equal annual installments
over the five-year period following the grant date. Compensation expense is being recognized on a ratable basis over the
vesting period.
During the first quarter of fiscal 2017, additional grants totaling 8,805 shares of restricted stock were issued to
non-executive members of management with a vesting date of August 31, 2021. Compensation expense is being
recognized on a ratable basis over the vesting period.
In August 2017, the Board of Directors of the Company approved the fiscal year 2018 LTIP for the executive
officers and other members of management. The 2018 LTIP was an equity-based plan with a grant date of September 1,
2017. 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 4,249 shares in the aggregate, subject to
adjustment based on fiscal 2018 results, with a vesting date of August 31, 2020, 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 3,473 shares in the aggregate, with a vesting date of August 31, 2020. Compensation expense
was recognized on a ratable basis over the vesting period.
Based on the fiscal year 2018 financial results, 572 additional shares of restricted stock (total of 4,821 shares)
were earned and granted subsequent to the end of fiscal year 2018 in accordance with the performance measurement
criteria. No further performance-based measurements apply to this award.
During the third quarter of fiscal 2018, an additional grant totaling 192 shares of restricted stock was issued to a
non-executive member of management with a vesting date of August 31, 2020. Compensation expense was recognized
on a ratable basis over the vesting period.
During the fourth quarter of fiscal 2018, an additional grant totaling 609 shares of restricted stock was issued to
an executive member of management with a vesting date of August 20, 2019. Compensation expense was recognized on
a ratable basis over the vesting period.
In August 2018, the Board of Directors of the Company approved the fiscal year 2019 LTIP for the executive
officers and other members of management. The 2019 LTIP is an equity-based plan with a grant date of September 1,
2018. In addition to the stock option component described below, the plan contains the following restricted stock
components: (a) a performance and service-based restricted stock grant of 3,541 shares in the aggregate, subject to
adjustment based on fiscal 2019 results, with a vesting date of August 31, 2021, for which compensation expense is
being recognized on a ratable basis over the vesting period based on quarterly probability assessments; and (b) a time-
based restricted stock grant of 3,068 shares in the aggregate, with a vesting date of August 31, 2021. Compensation
expense is being recognized on a ratable basis over the vesting period.
80
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
In September 2018, restricted stock in the amount of 2,472 shares related to a first quarter of fiscal 2017 grant
was forfeited in conjunction with the termination of employment of a non-executive member of management of the
Company.
During the fourth quarter of fiscal 2019, an additional grant of restricted stock was made related to the 2019
LTIP grant in conjunction with an amendment to the equity compensation program for a promoted employee. The
additional grant contains the following restricted stock components: (a) a performance and service-based restricted stock
grant of 211 shares in the aggregate, subject to adjustment based on fiscal 2019 results, with a vesting date of August 31,
2021, for which compensation expense is being recognized on a ratable basis over the vesting period based on quarterly
probability assessments; and (b) a time-based restricted stock grant of 132 shares in the aggregate, with a vesting date of
August 31, 2021, for which compensation expense is being recognized on a ratable basis over the vesting period.
In August 2019, restricted stock in the amount of 833 shares related to the 2019 LTIP grant was forfeited in
conjunction with an amendment in the equity compensation agreement of an employee.
Based on the fiscal year 2019 financial results, 2,694 shares of restricted stock already granted were forfeited
subsequent to the end of fiscal year 2019 in accordance with the performance measurement criteria. No further
performance-based measurements apply to this award. Compensation expense relating to the remaining portion is being
recognized on a ratable basis over the vesting period.
In August 2019, the Board of Directors of the Company approved the fiscal year 2020 LTIP for the executive
officers and other members of management. The 2020 LTIP is an equity-based plan with a grant date of September 1,
2019 and contains the following equity components: (a) a performance and service-based restricted stock grant of 3,697
shares in the aggregate, subject to adjustment based on fiscal 2020 results, with a vesting date of August 31, 2022.
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 3,689 shares in the aggregate, with a vesting date of
August 31, 2022. Compensation expense is being recognized on a ratable basis over the vesting period.
In August 2019, the Board of Directors of the Company approved equity retention agreements with certain
executive officers. The equity-based retention agreements have a grant date of September 1, 2019 and contained time-
based restricted stock grants of 15,945 shares in the aggregate, and have a vesting date of August 31, 2022.
Compensation expense is being recognized on a ratable basis over the vesting period.
During the second quarter of fiscal 2020, additional grants of 432, 616 and 18,720 shares of restricted stock
(total of 19,768) were issued to non-executive members of management with vesting dates of December 31, 2021, 2022
and 2024, respectively. Compensation expense is being recognized on a ratable basis over the vesting period.
In May 2020, restricted stock in the amount of 432 shares related to a second quarter of fiscal 2020 grant was
forfeited in conjunction with the termination of employment of a non-executive member of management of the
Company.
During the fourth quarter of fiscal 2020, two additional grants totaling 481 shares and 261 shares of restricted
stock were issued to two non-executive members of management, with vesting dates of July 27, 2021 and June 15, 2021,
respectively. Compensation expense is being recognized on a ratable basis over the vesting period.
81
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
Non-employee Board of Directors
In February 2017, as part of their standard compensation for board service, non-employee members of the
Board received a total grant of 2,407 shares of restricted stock for service for the period from January 31, 2017 through
January 31, 2018. 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 2018, as part of their standard compensation for board service, non-employee members of the
Board received a total grant of 2,779 shares of restricted stock for service for the period from January 31, 2018 through
January 31, 2019. 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 2019, as part of their standard compensation for board service, non-employee members of the
Board received a total grant of 4,599 shares of restricted stock for service for the period from January 31, 2019 through
January 31, 2020. The shares of restricted stock will vest at the conclusion of this service period. Compensation was
recognized on a ratable basis over the twelve-month vesting period.
In February 2020, as part of their standard compensation for board service, non-employee members of the
Board received a total grant of 4,906 shares of restricted stock for service for the period from January 31, 2020 through
January 31, 2021. 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.
A summary of the transactions of the Company’s restricted stock plans for the years ended August 31, 2020,
2019 and 2018 is presented below:
Unvested restricted stock at August 31, 2017
Granted
Vested
Forfeited or cancelled
Unvested restricted stock at August 31, 2018
Granted
Vested
Forfeited or cancelled
Unvested restricted stock at August 31, 2019
Granted
Vested
Forfeited or cancelled
Unvested restricted stock at August 31, 2020
Non
Employee
Directors
2,407
2,779
(2,407)
—
2,779
4,599
(2,779)
—
4,599
4,906
(4,599)
—
4,906
$
$
$
$
$
$
$
$
$
$
Weighted Average
Grant Date
Fair Value
91.05
101.05
91.05
101.05
101.92
101.05
101.92
95.59
101.92
95.59
Officers
and
Employees
73,972
13,922
(22,315)
—
65,579
7,524
(25,443)
(3,305)
44,355
43,841
(25,195)
(3,126)
59,875
$
$
$
$
$
$
$
$
$
$
$
$
Weighted Average
Grant Date
Fair Value
51.56
83.65
41.35
61.85
121.64
65.79
79.39
67.18
108.47
61.51
123.19
97.72
82
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
Stock Options
In August 2015, the Board of Directors of the Company approved the fiscal year 2016 LTIP for the executive
officers and other members of management. The 2016 LTIP was an equity-based plan with a grant date of September 1,
2015 and included options to purchase 21,275 shares of common stock in the aggregate with an exercise price of $39.50
per share. The options vested in three equal annual installments ending on August 31, 2018. The options granted will
expire on September 1, 2025. Compensation expense was recognized over the period of the award consistent with the
vesting terms.
In August 2016, the Board of Directors of the Company approved the fiscal year 2017 LTIP for the executive
officers and other members of management. The 2017 LTIP is an equity-based plan with a grant date of September 1,
2016 and included options to purchase 15,028 shares of common stock in the aggregate with an exercise price of $64.37
per share. The options vested in three equal annual installments ending on August 31, 2019. Of the options granted,
5,596 options will expire on August 31, 2026, and 9,432 options will expire on September 1, 2026. Compensation
expense was recognized over the period of the award consistent with the vesting terms.
In August 2016, the Board of Directors of the Company approved equity retention agreements with certain
executive officers. The equity-based retention agreements have a grant date of September 1, 2016 and included options
to purchase 23,563 shares of common stock in the aggregate with an exercise price of $64.37 per share. These options
cliff vested on August 31, 2019 and will expire on August 31, 2026. Compensation expense was recognized over the
period of the award consistent with the vesting terms.
In August 2017, the Board of Directors of the Company approved the fiscal year 2018 LTIP for the executive
officers and other members of management. The 2018 LTIP is an equity-based plan with a grant date of September 1,
2017 and included options to purchase 9,622 shares of common stock in the aggregate with an exercise price of $93.50
per share. The options vested in three equal annual installments ending on August 31, 2020. Of the options granted,
4,591 options will expire on August 31, 2027, and 5,031 options will expire on September 1, 2027. Compensation
expense was recognized over the period of the award consistent with the vesting terms.
During the third quarter of fiscal 2018, an additional grant of options to purchase 606 shares of common stock
with an exercise price of $104.00 was issued to a non-executive member of management. The options vested in three
equal annual installments ending on August 31, 2020 and will expire on March 1, 2028. Compensation expense was
recognized on a ratable basis over the vesting period.
In August 2018, the Board of Directors of the Company approved the fiscal year 2019 LTIP for the executive
officers and other members of management. The 2019 LTIP is an equity-based plan with a grant date of September 1,
2018 and included options to purchase 8,603 shares of common stock in the aggregate with an exercise price of $123.95
per share. The options vest in three equal annual installments ending on August 31, 2021. Of the options granted, 3,927
options will expire on August 31, 2028, and 4,676 options will expire on September 1, 2028. Compensation expense is
being recognized over the period of the award consistent with the vesting terms.
During the fourth quarter of fiscal 2019, an additional grant of 483 options to purchase shares of common stock
with an exercise price of $99.38 per share was made related to the 2019 LTIP grant and in conjunction with an
amendment to the equity compensation program for a promotion of an employee. The options vest in three equal
installments on August 31, 2019, 2020 and 2021, and will expire on August 31, 2028. Compensation expense is being
recognized on a ratable basis over the vesting period.
83
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
In August 2019, the Board of Directors of the Company approved the fiscal year 2020 LTIP for the executive
officers and other members of management. The 2020 LTIP is an equity-based plan with a grant date of September 1,
2019 and included options to purchase 13,418 shares of common stock in the aggregate with an exercise price of $100.22
per share. The options vest in three equal annual installments ending on August 31, 2022. Of the options granted, 6,218
options will expire on August 31, 2029, and 7,200 options will expire on September 1, 2029. Compensation expense is
being recognized over the period of the award consistent with the vesting terms.
In August 2019, the Board of Directors of the Company approved equity retention agreements with certain
executive officers. The equity-based retention agreements have a grant date of September 1, 2019 and contain stock
options to purchase 53,642 shares of common stock in the aggregate with an exercise price of $100.22 per share. The
options will cliff vest on August 31, 2022 and will expire on August 31, 2029. Compensation expense is being
recognized on a ratable basis over the vesting period.
The following table summarizes information about stock options outstanding as of August 31, 2020:
Options Outstanding
Options Exercisable
Exercise
Prices
16.00
$
29.72
$
35.50
$
39.50
$
64.37
$
93.50
$
$
99.38
$ 100.22
$ 104.00
$ 123.95
Number
Outstanding
5,065
13,790
13,372
12,753
34,260
8,704
483
67,060
606
8,603
164,696
Weighted Avg.
Remaining
Contractual
Life
2.1
3.0
4.0
5.0
6.0
7.0
8.0
9.0
7.5
8.0
6.8
Weighted
Average
Exercise Price
16.00
29.72
35.50
39.50
64.37
93.50
99.38
100.22
104.00
123.95
75.21
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
Aggregate
Intrinsic
Value
413
936
830
741
1,137
35
—
—
—
—
4,092
Weighted
Average
Exercise
Price
16.00
$
29.72
$
35.50
$
39.50
$
64.37
$
93.50
$
$
99.38
$ 100.22
$ 104.00
$ 123.95
57.96
$
Number
Exercisable
5,065
13,790
13,372
12,753
34,260
8,704
322
4,473
606
5,735
99,080
$
$
$
$
$
$
$
$
$
$
$
Aggregate
Intrinsic
Value
413
936
830
741
1,137
35
—
—
—
—
4,092
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, which is determined not to be materially different from the opening market
value on the date of grant.
84
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
A summary of the transactions of the Company’s stock option plans for the years ended August 31, 2020, 2019
and 2018 is presented below:
Options outstanding at August 31, 2017
Granted
Exercised
Forfeited or cancelled
Options outstanding at August 31, 2018
Granted
Exercised
Forfeited or cancelled
Options outstanding at August 31, 2019
Granted
Exercised
Forfeited or cancelled
Options outstanding at August 31, 2020
Options exercisable at August 31, 2020
Officers
and
Employees
Weighted
Average
Exercise Price
152,974
10,228
(64,012)
—
99,190
9,086
(7,022)
—
101,254
67,060
(3,618)
—
164,696
99,080
$
$
$
$
$
$
$
$
$
$
$
34.21
94.12
19.06
50.17
122.64
42.86
57.18
100.22
34.21
75.21
57.96
The weighted average grant date fair value of options granted in the years ended August 31, 2020, 2019 and
2018 was $29.79, $40.12 and $30.99 per share, respectively.
The total pretax intrinsic value of stock options exercised was $311, $403 and $6,714 for the years ended
August 31, 2020, 2019, and 2018, respectively.
Excluding the effects of common stock reserved for issuance upon exercise of the 164,696 outstanding options,
there were 949,398 shares of common stock available for future issuance under the Company’s 2013 Equity Incentive
Plan on August 31, 2020. Based on historic experience, management estimates all outstanding stock options will vest.
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 $149, $157 and $1,921 for the years ended August 31, 2020, 2019 and
2018, respectively.
As of August 31, 2020, unrecognized expense related to all stock-based compensation described above was
$5,397 (including $4,136 for restricted stock and $1,261 for stock options), which will be recognized over the next five
fiscal years.
85
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
Note 11—Segment Data
In fiscal 2019 (prior year), due to the recent changes in our business structure, including several recent
acquisitions and divestitures within the previously existing Industrial Materials segment, changes in senior management
and the establishment of our Chief Executive Officer as our sole chief operating decision maker, the Company's
management team has restructured its internal and external reporting process to more accurately reflect the manner in
which the current business is being managed and operated. In the fourth quarter of fiscal 2019 (prior year), the Company
reorganized into three reportable operating segments: an Adhesives, Sealants and Additives segment, an Industrial Tapes
segment and a Corrosion Protection and Waterproofing segment. The segments are distinguished by the nature of the
products manufactured and how they are delivered to their respective markets.
The Adhesives, Sealants and Additives segment (formerly included within the Industrial Materials segment)
offers innovative and specialized product offerings consisting of both end-use products and intermediates that are used
in, or integrated into, another company’s product. Demand for the segment’s product offerings is typically dependent
upon general economic conditions. This segment leverages the core specialty chemical competencies of the Company,
and serves diverse markets and applications. The segment sells predominantly into the transportation, appliances,
medical, general industrial and environmental market verticals. The segment’s products include moisture protective
coatings and customized sealant and adhesive systems for electronics, polymeric microspheres, polyurethane dispersions
and superabsorbent polymers. Beginning December 31, 2017, the Adhesives, Sealants and Additives segment includes
the acquired operations of Zappa Stewart within the Company’s specialty chemicals intermediates product line.
The Industrial Tapes segment (formerly included within the Industrial Materials segment) features legacy wire
and cable materials, specialty tapes, and other laminated and coated products. The segment derives its competitive
advantage through its proven chemistries, diverse specialty offerings and the reliability its supply chain offers to end
customers. These products are generally used in the assembly of other manufacturers’ products, with demand typically
dependent upon general economic conditions. This segment sells mostly to established markets, with some exposure to
growth opportunities through further development of existing products. Markets served include cable manufacturing,
utilities and telecommunications, and electronics packaging. The segment’s offerings include insulating and conducting
materials for wire and cable manufacturers, laminated durable papers, laminates for the packaging and industrial
laminate markets, custom manufacturing services, pulling and detection tapes used in the installation, measurement and
location of fiber optic cable and water and natural gas lines, and cover tapes essential to delivering semiconductor
components via tape and reel packaging.
The Corrosion Protection and Waterproofing segment (formerly known as the Construction Materials segment)
is principally composed of project-oriented product offerings that are primarily sold and used as “Chase” branded
products. End markets include new and existing infrastructure projects on oil, gas, water and wastewater pipelines,
highways and bridge decks, water and wastewater containment systems, and commercial buildings. The segment’s
products include protective coatings for pipeline applications, coating and lining systems for waterproofing and liquid
storage applications, adhesives and sealants used in architectural and building envelope waterproofing applications, high-
performance polymeric asphalt additives, and expansion joint systems for waterproofing applications in transportation
and architectural markets. With sales generally dependent on outdoor project work, the segment experiences highly
seasonal sales patterns.
86
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
The following tables summarize information about the Company’s segments:
Revenue
Adhesives, Sealants and Additives
Industrial Tapes
Corrosion Protection and Waterproofing
Total
Income before income taxes
Adhesives, Sealants and Additives
Industrial Tapes
Corrosion Protection and Waterproofing
Total for reportable segments
Corporate and common costs
Total
Includes the following costs by segment:
Adhesives, Sealants and Additives
Interest
Depreciation
Amortization
Industrial Tapes
Interest
Depreciation
Amortization
Corrosion Protection and Waterproofing
Interest
Depreciation
Amortization
2020
Years Ended August 31,
2019
2018
$
96,208
118,960
45,994
$ 261,162
$ 104,796
129,845
46,710
$ 281,351
$ 101,690
130,598
51,900
$ 284,188
$
$
$
$
$
25,953
31,237 (a)
16,638 (b)
73,828
(28,508)(c)
45,320
$
27,142 (d) $
28,216 (e)
15,909 (f)
71,267
(27,714) (g)
$
43,553
$
35,190 (h)
30,886 (i)
18,178
84,254
(27,289)(j)
56,965
$
98
994
9,313
$
177
1,467
9,359
422
1,285
7,895
$
111
1,746
1,800
$
216
1,755
1,800
516
2,748
2,604
$
37
615
463
$
126
674
1,286
234
753
1,308
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
Includes $559 in exit costs related to the movement of the pulling and detection business out of the Granite Falls, NC location and into the
Hickory, NC location during the first six months of fiscal 2020
Includes $170 gain on the refund of a payment made in fiscal 2019 related to engineering studies performed to assess potential operational
changes and further plant rationalization and consolidation and an expense of $405 for the write-down of certain assets under construction.
Includes $150 of expense related to exploratory IT work performed to assess potential future upgrades to the Company’s companywide ERP
system, a $760 gain related to the April 2020 sale of the Company’s Pawtucket, RI location, a $1,791 gain related to the August 2020 sale of the
Company’s Randolph, MA property, $183 in severance expense related to the May 2020 reduction in force, $85 in expenses related to the final
transition out of the Pawtucket, RI facility, $155 of pension-related settlement costs due to the timing of lump-sum distribution and $274 in
acquisition-related costs attributable to the September 2020 (fiscal 2021) acquisition of ABchimie
Includes $2,410 of loss on impairment of goodwill related to the Company’s polyurethane dispersions business
Includes $260 of expense related to the closure and exit of our Pawtucket, RI location recognized in the first quarter of fiscal 2019, and $526 in
exit costs related to the movement of the pulling and detection business out of the Granite Falls, NC location and into the Hickory, NC location
during the second half of fiscal 2019
Includes $200 of expense related to engineering studies performed to assess potential future operational changes and further plant rationalization
and consolidation, see note (b)
Includes $511 of pension-related settlement costs due to the timing of lump-sum distributions
Includes $1,070 of expense related to inventory step-up in fair value attributable to the acquisition of Zappa Stewart
Includes $1,085 gain on sale of license related to the structural composites product line recorded in the second quarter of fiscal 2018, $1,480 gain
on sale of business related to the April 2018 sale of the structural composites rod business and $1,272 of expense related to the exit of our
Pawtucket, RI location in the fourth quarter of fiscal 2018
Includes $393 in acquisition-related expense attributable to the December 2017 acquisition of Zappa Stewart
87
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
Total Assets
Adhesives, Sealants and Additives
Industrial Tapes
Corrosion Protection and Waterproofing
Total for reportable segments
Corporate and common assets
Total
Note 12—Export Sales and Foreign Operations
August 31, August 31,
2020
2019
$ 129,457 $ 135,583
77,085
32,478
245,146
62,822
$ 346,830 $ 307,968
71,229
32,642
233,328
113,502
Export sales from continuing domestic operations to unaffiliated third parties were $30,067, $30,582 and
$42,883 for the years ended August 31, 2020, 2019 and 2018, respectively. The decrease in export sales in fiscal 2020
against fiscal 2019 in a reflection of the overall year-over-year decrease in sales results. The decrease in export sales in
fiscal 2019 against fiscal 2018 resulted from decreased export sales into China and Europe.
The Company’s products are sold worldwide. Revenue for the years ended August 31, 2020, 2019 and 2018, are
attributed to operations located in the following countries:
Years Ended August 31,
2020
2019
2018
Revenue
United States
United Kingdom
All other foreign (1)
Total
$ 226,690 $ 248,281 $ 244,225
20,598
19,365
$ 261,162 $ 281,351 $ 284,188
20,543
13,929
17,504
15,566
(1) Inclusive of sales originated from our Paris, France location, royalty revenue attributable to our licensed
manufacturer in Asia, and Chase foreign manufacturing operations.
88
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
As of August 31, 2020 and 2019, 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) and goodwill and intangible assets, less accumulated amortization in the following
countries:
Long-Lived Assets
United States
Property, plant and equipment, net
Goodwill and Intangible assets, less accumulated amortization
$
22,427 $
117,930
24,993
129,057
August 31,
2020
August 31,
2019
United Kingdom
Property, plant and equipment, net
Goodwill and Intangible assets, less accumulated amortization
All other foreign
Property, plant and equipment, net
Goodwill and Intangible assets, less accumulated amortization
2,320
4,403
827
1,269
2,493
4,446
1,840
1,187
Total
Property, plant and equipment, net
Goodwill and Intangible assets, less accumulated amortization
$
$
25,574 $
123,602 $
29,326
134,690
Note 13—Supplemental Cash Flow Data
Supplemental cash flow information for the years ended August 31, 2020, 2019 and 2018 is as follows:
Income taxes paid
Interest paid
Noncash Investing and Financing Activities
Common stock received for payment of stock option exercises
Property, plant and equipment additions included in accounts payable
2020
11,186 $
230 $
2019
11,714 $
728 $
2018
20,142
915
123 $
92 $
119 $
67 $
1,028
197
$
$
$
$
89
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
Supplemental cash flow information as related to acquisitions and divestitures for the years ended August 31,
2020, 2019 and 2018 is as follows:
2020
2019
2018
$
$
(14)
(1,791)
1,805
(1,050)
(760)
1,810
Sale of Randolph, MA Property
Asset held for sale
Gain on sale of real estate
Cash received from sale of real estate, net
Sale of Pawtucket, RI Location
Asset held for sale
Gain on sale of real estate
Cash received from sale of real estate, net
Acquisition of Zappa Stewart
Current assets
Property, plant & equipment
Goodwill and Intangible assets
Deferred tax liability
Accounts payable and accrued liabilities
Payments for acquisitions
Sale of Structural Composites Rod Business
Inventory
Goodwill
Gain on sale of business
Cash received from sale of business, net of transaction costs
Sale of Structural Composites License
Property and equipment
Gain on sale of license
Accrued income taxes
Cash received from sale of license
$
$
$
10,478
1,872
64,378
(2,626)
(633)
(73,469)
(522)
(230)
(1,480)
2,232
(26)
(1,085)
111
1,000
Sale of Fiber Optic Cable Components Product Line
Due from sale of business
Cash received from sale of product line, net of transaction costs
$
(400)
400
90
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
Note 14—Acquisitions
Acquisition of ABchimie
On September 1, 2020 (subsequent to fiscal 2020), the Company acquired all the capital stock of ABchimie for
€18,000 (approximately $21,420 at the time of the transaction) net of cash and marketable securities acquired, subject to
final working capital adjustment, excluding acquisition-related costs of $274 and with a potential earn out based on
performance potentially worth an additional €7,000 (approximately $8,330 at the time of the transaction). ABchimie is a
Corbelin, France headquartered solutions provider for the cleaning and the protection of electronic assemblies, with
further formulation, production, and research and development capabilities. The transaction was funded 100% with cash
on hand. The financial results of the business will be included in the Company's fiscal 2021 financial statements within
the Adhesives, Sealants and Additives operating segment in the electronic and industrial coatings product line. The
Company is currently in the process of finalizing purchase accounting, regarding a final allocation of the purchase price
to tangible and identifiable intangible assets assumed and anticipates completion within fiscal 2021. The ABchimie
acquisition does not represent a significant business combination so pro forma financial information is not provided.
Acquisition of Zappa Stewart
On December 31, 2017, the Company acquired Zappa Stewart, an advanced superabsorbent polymer (SAP)
formulator and solutions provider, with operations located in Hickory and McLeansville, NC. The business was acquired
for a purchase price of $73,469, after final working capital adjustments and excluding acquisition-related costs. Chase
Corporation acquired all equity of the business and entered multiyear leases at both locations. The purchase was funded
by a combination of a $65,000 draw on the Company’s existing revolving credit facility and available cash on hand.
Zappa Stewart’s protective materials technology is complementary to Chase Corporation’s current specialty chemicals
offerings. This acquisition is in line with our core strategies and extends our reach into growing medical and consumer
applications.
Since the effective date for this acquisition, December 31, 2017, the financial results of the acquired business
have been included in the Company’s financial statements within the Adhesives, Sealants and Additives operating
segment, in the specialty chemicals intermediates product line. The acquisition was accounted for as a business
combination under ASC Topic 805, “Business Combinations.” In accordance with this accounting standard, the
Company expensed $393 of acquisition-related costs during the second quarter of 2018 to acquisition-related costs.
91
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
The Company finalized purchase accounting in the three-month period ended November 30, 2018 (the first
quarter of fiscal 2019), with no adjustments made to the preliminary amounts recorded at August 31, 2018. The purchase
price has been allocated to the acquired tangible and identifiable intangible assets assumed, based on their fair values as
of the date of the acquisition:
Assets and Liabilities
Accounts receivable
Inventory
Prepaid expenses and other current assets
Property, plant & equipment
Goodwill
Intangible assets
Deferred tax liability
Accounts payable and accrued expenses
Total purchase price
Amount
3,670
6,796
12
1,872
34,138
30,240
(2,626)
(633)
73,469
$
$
The excess of the purchase price over the net tangible and intangible assets acquired resulted in goodwill of
$34,138 that is largely attributable to the synergies and economies of scale from combining the operations, technologies
and research and development capabilities of Zappa Stewart and Chase, particularly as it pertains to the expansion of the
Company's product and service offerings, the established workforce and marketing efforts. A portion of this goodwill,
$23,990, is deductible for income tax purposes.
All assets, including goodwill, acquired as part of the Zappa Stewart acquisition are included in the Adhesives,
Sealants and Additives operating segment. Identifiable intangible assets purchased with this transaction are as follows:
Intangible Asset
Customer relationships
Technology
Trade names
Total intangible assets
Amount
$ 28,500
900
840
Weighted Average
Useful Life
7.9 years
7 years
4 years
$ 30,240
92
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
Supplemental Pro Forma Data (unaudited)
The following table presents the pro forma results of the Company for the year ended August 31, 2018 as
though the Zappa Stewart acquisition described above occurred on September 1, 2016 (the first day of fiscal 2017). The
actual revenue and expenses for the acquired business are included in the Company’s consolidated results beginning on
December 31, 2017. From the date of acquisition (December 31, 2017) through August 31, 2018, revenue and net
income for the Zappa Stewart operations included in the consolidated statement of operations were $16,324 and $578,
respectively, with results inclusive of sale of $1,070 in inventory step-up cost, $393 in acquisition-related costs and
amortization expense of $2,672 recognized related to intangible assets recorded as part of the transaction, but not
inclusive of any interest or financing costs. The pro forma results include adjustments for the estimated amortization of
intangibles, acquisition-related costs, sale of inventory step-up cost, interest expense assuming the entire $65,000 draw
remained outstanding through December 31, 2017 (at the interest rate effective at the date of borrowing) and the income
tax impact of the pro forma adjustments at the statutory rate of 26% for fiscal 2018. The following pro forma information
is not necessarily indicative of the results that would have been achieved if the acquisition had been effective on
September 1, 2016.
Revenue
Net income
Net income available to common shareholders, per common and common
equivalent share
Basic earnings per share
Diluted earnings per share
Note 15—Sale of License
Years Ended August 31,
2018
292,609
44,508
4.75
4.70
$
$
$
In November 2017 (fiscal 2018), the Company entered a license agreement with an unrelated party to sell a
license, including intellectual property, and certain construction in process assets, with a net book value of $26, all of
which related to the manufacturing of certain structural composite materials. In the second fiscal quarter of 2018, the
transaction was finalized for gross consideration of $1,111 comprising cash proceeds of $1,000 and $111 in foreign tax
consideration paid by the buyer on Chase Corporation’s behalf. This transaction resulted in a gain of $1,085, which was
recorded in the Company’s consolidated statement of operations as a gain on sale of license during the fiscal quarter
ended February 28, 2018.
In relation to this license agreement, the purchaser also entered into a royalty agreement with the Company
under which the purchaser agreed to make royalty payments to the Company based on the volume of future sales of
certain structural composite material manufactured by the purchaser. Revenue recognized related to this royalty
agreement was not material in fiscal 2019 and 2018, and this royalty agreement was terminated in fiscal 2019.
93
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
Note 16—Fair Value Measurements
The Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability
(exit price) in an orderly transaction between market participants at the measurement date. The Company uses a
three-tier fair value hierarchy, which classifies the inputs used in measuring fair values. These tiers are: 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.
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 or Level 2 in
the fair value hierarchy. The financial assets classified as Level 1 and Level 2 as of August 31, 2020 and 2019 represent
investments which are restricted for use in non-qualified retirement savings plans 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, 2020 and 2019:
Fair value measurement category
Fair value
measurement date Total
Quoted prices
Significant other
in active markets observable inputs unobservable inputs
(Level 2)
Significant
(Level 3)
(Level 1)
Assets:
Restricted investments
August 31, 2020 $ 1,619 $
1,395 $
224 $
Restricted investments
August 31, 2019 $ 1,260 $
1,091 $
169 $
—
—
The following table presents the fair values of the Company’s long-term debt as of August 31, 2020 and 2019
which is recorded at its carrying amount:
Fair value
Fair value measurement category
Quoted prices Significant other
Significant
in active markets observable inputs unobservable inputs
measurement date Total
(Level 1)
(Level 2)
(Level 3)
Liabilities:
Long-term debt
August 31, 2020 $
— $
— $
— $
Long-term debt
August 31, 2019 $
— $
— $
— $
—
—
The long-term debt had no outstanding balance as of August 31, 2020 and August 31, 2019. 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. See Note 6 to the consolidated financial statements for additional information on long-term debt.
94
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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:
Net income
Less: Allocated to participating securities
Available to common shareholders
Basic weighted average shares outstanding
Additional dilutive common stock equivalents
Diluted weighted average shares outstanding
Years Ended August 31,
2019
32,711 $
257
32,454 $
2020
34,157 $
273
33,884 $
$
$
9,359,940
79,810
9,439,750
9,334,232
44,975
9,379,207
2018
43,143
410
42,733
9,296,648
69,423
9,366,071
Net income available to common shareholders, per common and common
equivalent share
Basic
Diluted
$
$
3.62 $
3.59 $
3.48 $
3.46 $
4.60
4.56
For the years ended August 31, 2020, 2019 and 2018, stock options to purchase 11,183, 12,901 and 404 shares
of common stock were outstanding but were not included in the calculation of diluted net income per share because their
inclusion would be antidilutive. Included in the calculation of dilutive common stock equivalents are the unvested
portion of restricted stock and stock options.
Note 18—Sale of Businesses
Sale of Structural Composites Rod Business
On April 20, 2018, Chase Corporation finalized an agreement with an unrelated party to sell all inventory,
operational machinery and equipment and intangible assets of the Company’s structural composites rod business, as well
as a license related to the production and sale of rod, for proceeds of $2,232, net of transaction costs and following all
working capital adjustments. This business, which was part of the structural composites product line within the Industrial
Tapes segment (previously within the former Industrial Materials segment), had limited growth and profitability
prospects as part of the Company, and was outside the areas Chase has identified for strategic emphasis. The divestiture
was accounted for under ASC Topic 360, “Disclosure—Impairment or Disposal of Long-Lived Assets.” In accordance
with this accounting standard, the resulting pre-tax gain on sale of $1,480 was recognized in the third quarter of fiscal
2018 as a gain on sale of businesses within the consolidated statement of operations. Chase received $2,075, net of
transaction costs, in the third quarter of fiscal 2018, with the remaining $157 received in the fourth quarter of fiscal 2018
as a result of a working capital true-up.
Related to this transaction, the purchaser entered into a royalty agreement with the Company, under which the
purchaser agreed to make royalty payments to the Company based on future sales of certain structural composite
material manufactured by the purchaser. Royalty revenue recognized in fiscal 2019 and 2018 related to this agreement
was not material, and this royalty agreement was terminated in fiscal 2019.
The sale of the structural components rod business followed the Company’s sale of the RodPack® wind blade
components business in November 2015, and the licensing of certain composite technologies during the second quarter
of fiscal 2018 (see further discussion in Note 15 to the consolidated financial statements). Subsequent to the third quarter
of fiscal 2018, Chase Corporation has included the results of its remaining structural composites wind energy business
(inclusive of the royalties and the custom manufacturing services) within the specialty products product line.
95
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
Note 19—Sale of Real Estate
Sale of Randolph, MA Property
In August 2020, the Company finalized the sale of its Randolph, MA property for net proceeds of $1,805. This
transaction resulted in a gain of $1,791, which was recorded during the fourth quarter of fiscal 2020.
Sale of Pawtucket, RI Location
In April 2020, the Company finalized the sale of its Pawtucket, RI location for net proceeds of $1,810. This
transaction resulted in a gain of $760, which was recorded during the third quarter of fiscal 2020.
Note 20—Operations Optimization Costs
Strategic Actions Taken Related to COVID-19
The second, third and fourth fiscal quarters of 2020 saw the global spread of the coronavirus pandemic
(COVID-19), which grew to create significant volatility, uncertainty and global economic disruption. During the third
fiscal quarter, the Company implemented changes to its cost structure designed to address market changes brought on by
COVID-19 and demonstrate its commitment to fiscal prudence: (a) the Company made a targeted reduction in its global
workforce, contemplated pre-pandemic but catalyzed by COVID-19, which resulted in the recognition of $183 in
severance costs during the period; and (b) the Company also instituted a temporary 20% reduction in the base salaries of
its named executive officers and select members of senior management, as well as the cash compensation of the non-
employee members of its Board of Directors. The reduction in force, which impacted operations in the Company’s U.S.
facilities, and the adjustments in compensation, were both effective May 2020.
ERP System Upgrade
During the first quarter of fiscal 2020, the Company commissioned third party led studies regarding the
potential upgrading of the Company’s current worldwide ERP system. Chase Corporation is currently reviewing the data
and recommendations provided by the study and may further utilize third-party engineering, IT and other professional
services firms in the future for similar work, as well as work around the facilities rationalization and consolidation
initiative. The Company recognized $150 in expense related to these services in the first quarter of fiscal 2020, with no
expense recognized in the second, third or fourth fiscal quarters. Given the ongoing nature of the review, an estimate of
future costs, including those that may be capitalized, cannot currently be determined.
Relocation of Pulling and Detection Manufacturing to Hickory, NC
During the third quarter of fiscal 2019, Chase Corporation began moving the pulling and detection operations
housed in its Granite Falls, NC location to its Hickory, NC facility. This is in line with the Company’s ongoing initiative
to consolidate its manufacturing plants and streamline its existing processes. At the time, the pulling and detection
operations were the only Chase-owned production operations in Granite Falls, NC, with the remaining portions of the
building being either utilized for research and development or leased to a third party. The process of moving, including
moving internal research and development capabilities, was substantially completed during the second quarter of fiscal
2020. The Company recognized $559 in expense related to the move in the six-month period ended February 29, 2020,
having recognized $526 in expense during the second half of fiscal 2019. No costs were recognized in the six months
ended August 31, 2020, and future costs related to this move are not anticipated to be significant to the consolidated
financial statements.
96
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
Engineering Studies Related to Facility Consolidation and Rationalization Initiative
During the fourth quarter of fiscal 2019 (prior year), the Company commissioned engineering studies of certain
legacy operations, machinery and locations related to the Company’s facility rationalization and consolidation initiative.
Chase Corporation completed its review of the data and recommendations provided by the study in the fourth quarter of
fiscal 2020 (current year). The Company recognized $200 in expense related to these services in fiscal 2019, and a gain
of $170 in fiscal 2020, as certain amounts expensed in fiscal 2019 were refunded. Also in the fourth quarter of fiscal
2020 and related to the recommendations of the commissioned engineering studies, the Company wrote down the value
of certain non-operating production assets related to the pipeline coatings product line, within the Corrosion Protection
and Waterproofing segment. Given the nature and prospects of the equipment, the Company determined its then carrying
value exceeded its fair value and recognized an expense of $405 related to the machinery. The Company may utilize
third party engineering, IT and other professional services firms in the future for similar optimization-related work.
Given the ongoing nature of the facility rationalization and consolidation initiative, an estimate of future costs cannot
currently be determined.
Closure of Pawtucket, RI Facility
On June 25, 2018, the Company announced to its employees the planned closing of its Pawtucket, RI
manufacturing facility effective August 31, 2018. This is in line with the Company’s ongoing efforts to consolidate its
manufacturing plants and streamline its existing processes. The manufacture of products previously produced in the
Pawtucket, RI facility was substantially moved to Company facilities in Oxford, MA and Lenoir, NC during a two-
month transition period. In the fourth quarter of fiscal 2018, the Company expensed $1,272 related to the closure. The
Company also recognized $260 in expense related to the move in the three-month period ended November 30, 2018,
with no additional expense recognized in the remainder of fiscal 2019. The Company completed the sale of its
Pawtucket, RI location to a third party in the third quarter of fiscal 2020 for net proceeds totaling $1,810, recognizing a
gain on sale of real estate of $760. Also, during the third quarter of fiscal 2020, the Company recognized $85 in final
Pawtucket, RI transition and exit costs, with no further costs related to this initiative anticipated in future periods.
97
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
Note 21—Commitments and 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 cash flows, litigation is inherently unpredictable.
Therefore, judgments could be rendered, or settlements agreed to that could adversely affect the Company’s operating
results or cash flows in a particular period. The Company routinely assesses all 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
we assess the likelihood of loss as probable.
Note 22—Assets Held for Sale
The Company periodically reviews long-lived assets against its plans to retain or ultimately dispose of these
assets. If the Company decides to dispose of an asset and commits to a plan to actively market and sell the asset, it will
be moved to assets held for sale. The Company analyzes market conditions each reporting period, and, if applicable,
records additional impairments due to declines in market values of like assets. The fair value of the asset is determined
by observable inputs such as appraisals and prices of comparable assets in active markets for assets like the Company's.
Gains are not recognized until the assets are sold.
Assets held for sale as of August 31, 2020 and 2019 were:
Pawtucket, RI - Property, plant and equipment
Randolph, MA - Property
Total
August 31, 2020
August 31, 2019
$
$
—
—
—
$
$
1,050
14
1,064
The Randolph, MA and Pawtucket, RI locations were sold for gains of $1,791 and $760, respectively, during
fiscal 2020. See Note 19 to the consolidated financial statements for additional information on the sale of the Randolph,
MA and Pawtucket, RI properties during fiscal 2020.
98
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
Note 23—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, 2020 and 2019:
First
Second
Third
Fourth
Year
Fiscal Year 2020 Quarters
Net Sales
Gross Profit on Sales
Net income
Net income available to common shareholders, per common
and common equivalent share:
Basic
Diluted
Net Sales
Gross Profit on Sales
Net income
Net income available to common shareholders, per common
and common equivalent share:
Basic
Diluted
$ 65,757 $ 64,626 $ 64,157 $ 63,202 $ 257,742
23,974
96,127
24,468
$ 7,362 $ 7,879 $ 9,908 $ 9,008 $ 34,157
23,725
23,960
$
$
0.78 $
0.77 $
0.83 $
0.83 $
1.05 $
1.04 $
0.95 $
0.95 $
3.62
3.59
First
Second
Third
Fourth
Year
Fiscal Year 2019 Quarters
$ 71,364 $ 65,442 $ 70,883 $ 69,150 $ 276,839
96,676
24,477
24,789
$ 8,823 $ 5,273 $ 8,541 $ 10,074 $ 32,711
25,181
22,229
$
$
0.94 $
0.93 $
0.56 $
0.56 $
0.91 $
0.90 $
1.07 $
1.07 $
3.48
3.46
Note: Quarterly earnings per share amounts may not sum to earnings per share for the year due to rounding.
Note 24—Valuation and Qualifying Accounts
The following table sets forth activity in the Company’s accounts receivable and sales return reserve:
Year ended
August 31, 2020
August 31, 2019
August 31, 2018
Balance at
Beginning of
Year
Charges to
Operations
Deductions to
Reserves
$
$
$
739 $
559 $
456 $
921 $
1,775 $
1,138 $
(1,222) $
(1,595) $
(1,035) $
Balance at
End of Year
438
739
559
The following table sets forth activity in the Company’s warranty reserve (the warranty reserve is included
within accrued expenses on the consolidated balance sheet):
Year ended
August 31, 2020
August 31, 2019
August 31, 2018
Balance at
Beginning of
Year
Charges to
Operations
Deductions to
Reserves
Balance at
End of Year
—
37
—
(37) $
— $
(220) $
$
$
$
37 $
— $
220 $
— $
37 $
— $
99
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
Note 25—Accumulated Other Comprehensive Income
The changes in accumulated other comprehensive income (loss), net of tax, were as follows:
Change in Funded Foreign Currency
Balance at August 31, 2018
Other comprehensive gains (losses) before
reclassifications
Reclassifications to net income of previously deferred
(gains) losses
Other comprehensive income (loss)
Restricted
Investments Pension Plans
$
126 $
Status of
(5,796) $
Translation
Adjustment
Total
(6,666) $ (12,336)
36
(8)
28
(1,215)
(1,541)
(2,720)
740
(475)
—
(1,541)
732
(1,988)
Balance at August 31, 2019
$
154 $
(6,271) $
(8,207) $ (14,324)
Other comprehensive gains (losses) before
reclassifications
Reclassifications to net income of previously deferred
(gains) losses
Other comprehensive income (loss)
Adoption of ASU 2018-02
143
(28)
115
—
(1,278)
3,163
2,028
620
(658)
—
3,163
592
2,620
(1,388)
—
(1,388)
Balance at August 31, 2020
$
269 $
(8,317) $
(5,044) $ (13,092)
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
Location of Gain (Loss) Reclassified from Accumulated
August 31, 2020
August 31, 2019
Other Comprehensive Income (Loss) into Income
Gains on Restricted Investments:
Realized loss (gain) on sale of
restricted investments
Tax expense (benefit)
Gain net of tax
Loss on Funded Pension Plan
adjustments:
Amortization of prior pension
service costs and unrecognized
losses
Settlement and curtailment loss
Tax expense (benefit)
Loss net of tax
Total net loss reclassified for the
period
$
$
$
$
$
(37) $
9
(28) $
667 $
155
(202)
620 $
(11)
3
(8)
475
511
(246)
740
592 $
732
100
Selling, general and administrative expenses
Other income (expense)
Other income (expense)
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
Note 26—Revenue from Contracts with Customers
The Company accounts for revenue in accordance with ASC 606, “Revenue from Contracts with Customers,”
adopted September 1, 2018 (proceeding periods are accounted for under the historic accounting standards of ASC 605).
This revenue is generated from the manufacture of specialty chemical products including coatings, linings, adhesives,
sealants, specialty tapes, polymers and laminates. Certain of these manufactured products can incorporate customer-
owned materials. The Company also recognizes, to a lesser extent, revenue through royalties and commissions from
licensed manufacturers and from providing custom manufacturing-related services. The Company’s revenue recognition
policies require the Company to make significant judgments and estimates. In applying the Company’s revenue
recognition policy, determinations must be made as to when control of products passes to the Company’s customers,
which can be either at a point in time or over time based on contractual terms with customers. Revenue is generally
recognized at a point in time when control passes upon either shipment to or receipt by the customer of the Company’s
products, while revenue is generally recognized over time when control of the Company’s products transfers to
customers during the manufacturing process. The Company analyzes several factors, including but not limited to, the
nature of the products being sold and contractual terms and conditions in contracts with customers to help the Company
make such judgments about revenue recognition.
Contract Balances
The Company’s contract assets primarily relate to unbilled revenue for products currently in production at the
Company’s facilities and which incorporate customer-owned material. Revenue is recognized in advance of billing to the
customer in these specific circumstances, whereas billing is typically performed at the time of shipment to or receipt by
the customer. Contract assets are included in prepaid expenses and other current assets on the Company’s consolidated
balance sheet. The following table presents contract assets by reportable operating segment as of August 31, 2020 and
2019:
Contract Assets
Adhesives, Sealants and Additives
Industrial Tapes
Corrosion Protection and Waterproofing
Total
August 31,
2020
August 31,
2019
$
$
20
21
41
82
$
$
42
26
79
147
The Company did not have any contract liabilities as of August 31, 2020 and 2019.
101
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
Disaggregated Revenue
The Company disaggregates revenue from customers by geographic region, as it believes this disclosure best
depicts how the nature, amount, timing and uncertainty of the Company's revenue and cash flows are affected by
economic factors. Disaggregated revenue by geographical region for the years ended August 31, 2020 and 2019 was as
follows:
Revenue
North America
Asia
Europe
All other foreign
Total Revenue
Revenue
North America
Asia
Europe
All other foreign
Total Revenue
Adhesives, Sealants
and Additives
Industrial
Tapes
Corrosion Protection
and Waterproofing
Consolidated
Revenue
Year Ended August 31, 2020
$
$
64,611 $
17,977
13,201
419
96,208 $
105,911
7,150
3,286
2,613
118,960
$
$
36,252
6,361
3,047
334
45,994
$
$
206,774
31,488
19,534
3,366
261,162
Adhesives, Sealants
and Additives
Industrial
Tapes
Corrosion Protection
and Waterproofing
Consolidated
Revenue
Year Ended August 31, 2019
$
$
70,320 $
19,430
14,773
273
104,796 $
117,955
7,126
2,637
2,127
129,845
$
$
37,463
6,524
2,455
268
46,710
$
$
225,738
33,080
19,865
2,668
281,351
Practical Expedients and Policy Elections
Shipping and Handling Policy Election — the Company has made an accounting policy election to record
shipping and handling activities occurring after control has passed to the customer to be treated as a fulfillment cost
rather than as a distinct performance obligation. Shipping and handling expenses consist primarily of costs incurred to
deliver products to customers and internal costs related to preparing products for shipment and are recorded within cost
of products and services sold. Amounts billed to customers as shipping and handling are classified as revenue when
services are performed.
Considering Existence of a Significant Financing Component — as a practical expedient, an entity need not
adjust the promised amount of consideration for the effects of a significant financing component if the entity expects, at
contract inception, that the period between when the entity transfers a promised good or service to the customer and
when the customer pays for that good or service will be one year or less. Given the time between the Company
transferring a promised good or service to the customer and the customer paying for that good or service is less than one
year based on the terms of arrangements with customers, the Company does not adjust the promised amount of
consideration for effects of a significant financing component.
102
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 provide reasonable assurance
that information required to be disclosed in the Company’s reports under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), 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 generally accepted accounting principles.
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 (2013)” issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, our
management concluded that our internal control over financial reporting was effective as of August 31, 2020. Grant
Thornton LLP, an independent registered public accounting firm, audited the effectiveness of our internal control over
financial reporting as of August 31, 2020.
103
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There have not been any changes in the Company’s internal control over financial reporting during the fourth
quarter of fiscal 2020 that have materially affected, or are reasonably likely to materially affect, its internal control over
financial reporting.
104
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
Chase Corporation
Opinion on internal control over financial reporting
We have audited the internal control over financial reporting of Chase Corporation (a Massachusetts
corporation) and subsidiaries (the “Company”) as of August 31, 2020, based on criteria established in the 2013 Internal
Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financial
reporting as of August 31, 2020, based on criteria established in the 2013 Internal Control—Integrated Framework issued
by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended August
31, 2020, and our report dated November 12, 2020 expressed an unqualified opinion on those financial statements.
Basis for opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the
Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting
was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness
of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and limitations of internal control over financial reporting
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 (1) pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the company; (2) 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 (3) 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/ GRANT THORNTON LLP
Boston, Massachusetts
November 12, 2020
105
ITEM 9B – OTHER INFORMATION
Not applicable.
PART III
ITEM 10 – DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
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,
2020. Information regarding the Company’s executive officers found in the section captioned “Information About Our
Executive Officers” 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, 2020.
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, 2020.
The following table summarizes the Company’s equity compensation plans as of August 31, 2020. 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
Weighted
average exercise
Chase common
stock to be issued
upon the exercise of
outstanding options
price of
outstanding
options
Number of shares of
Chase common stock
remaining available for
future issuance
2005 Incentive Plan
2013 Equity Incentive Plan
Total
39,473 $
125,223
164,696 $
31.71
88.92
75.21
—
949,398
949,398
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, 2020.
106
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, 2020.
107
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
3.1.2
Description
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”)).
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
Amended and Restated By-Laws (incorporated by reference from Exhibit 3.1 to the Company’s
current report on Form 8-K filed on April 12, 2016).
4.1
Description of the Company’s Capital Stock (incorporated by reference from Exhibit 4.1 to the
Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2019, filed on
November 13, 2019).
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). *
10.3.1
Chase Corporation Employee’s Supplemental Savings Plan, as Amended and Restated Effective
December 31, 2016.*
10.3.2
Amendment to the Chase Corporation Employee’s Supplemental Savings Plan, dated July 15,
2020.*
10.4
10.5
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). *
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).*
10.6
Amended and Restated Severance Agreement between the Company and Adam P. Chase dated
January 2, 2018 (incorporated by reference from Exhibit 10.1 to the Company’s current report on
Form 8-K on January 8, 2018). *
108
10.7.1
10.7.2
10.8.1
10.8.2
10.8.3
10.8.4
10.8.5
10.8.6
10.9.1
10.9.2
10.10.1
10.10.2
10.10.3
10.10.4
10.11.1
Offer letter dated August 1, 2018 by and between Chase Corporation and Christian J. Talma
(incorporated by reference from Exhibit 10.1 to the Company’s current report on Form 8-K on
August 24, 2018).*
Severance Agreement between the Company and Christian J. Talma dated August 17, 2018
(incorporated by reference from Exhibit 10.2 to the Company’s current report on Form 8-K on
August 24, 2018).*
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).*
2013 Equity Incentive Plan of Chase Corporation (incorporated by reference from Exhibit A to the
Company’s 2012 Proxy Statement filed on December 21, 2012).*
Form of restricted stock unit award issued 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 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 for 2013 Equity Incentive Plan (incorporated by reference
from Exhibit 10.9.5 to the Company’s Annual Report on Form 10-K for the fiscal year ended
August 31, 2019, filed on November 13, 2019).*
Form of stock option award issued (incorporated by reference from Exhibit 10.11.6 to the
Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2009, filed on
November 16, 2009). *
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).*
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).*
FY 2020 Chase Corporation Annual Incentive Plan (incorporated by reference from Exhibit 99.1 to
the Company's current report on Form 8-K filed on August 23, 2019).*
FY 2020 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 August 23, 2019).*
FY 2021 Chase Corporation Annual Incentive Plan (incorporated by reference from Exhibit 99.1 to
the Company's current report on Form 8-K filed on August 31, 2020).*
FY 2021 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 August 31, 2020).*
Amended and Restated Credit Agreement dated as of December 15, 2016 by and among Chase
Corporation, NEPTCO Incorporated, the Guarantors named therein, Bank of America, N.A., as
administrative agent, and the Lenders party thereto (incorporated by reference from Exhibit 10.1 to
the Company’s current report on Form 8-K filed December 20, 2016)
109
10.11.2
10.12
21
23.1
23.2
31.1
First Amendment to Amended and Restated Credit Agreement, dated as of February 6, 2017 by and
among Chase Corporation, NEPTCO Incorporated, the Guarantors, the Lenders party thereto and
Bank of America, N.A., as administrative agent (incorporated by reference from Exhibit 10.2 to the
Company’s Quarterly Report on Form 10-Q for the quarter ended February 28, 2017, filed on April
7, 2017).
Membership Interest and Stock Purchase Agreement by and among Chase Corporation, The Stewart
Group Limited, Explortec, Inc., Zappa-Tec, LLC, Stewart Superabsorbents, LLC, Stewart SA, Inc.
and William Morris. (incorporated by reference from Exhibit 10.2 to the Company’s current report
on Form 8-K/A filed on March 9, 2018).
Subsidiaries of the Registrant
Consent of Independent Registered Public Accounting Firm – Grant Thornton LLP
Consent of Independent Registered Public Accounting Firm – PricewaterhouseCoopers LLP
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
110
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.
ITEM 16 – FORM 10-K SUMMARY
None.
111
SIGNATURES
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.
Chase Corporation
By:
/s/ Adam P. Chase
Adam P. Chase
President and Chief Executive Officer
November 12, 2020
By:
/s/ Christian J. Talma
Christian J. Talma
Treasurer and Chief Financial Officer
November 12, 2020
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
/s/ Peter R. Chase
Peter R. Chase
/s/ Adam P. Chase
Adam P. Chase
/s/ Christian J. Talma
Christian J. Talma
/s/ Mary Claire Chase
Mary Claire Chase
/s/ Thomas DeByle
Thomas DeByle
/s/ John H. Derby III
John H. Derby III
/s/ Lewis P. Gack
Lewis P. Gack
/s/ Chad A. McDaniel
Chad A. McDaniel
/s/Dana Mohler-Faria
Dana Mohler-Faria
/s/ Thomas Wroe, Jr
Thomas Wroe, Jr.
Executive Chairman
November 12, 2020
Title
Date
Director, President and Chief Executive Officer
November 12, 2020
(Principal Executive Officer)
Treasurer and Chief Financial Officer
November 12, 2020
(Principal Financial Officer and Principal Accounting
Officer)
Director
Director
Director
Director
Director
Director
Director
112
November 12, 2020
November 12, 2020
November 12, 2020
November 12, 2020
November 12, 2020
November 12, 2020
November 12, 2020
HOUSTON, TX
C.I.M. Industries, Inc.
6900 Nelms Street
Houston, TX 77061
Phone (713) 242-9015
PRODUCTS/SERVICES: High
performance industrial coatings and linings
providing a seamless, impermeable,
abrasion-resistant barrier against water and
chemicals.
MCLEANSVILLE, NC
Zappa-Tec
828 Knox Road
McLeansville, NC 27301
Phone (336) 378-6004
CHASE Corporation Officers
Peter R. Chase
Executive Chairman
EVANSTON, IL
1527 Lyons Street
Evanston, IL 60201
Phone (847) 866-8500
Fax (847) 866-8596
Adam P. Chase
President & Chief Executive Officer
Christian J. Talma
Treasurer & Chief Financial Officer
PRODUCTS/SERVICES: Innovative
products for the protection against corrosion
for underground gas, oil and water pipelines
and marine industries, waterproofing tapes,
as well as private label manufacturing.
George M. Hughes
Corporate Secretary
Independent Registered Public
Accounting Firm
Grant Thornton LLP
75 State Street, 13th floor
Boston, MA 02109
Registrar & Transfer Agent
American Stock Transfer &
Trust Company
Operations Center
6201 15th Avenue
Brooklyn, NY 11219
Corporate Headquarters
295 University Avenue
Westwood, MA 02090
Phone (781) 332-0700
Fax (781) 332-0701
Toll Free (800) 323-4182
Operating Facilities
OXFORD, MA
24 Dana Road
Oxford, MA 01540
Phone (508) 731-2710
Fax (508) 987-1092
PRODUCTS/SERVICES: Shielding &
binding tapes for electronic &
telecommunication cable. Laminated
papers used for a variety of durable paper
applications and RFID protection.
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
Fax (412) 828-3487
PRODUCTS/SERVICES: HumiSeal®
conformal coatings, protective coatings for
underground gas, oil and water pipelines,
waterproofing membranes, high-
performance polymer additives for asphalt,
expansion joints and accessories, and water
blocking compounds for power and
telecommunications.
WOBURN, MA
Resin Designs
11 State Street
Woburn, MA 01801
Phone (781) 935-3133
Fax (781) 935-3144
PRODUCTS/SERVICES: Customized
advanced adhesives and coatings for
automotive and industrial applications that
require specialized bonding, encapsulating,
environmental protection, or thermal
management functionality.
NEWARK, CA
Resin Designs
39714 Eureka Drive
Newark, CA 94560
Phone (510) 413-0115
PRODUCTS/SERVICES: Customized
advanced sealants and coatings for
automotive and industrial applications that
require specialized bonding, encapsulating,
environmental protection, or thermal
management functionality.
GREENVILLE, SC
9 Furman Hall Ct.
Greenville, SC 29609
Phone (846) 232-3893
PRODUCTS/SERVICES: Polymeric
microspheres, sold under the Dualite®
brand, which are utilized for weight and
density reduction and sound dampening
across varied industries.
LENOIR, NC
NEPTCO, INC.
2012 Hickory Boulevard
Lenoir, NC 28645
Phone (828) 728-5951
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. Provider of
coating, laminating and converting
services for original equipment
manufacturers.
HICKORY, NC
Stewart Superabsorbents
1954 Main Avenue SE
Hickory, NC 28602
Phone (828) 855-9316
Fax (828) 855-9319
PRODUCTS/SERVICES: Superabsorbent
polymers, which are utilized for water and
liquid management, remediation and
protection in diverse markets including
wire and cable, medical, environmental,
infrastructure, energy and consumer
products. Pulling and detection tapes used
in the installation, measurement and
location of fiber optic cables, water and
natural gas lines.
PRODUCTS/SERVICES: Superabsorbent
polymers, which are utilized for water and
liquid management, remediation and
protection in diverse markets including
wire and cable, medical, environmental,
infrastructure, energy and consumer
products.
SUZHOU, JIANGSU, CHINA
NEPTCO, INC.
D-10 #19 Datong Road
Suzhou New District Processing Zone
Suzhou, Jiangsu, China 215151
Phone 86-512-6269-6298
SKYPE 828-398-0641
CORBELIN, FRANCE
ABchimie
1230 Route de la Porte
ZA La Rivoire
38630 Corbelin, France
Phone +33 (0) 474 83 12 19
Fax +33 (0) 474 83 68 62
PRODUCTS/SERVICES: Solutions
provider for the cleaning and the protection
of electronic assemblies, with further
formulation, production, and research and
development capabilities.
PUNE, INDIA
HumiSeal India Private Limited
J-154, M.I.D.C.
Bhosari, Pune-411 026
Maharashtra, India
Phone +91 20 66308098
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, East Sussex
TN31 7TE UK
Phone +44 (0) 1797 223561
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.
PRODUCTS/SERVICES: Cover tapes
essential to delivering semiconductor
components via tape-and-reel packaging.
SHAREHOLDER
INFORMATION
WINNERSH, WOKINGHAM,
ENGLAND
505 Eskdale Road
Winnersh, Wokingham, Berkshire
RG41 5TU UK
Phone +44 (0) 1189 442 333
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.
PARIS, FRANCE
4/6 Avenue Eiffel
78420 Carrieres-Sur-Seine France
Phone +33 (0) 1 30 09 86 86
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.
Common Stock
Common Stock of Chase Corporation is
traded on the NYSE American under the
symbol “CCF”.
Annual Meeting of Shareholders
The Annual Meeting of Shareholders will be
held at 9:30 a.m. on Tuesday, February 2,
2021. This year's Annual Meeting will be a
completely "virtual meeting" of
shareholders. You will be able to attend the
Annual Meeting, vote and submit your
questions during the Annual Meeting via
live webcast by visiting:
www.virtualshareholdermeeting.com/CCF2021
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
or ccf@alpha-ir.com
CHA SE CORPOR ATION
BOARD OF DIRECTORS
From left to right:
Thomas Wroe, Jr.
Retired Chief Executive Officer and Current
Board Member of Sensata Technologies,
Chairman of the Compensation and
Management Development Committee of
CHASE Corporation
Chad A. McDaniel
Executive Vice President, General Counsel
and Chief Administrative Officer Lydall Inc.
Adam P. Chase
President and Chief Executive Officer
CHASE Corporation
Peter R. Chase
Executive Chairman CHASE Corporation
Mary Claire Chase
President, Founder Chase Partners
Dana Mohler-Faria
President Emeritus, Bridgewater State
University, Lead Independent Director and
Chairman of the Nominating and Governance
Committee of CHASE Corporation
Thomas D. DeBlye
Senior Vice President and
Chief Financial Officer NN, Inc.,
Chairman of the Audit Committee
of CHASE Corporation
Lewis P. Gack
Managing Partner LPG Consulting
Joan Wallace - Benjamin
Founder and President J Wallace-Benjamin
Consulting LLC
John H. Derby III
President Derby Management
Annual Report 2020
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.
CHASE CORPORATE HEADQUARTERS
AND GLOBAL OPERATIONS CENTER
295 University Ave., Westwood, MA 02090
Tel: 781-332-0700 • Fax: 781-332-0701
www.chasecorp.com • NYSE American: CCF
Printed on recycled paper