EDGAR 10-K Filing

Company CIK: 830524
Filing Year: 2023
Filename: 830524_10-K_2023_0001558370-23-018600.json

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ITEM 1. BUSINESS
Item 1 - Business
Primary Operating Divisions and Facilities and Industry Segments
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.
We are organized 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 generally used in, or integrated into, another company’s product. 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, personal care, general industrial and environmental market verticals. The segment’s products include moisture protective coatings and cleaners, and customized sealant and adhesive systems for electronics, polymeric microspheres, polyurethane dispersions, specialty polymers and superabsorbent polymers. Beginning September 1, 2022 (first day of fiscal 2023), the Adhesives, Sealants and Additives segment includes the acquired operations of NuCera Solutions (“NuCera”), within the functional additives product line.
The Industrial Tapes segment features wire and cable materials, specialty tapes and other laminated and coated products. The segment derives its competitive advantage through its proven chemistries, its 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 cables 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.
Our manufacturing facilities are distinct to their respective segments apart from our O’Hara Township, PA, Blawnox, PA and Hickory, NC facilities, which manufacture products related to a combination of operating segments.
A summary of our operating structure as of August 31, 2023 is as follows:
ADHESIVES, SEALANTS AND ADDITIVES SEGMENT
Primary
Operating
Key Products
Locations
Background/History
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.
O'Hara Township, PA
The HumiSeal business and product lines were acquired in the early 1970s. In the third quarter of 2021, we began relocating the electronic and industrial coatings manufacturing line from our Woburn, MA, location to our O’Hara Township, PA location. This relocation was completed in fiscal 2023.
Advanced adhesives, sealants, and coatings for automotive and industrial applications that require specialized bonding, encapsulating, environmental protection, or thermal management functionality.
O’Hara Township, PA
Hickory, NC
In September 2016, we acquired certain assets and the operations of Resin Designs, LLC. In the second quarter of 2021, we began relocating the sealants system manufacturing process from our Newark, CA, location to our Hickory, NC location. The relocation from our Newark, CA, location to our Hickory, NC was completed in fiscal 2022. In the third quarter of 2021, we began relocating the electronic and industrial coatings manufacturing line from our Woburn, MA, location to our O’Hara Township, PA location. The relocation from our Woburn, MA, location to our O’Hara Township, PA location was completed in fiscal 2023.
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
Paris, France
Pune, India
In October 2005, we acquired all of the capital stock of Concoat Holdings Ltd. and its subsidiaries. In 2006, Concoat was renamed HumiSeal Europe.
In March 2007, we expanded our international presence with the formation of HumiSeal Europe SARL in France. 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.
Solutions provider for the cleaning and protection of electronic assemblies under the brand name ABchimie.
Corbelin, France
In September 2020, we acquired all the capital stock of ABchimie.
Polymeric microspheres, sold under the Dualite® brand, which are utilized for weight and density reduction and sound dampening across varied industries.
Polyurethane dispersions utilized for various coating products.
Greenville, SC
In January 2015, we acquired two product lines from Henkel Corporation. They, along with the Superabsorbents business acquired in December 2017, comprise our functional additives product line.
The Company currently contracts with manufacturing partners to produce its polyurethane dispersions.
Superabsorbent polymers, sold through our Zappa Stewart and Emerging Technologies, Inc. divisions, 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
Greensboro, NC
In December 2017, we acquired Stewart Superabsorbents, LLC and its Zappa-Tec business (collectively “Zappa Stewart”).
In February 2021, we acquired the assets and operations of Emerging Technologies, Inc. (ETi).
Highly differentiated specialty polymers and polymerization technologies sold through our NuCera Solutions brand utilized in high-growth end markets such as personal care, polymer additives, coatings, diversified consumer products and masterbatches.
Barnsdall, OK,
In September, 2022, we acquired all of the capital stock of NuCera Solutions (“NuCera”)
INDUSTRIAL TAPES SEGMENT
Primary
Operating
Key Products
Locations
Background/History
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.
PaperTyger®, a trademark for laminated durable papers sold to the envelope converting and commercial printing industries.
Oxford, MA
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.
Pulling and detection tapes used in the installation, measurement and location of fiber optic cable, and water and natural gas lines.
Lenoir, NC
Suzhou, China
Hickory, NC
In June 2012, we acquired all of the capital stock of NEPTCO Incorporated, which operated facilities in Rhode Island, North Carolina and China.
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.
CORROSION PROTECTION AND WATERPROOFING SEGMENT
Primary
Operating
Key Products
Locations
Background/History
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.
Blawnox, PA
The Royston business was acquired in the early 1970s.
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.
The ServiWrap® brand pipeline protection tapes and products, which offer long-term corrosion protection for buried pipelines in the most challenging natural environments.
Rye, East Sussex, England
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.
Other Business Developments
Merger Agreement
On July 21, 2023, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among the Company, Formulations Parent Corporation, a Delaware corporation (“Parent”), Formulations Merger Sub Corporation, a Delaware corporation and a direct, wholly owned subsidiary of Parent (“Merger Sub”), pursuant to which Merger Sub will merge with and into the Company, with the Company surviving as a wholly owned subsidiary of Parent (the “Merger”). Parent is an affiliate of investment funds managed by KKR, a leading global investment firm.
Subject to the terms and conditions of the Merger Agreement, at the effective time of the Merger, each share of Company common stock, par value $0.10 per share (other than shares held by the Company as treasury stock or owned by Parent immediately prior to the effective time, shares held by any subsidiary of the Company or Parent immediately prior to the effective time, or shares held by any holder who is entitled to appraisal rights and has properly exercised such rights under Massachusetts law) will be converted into the right to receive $127.50 in cash, without interest.
If the Merger is consummated, the Company’s securities will be delisted from the NYSE American and deregistered under the Securities Exchange Act of 1934 as promptly as practicable after the effective time.
The consummation of the Merger (the “Closing”) is subject to certain customary mutual conditions, including (i) the approval of the Company’s shareholders holding at least two thirds of the outstanding shares of Company Common Stock entitled to vote on the adoption of the Merger Agreement, (ii) the expiration or termination of any waiting period (and any extension thereof) applicable to the consummation of the Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and the approvals, clearances or expiration of applicable waiting periods of the Merger, as applicable, under the antitrust and foreign investment laws of certain other jurisdictions, and (iii) the absence of any order, injunction, decree or law issued or enforced by any governmental authority of competent jurisdiction that prohibits, renders illegal or enjoins the consummation of the Merger.
The 30-day waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), in connection with the Merger expired at 11:59 p.m. on September 5, 2023. The expiration of the HSR Act waiting period satisfies one of the conditions to the closing of the Merger.
On October 6, 2023, the Company convened a special meeting of shareholders to consider and vote upon certain proposals related to the Merger Agreement. Each proposal was approved by shareholders at the special meeting. Shareholder approval satisfies one of the conditions to the closing of the Merger.
The Company incurred $4,270,000 of acquisition-related costs (in the fourth fiscal quarter) of fiscal 2023, related to the Merger.
NuCera Solutions
On September 1, 2022 (the first day of fiscal 2023), the Company completed its acquisition of NuCera Solutions, a recognized global leader in the production and development of highly differentiated specialty polymers and polymerization technologies serving demanding applications, offering products critical to enabling end-product functionality, performance and reliability. The Company acquired all of the capital stock of NuCera for a purchase price of $250,000,000, net of debt, accrued income taxes and cash at closing, and pending any working capital adjustments. See Note 14 - “Acquisitions” to the consolidated financial statements for additional information.
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) moisture protective coatings and cleaning solutions, which are sold to the electronics industry for circuitry manufacturing, including circuitry used in automobiles, industrial controls and home appliances;
(ii) advanced adhesives, sealants, and coatings for automotive and industrial applications that require specialized bonding, encapsulating, environmental protection, or thermal management functionality;
(iii) polymeric microspheres utilized by various industries to allow for weight and density reduction and sound dampening;
(iv) polyurethane dispersions utilized for various coating products;
(v) superabsorbent polymers utilized for water and liquid management, remediation and protection in diverse markets including wire and cable, medical, environmental, infrastructure, energy and consumer products; and
(vi) highly differentiated polymers and polymerization technologies which are utilized in high-growth end markets such as personal care, polymer additives, coatings, diversified consumer products and masterbatches.
In our Industrial Tapes segment, these products consist of:
(i) insulating and conducting materials for the manufacture of electrical and telephone wire and cable, electrical splicing, and terminating and repair tapes, which are marketed to wire and cable manufacturers;
(ii) laminated film foils, including EMI/RFI shielding tapes used in communication and local area network (LAN) cable;
(iii) industrial coated or laminate products and custom manufacturing services sold into medical, consumer, automotive, packaging, energy, telecommunications and other specialized markets;
(iv) laminated durable papers, including laminated paper with an inner security barrier used in personal and mail-stream privacy protection, which are sold primarily to the envelope converting and commercial printing industries;
(v) pulling and detection tapes used in the installation, measurement and location of fiber optic cable, water and natural gas lines, and power, data, and video cable for commercial buildings; and
(vi) 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) waterproofing tapes and coatings used in waterproofing of the exterior of both commercial and industrial structures;
(iv) 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 Management
Chase Corporation’s success derives from its dedicated employees worldwide, who are responsible for the operations, innovation and ethics core to our business and its future.
As of August 31, 2023, we employed approximately 859 people (including union employees). Of these, 82% were U.S. based and 18% international. 31% of our employees worked in administrative, selling and research and development functions, while 69% worked in the manufacture of our products at our facilities. Given macrotrends faced worldwide, Chase currently operates in an increasingly competitive landscape in hiring and retaining a manufacturing labor force. 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.
We have policies in place designed to provide a safe and healthy workplace and comply with applicable safety and health regulations and our own internal requirements. We work to provide and maintain a safe, healthy and productive workplace, in consultation with our employees, by addressing and remediating identified risks of accidents, injury and health impacts.
We strive to maintain workplace environments that are free from discrimination or harassment on the basis of race, sex, color, national or social origin, ethnicity, religion, age, disability, sexual orientation, gender identification or expression, political opinion, or any other status protected by applicable law. The qualities and characteristics we seek for recruitment, hiring, placement, development, training, compensation, and advancement at the Company are job qualifications, performance, skills, and experience.
Respect for human rights is a fundamental value of the Company. Chase strives to respect and promote human rights in accordance with the United Nations Guiding Principles on Business and Human Rights in our relationships with our employees, customers, suppliers, and vendors. Our aim is to further advance human rights within the communities in which we operate. The Chase Corporation Human Rights and Supplier Code of Conduct policies and statements on Safety Performance, Environmental Impact and Energy and Resources are available on our website (www.chasecorp.com).
Backlog, Customers and Competition
As of August 31, 2023, the backlog of customer orders believed to be firm was approximately $42,920,000. This compared with a backlog of approximately $40,600,000 as of August 31, 2022. The increase in backlog from the prior year amount was primarily due to NuCera Solutions increasing the balance for the current year. We continue to work with our customers, vendors and supply chain partners to prioritize the flow of goods. During fiscal 2023 and 2022, 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, 2023, 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; ZapPak®, a trademark for medical waste solidifier products packaged in dissolvable film; and ABchimie®, a trademark used in conjunction with most of ABchimie’s products marketing material and communications.
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.
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 375 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.

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ITEM 1A. RISK FACTORS
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. 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 (as was experienced in the second half of fiscal 2021 and in the fiscal 2022 period), 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.
The Company’s results of operations have been and may continue to be adversely affected by public health issues, including epidemics or pandemics such as the coronavirus disease 2019 (COVID-19) pandemic.
We face various risks related to public health issues, including epidemics, pandemics, and other outbreaks, including the global outbreak of the coronavirus disease 2019 (COVID-19). The global spread of the COVID-19 pandemic had created significant volatility, uncertainty and economic disruption. The Company experienced lower sales as a result of the economic disruption (most acutely in the first half of fiscal 2021), and initiated cost-saving measures, including a targeted workforce reduction in 2020, in response to the uncertainties associated with the scope and duration of the pandemic. The extent to which public health issues, including epidemics or pandemics such as the COVID-19 pandemic, impact 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; future domestic and international waves and variants seen in public health issues, like COVID-19 and current vaccines’ effectiveness
against such variants; 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 vendor’s 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 public health issues like a pandemic may also increase the Company’s cost of capital or make additional capital 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.
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.
Strategic Risks
We face risks associated with the Merger.
On July 21, 2023, we entered into the Merger Agreement with Formulations Parent Corporation, an affiliate of investment funds managed by KKR, and Merger Sub. The consummation of the Merger is conditioned on the receipt of the approval of our shareholders, which we received on October 6, 2023, as well as the satisfaction of other customary closing conditions, including domestic and foreign regulatory approvals and performance in all material respects by each party of its obligations under the Merger Agreement. The 30-day waiting period under the HSR Act expired on September 5, 2023. Consummation of the Merger is not subject to a financing condition. Although we are not aware of any conditions that would cause the Merger not to be consummated, there is no assurance that the conditions to the Merger will be satisfied in a timely manner or at all. Additionally, if the Merger is not completed, we may suffer a number of consequences that could adversely affect our business, results of operations, and stock price. There are numerous risks related to the Merger, including the following:
•Various conditions of the Merger may not be waived or satisfied;
•
The Merger may not be consummated, which among other things may cause our share price to decline to the extent that the current price reflects an assumption that the Merger will be completed;
•
The failure to consummate the Merger may result in negative publicity and a negative impression of us in the investment community;
•Required regulatory approvals from governmental entities may delay the Merger;
•Our ability to attract, recruit, retain and motivate current and prospective employees may be adversely affected;
•The attention of our employees and management may be diverted due to activities related to the Merger;
•
Disruptions from the Merger, whether or not it is completed, may harm our relationship with our employees, customers, distributors, suppliers, or other business partners, and may result in a loss of or a reduction in purchases by our customers; and
•
The Merger Agreement restricts us from engaging in certain actions without Parent’s approval, which could prevent us from pursuing certain business opportunities outside the ordinary course of business that arise prior to the closing of the Merger.
In addition, we have incurred, and will continue to incur, substantial costs, expenses and fees for professional services and other transaction costs in connection with the Merger, and those fees and costs are payable by us regardless of whether the Merger is consummated.
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 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. 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 (as we did in fiscal 2023 for NuCera and fiscal 2021 for both ABchimie and the operations of Emerging Technologies, Inc. (“ETI”)), 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. 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.
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.
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. We have experienced in the past, and may continue to experience, an
increasingly competitive landscape relating to obtaining and retaining a manufacturing labor force. 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.
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.
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 could 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 (with information technology security threats increasing in frequency and sophistication) 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.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B - Unresolved Staff Comments
Not applicable.

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ITEM 2. PROPERTIES
Item 2 - Properties
The principal properties of the Company as of August 31, 2023 are situated at the following locations and have the following characteristics:
Square
Owned /
Location
Feet
Leased
Principal Use
Westwood, MA
10,000
Leased
Corporate headquarters, executive office and global operations center, including research and development, sales and administrative services
Blawnox, PA
44,000
Owned
Manufacture and sale of protective coatings and tape products
Barnsdall, OK
166,000
Owned
Manufacture and sale of highly differentiated specialty waxes and polymers
Corbelin, France
9,600
Leased
Manufacture and sale of protective electronic coatings, as well as research and development
Evanston, IL
100,000
Owned
Manufacture and sale of protective coatings and tape products
Granite Falls, NC
108,000
Owned
The building is currently being leased to a third party
Greenville, SC
34,600
Leased
Manufacture and sale of polymeric microspheres, as well as research and development
Hickory, NC
180,000
Leased
Manufacture and sale of superabsorbent polymer products, pulling and detection tapes and sealant systems, as well as research and development
Houston, TX
45,000
Owned
Manufacture of coating and lining systems for use in liquid storage and containment applications
Houston, TX
6,200
Leased
Research and development center
Lenoir, NC
110,000
Owned
Manufacture and sale of laminated film foils and cover tapes
Mississauga, Canada
2,500
Leased
Distribution center
O’Hara Township, PA
109,000
Owned
Manufacture and sale of protective electronic coatings, expansion joints and accessories
Oxford, MA
73,600
Owned
Manufacture of tape and related products for the electronic and telecommunications industries, as well as laminated durable papers
Paris, France
1,900
Leased
Sales/technical service office and warehouse allowing direct sales and service to the French market
Paris, France
4,000
Leased
Sales/technical service office
Pune, India
4,650
Leased
Manufacture, packaging and sale of protective electronic coatings
Rotterdam, Netherlands
2,500
Leased
Distribution center
Rye, East Sussex, England
36,600
Owned
Manufacture and sale of protective coatings and tape products
Singapore
4,000
Leased
Sales/technical service office
Suzhou, China
48,000
Leased
Manufacture of packaging tape products for the electronics industries
Winnersh, Wokingham, England
18,800
Leased
Manufacture and sale of protective electronic coatings, as well as research and development
The above facilities vary in age, are in good condition and, in the opinion of management, are 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.

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ITEM 3. LEGAL PROCEEDINGS
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.

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ITEM 4. MINE SAFETY DISCLOSURE
item 4 - mine safety disclosures
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
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, 2023, there were 244 shareholders of record of our Common Stock and we believe there were approximately 7,799 beneficial owners who held shares through brokers or other nominees. On that date, the closing price of our common stock was $127.06 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, 2022 and 2021 in the amounts of $1.00 and $1.00 per common share, respectively. Our revolving credit facility contains financial covenants which may have the effect of limiting the amount of dividends that we can pay.
Comparative Stock Performance
The following line graph compares the yearly percentage change in our cumulative total shareholder return on the Common Stock for the last five fiscal years with the cumulative total return on the Standard & Poor's 500 Stock Index (the “S&P 500 Index”), and a composite peer index that is weighted by market equity capitalization (the “Peer Group Index”). The companies included in our Peer Group Index are Henkel AG & Co KGaA, H.B. Fuller Company, CSW Industrials, Inc., Element Solutions, Inc., Quaker Chemical Corporation, and RPM International, Inc. Cumulative total returns are calculated assuming that $100 was invested on August 31, 2018 in each of the Common Stock, the S&P 500 Index and the Peer Group Index, and that all dividends were reinvested.
Chase Corp
$
$
$
$
$
$
S&P 500 Index
$
$
$
$
$
$
Peer Group Index
$
$
$
$
$
$
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.

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ITEM 6. SELECTED FINANCIAL DATA
Item 6 - Reserved
Not required.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
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. This material 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.
The discussion of the comparison of our fiscal 2022 and fiscal 2021 results was previously presented in the Management’s Discussion & Analysis in Part II, Item 7 of the Company’s Annual Report on Form 10-K filed with the SEC on November 10, 2022 and has been omitted from this section pursuant to Instruction 1 to Item 303(a) of Regulation S-K.
Selected Relationships within the Consolidated Statements of Operations
Years Ended August 31,
(Dollars in thousands)
Revenue
$
404,015
$
325,660
$
293,336
Net income
$
33,182
$
44,671
$
44,920
Increase (decrease) in revenue from prior year
Amount
$
78,355
$
32,324
$
32,174
Percentage
%
%
%
Increase (decrease) in net income from prior year
Amount
$
(11,489)
$
(249)
$
10,763
Percentage
(26)
%
(1)
%
%
Percentage of revenue:
Revenue
%
%
%
Cost of products and services sold
Selling, general and administrative expenses
Research and product development costs
Acquisition-related costs
-
Other (income) expense, net
*
Income before income taxes
%
%
%
Income taxes
Net income
%
%
%
* denotes less than one percent
Note: Some percentage of revenue amounts may not sum due to rounding
Executive Overview
Results of Operations
The Company’s revenue grew in fiscal 2023, with the Adhesives, Sealants and Additives and Industrial Tapes operating segments surpassing revenue achieved in fiscal 2022. The increase in revenue for fiscal 2023 was primarily attributed to inorganic growth from our NuCera Solutions (“NuCera”) business acquired in the first month of fiscal 2023 and our electronic and industrial coatings product line (included within our Adhesives, Sealants and Additives operating segment) coupled with revenue generated by our cable materials, specialty products and pulling and detection product lines (included within our Industrial Tapes operating segment). Tempering the overall increase in fiscal 2023 revenue was decreased demand seen in our Corrosion Protection and Waterproofing operating segment.
The Company’s gross margin as a percentage of revenue was 36.0% in fiscal 2023 compared to 37.8% in fiscal 2022. Despite the Company’s sales growth in fiscal 2023, the Company continues to have less favorable gross margin compared to the comparable prior fiscal period. The decrease in gross margin percentage in the fiscal period is primarily attributed to lower gross margin from our NuCera business. Additionally, the Company’s gross margin was negatively impacted by customer destocking caused by customer inventory reduction initiatives seen in the first half of fiscal 2023.
After being negatively impacted by inflationary pressures in fiscal 2022, the gross margin for our organic business has stabilized due to measures implemented in fiscal 2022, including sales price increases fully realized in fiscal 2023 and the Company’s supply chain strategy to actively explore secondary sourcing initiatives to locate alternative suppliers for our critical raw materials. Inflationary pressures did not have a significant impact on our profitability in the fiscal year.
The Company’s operating expenses increased in the year-to-date period over the comparable prior period. The increase in operating expenses is attributable to the inclusion of expenses from our NuCera business including purchase accounting adjustments such as additional amortization expected to recur in future periods and backlog intangible that was fully amortized during the first fiscal quarter, acquisition-related costs related to the merger agreement dated July 21, 2023, and lease impairment and write-off of long-term assets, all of which negatively impacted operating income over the fiscal 2023 period.
Balance Sheet and Cash Flow
Chase Corporation’s balance sheet remained healthy as of August 31, 2023, with cash on hand of $49,019,000, and a current ratio of 4.4. The Company’s cash position remained steady including cash flow from operations and debt paydown. The Company’s disciplined inventory reduction approach in the fiscal period has continued to allow the Company to make subsequent payments on our long-term debt and improve cash flow. Furthermore, during the second fiscal quarter Chase Corporation paid out an annual cash dividend of $9,500,000 on December 9, 2022.
The Company had $105,000,000 outstanding balance on its $200,000,000 revolving credit facility as of August 31, 2023, related to the funding of the NuCera acquisition as noted above. The Company made $75,000,000 in principal payments related to the outstanding balance over the course of fiscal 2023.
Pending Merger
On July 21, 2023, the Company entered into the Merger Agreement with Parent and Merger Sub. See “Business-Other Business Developments-Merger Agreement” in Item 1 of Part I of this Annual Report on Form 10-K for more information.
Results of Operations
Revenue
Total revenue increased $78,355,000, or 24.1% to $404,015,000 for the year ended August 31, 2023, compared to $325,660,000 in fiscal 2022. Out of the $78,355,000 increase in fiscal 2023 revenue, 89% relates to inorganic revenue from our NuCera business and the remaining increase in revenue is primarily attributable to sales price increases fully realized in fiscal 2023.
Revenue by Segment
The Company has three reportable operating segments summarized below:
Segment
Product Lines
Manufacturing Focus and Products
Adhesives, Sealants and Additives
Electronic and Industrial Coatings
Functional Additives
Protective coatings, including moisture protective coatings and cleaning solutions, and customized sealant and adhesive systems for electronics; polyurethane dispersions, polymeric microspheres and superabsorbent polymers; highly differentiated specialty waxes and polymers.
Industrial Tapes
Cable Materials
Specialty Products
Pulling and Detection
Electronic Materials
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; and cover tapes essential to delivering semiconductor components via tape and reel packaging.
Corrosion Protection and Waterproofing
Coating and Lining Systems
Pipeline Coatings
Building Envelope
Bridge and Highway
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.
Results of Operations
Revenue and Income Before Income Taxes by Segment are as follows:
Income Before
% of
Revenue
Income Taxes
Revenue
(Dollars in thousands)
Fiscal 2023
Adhesives, Sealants and Additives
$
207,900
$
29,314
(a), (b)
%
Industrial Tapes
153,660
47,694
%
Corrosion Protection and Waterproofing
42,455
14,729
%
$
404,015
91,737
%
Less corporate and common costs
(48,546)
(c)
Income before income taxes
$
43,191
Fiscal 2022
Adhesives, Sealants and Additives
$
135,770
$
37,657
(d)
%
Industrial Tapes
143,954
41,387
%
Corrosion Protection and Waterproofing
45,936
17,415
%
$
325,660
96,459
%
Less corporate and common costs
(37,861)
(e)
Income before income taxes
$
58,598
Fiscal 2021
Adhesives, Sealants and Additives
$
126,864
$
36,520
(f)
%
Industrial Tapes
120,873
37,407
%
Corrosion Protection and Waterproofing
45,599
15,913
(g)
%
$
293,336
89,840
%
Less corporate and common costs
(31,246)
(h)
Income before income taxes
$
58,594
(a) Includes a $702 year-to-date loss on the upward adjustment of the performance-based earn out contingent consideration associated with the September 2020 acquisition of ABchimie, $516 in operations optimization costs related to the move from Woburn, MA to O’Hara Township, PA, $862 loss on impairment/write-off of long-term asset related to the Woburn, MA facility, $331 year-to-date loss on impairment/write-off of long-term asset related to the relocation of the Woodlands, TX facility to the new NuCera-related R&D facility in Houston, TX, and $492 and $3 year-to-date loss on impairment/write-off of long-term asset related to a discontinued NuCera-related engineering design study and fixed asset disposal from our Barnsdall, OK facility, respectively
(b) Includes $2,242 of purchase accounting inventory adjustment related to the Company’s NuCera business and $2,280 of backlog amortization fully amortized related to the Company’s NuCera business both incurred during the first quarter of the fiscal year
(c) Includes $1,476 in operations optimization costs related to the Company’s ERP upgrade, $4,270 of acquisition-related expenses attributable to the merger agreement signed on July 21, 2023, $29 of acquisition-related expenses attributable to NuCera
(d) For 2022, includes a $432 loss on the upward adjustment of the performance-based earn out contingent consideration associated with the September 2020 acquisition of ABchimie, $463 in operations optimization costs related to the move from Woburn, MA to O’Hara Township, PA and $147 of operations optimization costs related to the move from Newark, CA to Hickory, NC
(e) For 2022, includes $232 of operations optimization costs related to the Company’s move to the new corporate headquarters within Westwood, MA and $4,000 of acquisition-related expenses attributable to NuCera
(f) For 2021, includes $1,664 in loss on the upward adjustment of the performance-based earn out contingent consideration associated with the September 2020 acquisition of ABchimie and $977 in exit costs related to the movement of the sealants system business out of the Newark, CA location and into the Hickory, NC location during fiscal 2021
(g) For 2021, includes expense of $100 for the write-down of certain assets under construction
(h) For 2021, includes $128 in acquisition-related expense attributable to the February 2021 acquisition of the operations of ETi
Total Revenue
Revenue for our Adhesives, Sealants and Additives segment increased in fiscal 2023 over the comparable prior year period. The segment revenue increased $72,130,000, or 53% to $207,900,000 for the year ended August 31, 2023 compared to $135,770,000 in fiscal 2022. The year-to-date increase in revenue was predominately due to the inorganic growth from our NuCera business acquired on the first day of fiscal 2023, totaling $69,669,000. The remaining increase in revenue for the fiscal period was primarily attributed to sales price increases realized over the comparable fiscal year and increased demand for our world-wide focused electronic and industrial coatings product line, totaling $10,808,000. Partially offsetting this increase in revenue in the fiscal year-to-date period was a reduction in revenue in our organic functional product line due to decreased customer demand in North America over the comparable prior fiscal year, totaling $8,347,000.
Revenue for our Industrial Tapes segment increased in fiscal 2023 over the comparable prior year period. The segment revenue increased $9,706,000, or 6.7% to $153,660,000 for the year ended August 31, 2023 compared to $143,954,000 in fiscal 2022. Sales price increases realized over the prior year and increased demand for our North American-focused specialty products, pulling and detection, and cable materials product lines increased fiscal 2023 revenue by $11,710,000. Partially offsetting this increase in revenue in the fiscal year was a year-to-date reduction in sales volume from our Asia-focused electronic materials product line, totaling $2,004,000.
Revenue in the Company’s Corrosion Protection and Waterproofing segment decreased $3,481,000, or 7.6% to $42,455,000 for the year ended August 31, 2023 compared to $45,936,000 in fiscal 2022. Negatively impacting sales for the segment in the fiscal year was a reduction in sales volume for our building envelope product line related to customer destocking due to prior year demand attributed to customer inventory increase initiatives in reaction to supply chain shortages, totaling $4,147,000. Also negatively impacting sales for the segment for the fiscal year was our pipeline coatings product line predominately due to delayed projects in the Middle East market over the prior comparable period coupled with customer destocking initiatives in North American oil and gas markets, totaling $927,000. Partially offsetting the decrease in revenue was our coating and lining systems product line, with a revenue increase of $1,283,000, attributed to sales price increases realized over the prior year and increased demand seen in the last quarter of the fiscal year due to the commencement of delayed projects affected by the extended rainy season seen in the west coast of North America. Also, partially offsetting the decrease in revenue was our bridge and highway product line, with a revenue increase of $310,000, predominately due to sales price increases realized over the prior year coupled with increased demand seen in the fourth quarter of the fiscal year due to the commencement of bridge and highway projects in North America.
Royalties and commissions in the Adhesive, Sealants and Additives segment totaled $3,133,000 and $3,198,000 for the year ended August 31, 2023 and 2022, respectively. The decrease in royalties and commissions in fiscal 2023 compared to fiscal 2022 was primarily due to decreased demand seen in our electronic and industrial coatings products by our licensed manufacturer in Asia.
Cost of Products and Services Sold
Cost of products and services sold increased $55,866,000 or 27.6% to $258,574,000 for the fiscal year ended August 31, 2023 compared to $202,708,000 in fiscal 2022.
The following table summarizes the relative percentages of cost of products and services sold to revenue for our three operating segments:
Fiscal Years Ended August 31,
Cost of products and services sold
Adhesives, Sealants and Additives
%
%
%
Industrial Tapes
%
%
%
Corrosion Protection and Waterproofing
%
%
%
Total Company
%
%
%
Cost of products and services sold in the Adhesives, Sealants and Additives segment was $133,484,000 for the fiscal year ended August 31, 2023 compared to $80,619,000 in fiscal 2022. Cost of products and services sold in the Industrial Tapes segment was $100,264,000 for the fiscal year ended August 31, 2023 compared to $96,132,000 in fiscal 2022. Costs of products and services sold in the Corrosion Protection and Waterproofing segment was $24,826,000 for the fiscal year ended August 31, 2023 compared to $25,957,000 in fiscal 2022.
As a percentage of revenue, cost of products and services sold increased in fiscal 2023 for both the Adhesives, Sealants and Additives and Corrosion Protection and Waterproofing segment as compared to the prior comparable period. The decrease in relative gross margin for our Adhesives, Sealants and Additives segment was impacted by lower historical gross margin from our NuCera business. The decrease in relative gross margin for the Corrosion Protection and Waterproofing segment in fiscal 2023 was primarily due to decreased production affecting overhead variances. As a percentage of revenue, costs of products and services sold decreased for the Industrial Tapes segment in fiscal 2023 due to sales price increases realized in the current fiscal period coupled with increased demand.
With the composition of the Company’s finished goods and the markets it serves, 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) directly and indirectly affect both the purchase price of our raw materials and the market demand for our product offerings. In an effort to preserve margins, the Company diligently monitors raw material and commodities pricing across all its product lines in its efforts to preserve margins.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $22,679,000 or 41.7% to $77,117,000 during fiscal 2023 compared to $54,438,000 in fiscal 2022. The year over year increase in activity is attributed to the inclusion of expenses from our NuCera business (including additional amortization expected to recur in future periods and backlog intangible that was fully amortized during the first fiscal quarter), which was acquired on the first day of fiscal 2023. As a percentage of revenue, selling, general and administrative expenses represented 19% and 17% of total revenue in fiscal 2023 and 2022, respectively.
Research and Product Development Costs
Research and product development costs increased $1,620,000 or 36.7% to $6,035,000 during fiscal 2023 compared to $4,415,000 in fiscal 2022. The year over year increase in research and product development costs is primarily related to our NuCera business, which was acquired in the first month of fiscal 2023.
Operations Optimization Costs
ERP System Upgrade
The Company recognized $1,476,000 in operations optimization costs during fiscal 2023 and $0 in fiscal 2022, related to the ERP system upgrade. Please see note 19 - “Operations Optimization” to the Consolidated Financial Statements for further discussion on Operations Optimization Costs.
Relocation of Adhesives Systems Manufacturing to O’Hara Township, PA
The Company recognized $516,000 in operations optimization costs during fiscal 2023 and 463,000 in fiscal 2022, related in operations optimization expense related to the consolidation of the Woburn, MA location. Please see note 19 - “Operations Optimization” to the Consolidated Financial Statements for further discussion on Operations Optimization Costs.
Relocation of Sealants Systems Manufacturing to Hickory, NC
The Company recognized $0 and $147,000 in operations optimization costs during fiscal 2023 and 2022, respectively, related to the relocation of the Sealants Systems Manufacturing from Newark, CA to Hickory, NC location. Please see note 19 - “Operations Optimization” to the Consolidated Financial Statements for further discussion on Operations Optimization Costs.
Relocation of Chase Corporate Headquarters
The Company recognized $0 and $232,000 in operations optimization costs during fiscal 2023 and 2022, respectively, related to the relocation of the Company’s headquarters to another location within Westwood, MA. Please see note 19 - “Operations Optimization” to the Consolidated Financial Statements for further discussion on Operations Optimization Costs.
Acquisition-Related Costs
Merger Agreement
The Company incurred $4,270,000 in the fourth quarter of fiscal 2023, related to the Agreement and Plan of Merger dated as of July 21, 2023. Please see note 14 - “Acquisitions” to the Consolidated Financial Statements for further discussion.
NuCera Solutions
The Company incurred $29,000 (in the first fiscal quarter) and $4,000,000 (in the fourth fiscal quarter) of acquisition-related costs in fiscal 2023 and 2022, respectively, related to our acquisition of NuCera Solutions (“NuCera”) on September 1, 2022 (first day of fiscal 2023). Please see note 14 - “Acquisitions” to the Consolidated Financial Statements for further discussion on the acquisition of NuCera Solutions.
Loss on Impairment/write-off of long-term assets
Woburn, MA Facility
The Company expensed $548,000 in the first quarter of fiscal 2023 as a lease impairment related to the Woburn, MA facility relocation. The Woburn, MA facility closure is related to the relocation of the Company’s Adhesives, Sealants and Additives segment’s electronic and industrial coatings product line to the Company’s existing O’Hara Township, PA location.
On the last day of the second quarter of fiscal 2023, the Company signed a termination agreement with the landlord for the Woburn, MA facility and wrote off the right-of-use asset and liability of the Woburn, MA lease, expensing $314,000.
Woodlands, TX Facility
On the third quarter of fiscal 2023, the Company moved out of the Woodlands, TX facility (previously NuCera Corporate and R&D headquarters) to a smaller R&D facility in Houston, TX. On the last day of the third fiscal quarter, the Company signed a sublease agreement for the Woodlands office and expensed $211,000 as a lease impairment related to this facility in the third quarter of the fiscal period. The project is now complete and no future costs related to the facility relocation are anticipated.
Additionally, the Company wrote off $120,000 of fixed assets primarily related to the R&D relocation of the Houston, TX facility in the third quarter and year-to-date period of fiscal 2023.
NuCera-related fixed asset disposals
In the fourth quarter of fiscal 2023, the Company wrote off $492,000 and $3,000, related to a discontinued engineering design study and fixed asset disposal from our Barnsdall, OK facility, respectively.
Loss on Contingent Consideration
As part of the September 1, 2020 (fiscal 2021) acquisition of ABchimie, the Company incurred a performance-based earn out liability potentially worth an additional €7,000,000 (approximately $8,330,000 at the time of the transaction) in consideration. Following its initial recording of an accrual for $928,000 at the acquisition date, the Company recorded charges of $702,000, $432,000 and $1,664,000 in expenses related to adjustments to the performance-based earn out accrual were recorded during the fiscal years ended August 31, 2023, 2022 and 2021, respectively.
Interest Expense
Interest expense of $8,981,000 was recognized in fiscal 2023 compared to $425,000 in fiscal 2022. The year over year increase in interest expense relates to our outstanding long-term debt which was used to fund our NuCera business acquisition at the beginning of fiscal 2023.
Other Income (Expense)
Other (expense) income was an expense of ($1,435,000) in fiscal 2023 compared to income of $198,000 in the comparable period, a difference of $1,633,000. Other (expense) income 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 year over year change in total other (expense) income was largely due to the recognition of a foreign exchange loss in fiscal 2023 as compared to a foreign exchange gain in fiscal 2022.
Income Taxes
The Company’s recognized effective tax rate was 23.2% and 23.8% in fiscal 2023 and 2022, respectively.
For fiscal 2023 and 2022, the Company is utilizing the 21% Federal tax rate enacted by the Tax Cuts and Jobs Act (the “Tax Act”) passed in December 2017. Please see Note 7 - “Income Taxes” to the Consolidated Financial Statements for further discussion of the effects of the Tax Act.
Net Income
Net income decreased $11,489,000 or 25.7% to $33,182,000 in fiscal 2023 compared to $44,671,000 in fiscal 2022. The decrease in net income is predominately caused by an increase in operating expenses and interest expense in fiscal 2023. The increase in operating expenses includes incremental depreciation and amortization related to our NuCera business, lease impairment/write-off of right of use asset, and first quarter purchase accounting adjustments related to the NuCera acquisition, which include backlog fully amortized during the first fiscal quarter - all of which negatively impacted net income over the comparable prior year.
Liquidity and Sources of Capital
The Company’s overall cash and cash equivalents balance decreased $266,476,000 to $49,019,000 at August 31, 2023 compared to $315,495,000 at August 31, 2022. The lower year over year cash balance was primarily attributed to the $180,000,000 of cash drawn from the revolving credit facility prior to the end of fiscal 2022, the proceeds of which were used, together with $70,000,000 in cash on hand, to fund the acquisition of NuCera which closed on September 1, 2022 (the first day of fiscal 2023). In addition, the Company made $75,000,000 of principal debt payments. The decrease in cash balance at August 31, 2023 is offset by cash provided by operations of $74,336,000.
Of the above-noted balances, $28,350,000 and $28,951,000 were held outside the United States by Chase Corporation and its foreign subsidiaries as of August 31, 2023 and August 31, 2022, respectively. Given the Company’s 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 the Company did not have a history of repatriating a significant portion of its foreign cash. With the passage of the Tax Cuts and Jobs Act (the “Tax Act”) in the second quarter of fiscal 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, 2021, or 2022. The Company repatriated $11,458,000 in U.K. foreign earnings in fiscal 2023. Please see Note 7 - “Income Taxes” to the Consolidated Financial Statements for further discussion of the effects of the Tax Act.
Cash flow provided by operations was $74,336,000 in fiscal year 2023 compared to $34,859,000 in fiscal 2022. The increase in cash provided by operations year over year was primarily related to increase in revenue, mainly driven by our NuCera business and reduction on inventory spend.
The ratio of current assets to current liabilities was 4.4 as of August 31, 2023 compared to 12.4 (or 7.3 excluding the $180,000,000 cash drawn from our revolving credit facility to fund the NuCera acquisition) as of August 31, 2022. The decrease in the ratio of current assets to current liabilities is primarily due to the cash outflow of $250,000,000 to fund the acquisition of NuCera mentioned above.
Cash flow used in investing activities of $257,231,000 was primarily due to the purchase of NuCera, which occurred on the first day of fiscal 2023.
Cash flows used in financing activities of $85,418,000 was due to principal payments (totaling $75,000,000) on our long-term debt related to the funding of the NuCera acquisition mentioned above. Please see note 6 - “Long-Term Debt” to the Consolidated Financial Statements for further discussion on the Company’s credit facility. Additionally, the cash flows used in financing activities was due to a cash dividend of $1.00 per share (totaling $9,500,000) to shareholders of record on November 30, 2022 and paid on December 9, 2022, the second quarter of fiscal 2023.
The Company’s Second Amended and Restated Credit Agreement (the “Credit Agreement”) with Bank of America, N.A. as administrative agent and the other lenders party thereto, which is used to provide for additional liquidity to finance acquisitions, working capital and capital expenditures, and for other general corporate purposes. The Credit Agreement includes a revolving credit loan (the “Revolving Facility”), with borrowing capabilities not to exceed $200,000,000 at any time, with the ability to request an increase in this amount by an additional $100,000,000 at the individual or collective option of any of the Lenders. As of August 31, 2023, the Company had $105,000,000 in long-term debt related to the acquisition of NuCera Solutions that closed on September 1, 2022. The long-term debt has a weighted average interest rate of 6.43% as of August 31, 2023. See Note 6 - “Long Term Debt” to the Consolidated Financial Statements for more information about the Credit Facility. We expect the Credit Facility to be paid off in connection with the Merger.
The Company has several ongoing capital projects, including upgrading the Company’s ERP system, 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.
We may acquire companies or other assets in future periods which are complementary to our business. The Company believes that its 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 its 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.
Contractual Cash Obligations
The following table summarizes our contractual cash obligations at August 31, 2023 under operating leases and the effect such obligations are expected to have on our liquidity and cash flow in future periods (dollars in thousands):
Payments Due
Contractual Obligations
Total
2029 and thereafter
Operating leases
$
7,170
$
1,664
$
1,439
$
1,101
$
$
$
1,675
Total
$
7,170
$
1,664
$
1,439
$
1,101
$
$
$
1,675
We may be required to make payments related to our unrecognized tax benefits. 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. The Company’s unrecognized tax benefits was $1,895,000 as of August 31, 2023. See Note 7 - “Income Taxes” to the Consolidated Financial Statements for further information.
We also expect to make payments as needed to satisfy our funding obligations for our obligations for pension and other post-retirement benefit plans. As of August 31, 2023, we had recognized an accrued benefit plan liability of $5,679,000 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.
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 Adopted Accounting Standards” in Note 1 - “Summary of Significant Accounting Policies” to the Consolidated Financial Statements included in this Report.
Critical Accounting Policies, Judgments, and Estimates
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the U.S. requires management to make judgments, assumptions and estimates that affect the amounts reported in the consolidated financial statements and accompanying notes. Our significant accounting policies are described in Note 1 - “Summary of Significant Accounting Policies” to the Consolidated Financial Statements included in this Report.
The U.S. Securities and Exchange Commission (“SEC”) requires companies to provide additional disclosure and commentary on their most critical accounting policies and estimates. The SEC has defined 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. The SEC has defined critical accounting estimates as those estimates made in accordance with generally accepted accounting principles that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the financial condition or results of operations of a company.
Judgments, assumptions, and estimates are used for, but not limited to, the allowances for accounts receivable; inventory allowances; business combinations, goodwill, intangible assets, and other long-lived assets; revenue; income tax reserves; deferred income taxes; stock-based compensation; as well as discount and return rates used to calculate pension obligations. The accounting policies described below are significantly affected by critical accounting estimates.
Business Combinations
Business Combinations are recorded using the acquisition method. We assign the value of the consideration transferred to acquire a business to the tangible assets, identifiable intangible assets acquired, and liabilities assumed on the basis of their fair values at the date of acquisition. Any excess purchase price over the fair value of the net tangible and intangible assets acquired is allocated to goodwill. Any excess of the purchase price is largely attributable to the synergies and economies of scale from combining operations, technologies and research and development capabilities.
The Company assesses 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. Some of the most significant assumptions used include the discount rate, forward-looking financial information, and estimated customer attrition rates. A change in one of these assumptions could have material changes on the value of the intangible assets and goodwill which will impact the amortization expense in future periods and the goodwill impairment evaluation. During the year 2023, a 10% increase or decrease in the value of the intangible assets related to the NuCera acquisition would have decreased or increased the goodwill amount by $14,802,000 and it would have increased or decreased the year-to-date amortization expense by $1,504,000.
Transaction costs and restructuring costs associated with a transaction to acquire a business are expensed as incurred.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7a - Quantitative and Qualitative Disclosures about Market Risk
Chase limits the amount of credit exposure to any one issuer. At August 31, 2023, other than the Company’s restricted investments (which are restricted for use in non-qualified retirement savings plans for certain key employees and members of the Board of Directors), all of the Company’s 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.
Chase’s U.S. operations have limited currency exposure since substantially all transactions are denominated in U.S. dollars. However, the Company’s European and Asian operations are subject to currency exchange fluctuations. The Company continues to review its 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 and the U.S. dollar and the Euro and the U.S. dollar would not have a material direct effect on the Company’s overall liquidity.
As of August 31, 2023, the Company had cash balances in the following foreign currencies (with USD equivalents in thousands):
Currency Code
Currency Name
USD Equivalent at August 31, 2023
GBP
British Pound
$
13,182
EUR
Euro
$
10,316
INR
Indian Rupee
$
1,348
CAD
Canadian Dollar
$
CNY
Chinese Yuan
$
SGD
Singapore Dollar
$
The Company will continue to review its current cash balances denominated in foreign currency in light of 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 Company recognized a foreign currency translation gain for the year ended August 31, 2023 in the amount of $5,385,000 related to its European, Asian and Indian operations, which is recorded in other comprehensive income (loss) within its Statement of Equity and Statement of Comprehensive Income. The Company does not have or utilize any derivative financial instruments.
The Company pays interest on its outstanding long-term debt at interest rates that fluctuate based upon changes in various base interest rates. There was an outstanding balance of long-term debt of $105,000,000 for the year ended August 31, 2023.
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.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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:
Page No.
Report of Independent Registered Public Accounting Firm (PCAOB ID: 248)
Consolidated Balance Sheets as of August 31, 2023 and 2022
Consolidated Statements of Operations for each of the three fiscal years in the period ended August 31, 2023
Consolidated Statements of Comprehensive Income for each of the three fiscal years in the period ended August 31, 2023
Consolidated Statements of Equity for each of the three fiscal years in the period ended August 31, 2023
Consolidated Statements of Cash Flows for each of the three fiscal years in the period ended August 31, 2023
Notes to Consolidated Financial Statements
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, 2023 and 2022, the related consolidated statements of operations, comprehensive income, equity, and cash flows for each of the three years in the period ended August 31, 2023, 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, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended August 31, 2023, 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, 2023, 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 9, 2023 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.
Critical audit matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Valuation of the acquisition-date fair value of customer relationships
As described in Note 14 to the consolidated financial statements, on September 1, 2023 the Company acquired NuCera Solutions for a total purchase price of $250 million. As part of the transaction, the Company recorded a customer relationships intangible asset of $119 million related to NuCera US customer relationships. We identified the valuation of the acquisition-date fair value of the NuCera US customer relationships as a critical audit matter.
The principal considerations for our determination that the valuation of the NuCera US customer relationships is a critical audit matter were (i) the significant judgments applied by management in developing forecasted financial information and selecting a customer attrition rate for use in the fair value measurement of acquired customer relationship (ii) the high degree of auditor judgment and subjectivity required in performing procedures and evaluating management’s significant assumptions relating to the projected forecasted information including revenue growth rate, weighted average cost of capital (WACC), and customer attrition rate.
Our audit procedures related to the valuation of the acquisition-date fair value of the customer relationships intangible asset included the following, among others:
● We tested the design and operating effectiveness of internal controls over the Company’s estimation process for recognition and measurement of customer relationships.
● We evaluated the annual customer attrition rate by examining the Company’s historical customer attrition data, as well as comparing attrition rates to prior acquisitions.
● We tested the reasonableness of management’s forecasted cash flows by comparing forecasts to historical results, subsequent results, and projected market and industry trends.
● With the assistance of our valuation specialist, we assessed the key assumptions and methodologies used in valuing the customer relationship, including WACC and customer attrition rates.
/s/ GRANT THORNTON LLP
We have served as the Company’s auditor since 2019.
Boston, Massachusetts
November 9, 2023
CHASE CORPORATION
CONSOLIDATED BALANCE SHEETS
In thousands, except share and per share amounts
August 31,
August 31,
ASSETS
Current Assets
Cash and cash equivalents
$
49,019
$
315,495
Accounts receivable, less allowances of $833 and $610
54,285
51,540
Inventory
69,576
63,039
Prepaid expenses and other current assets
8,625
4,374
Prepaid income taxes and refunds due
3,283
2,329
Total current assets
184,788
436,777
Property, plant and equipment, less accumulated depreciation of $61,678 and $52,503
60,469
24,248
Other Assets
Goodwill
178,210
95,160
Intangible assets, less accumulated amortization of $125,939 and $101,237
159,251
33,661
Cash surrender value of life insurance
4,450
4,450
Restricted investments
2,938
2,367
Funded pension plan
-
Deferred income taxes
5,763
Operating lease right-of-use assets
6,986
8,596
Other assets
3,564
Total assets
$
600,806
$
611,580
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable
$
18,317
$
20,122
Accrued payroll and other compensation
7,303
6,381
Income taxes payable
1,039
Accrued expenses
15,005
8,271
Total current liabilities
41,664
35,328
Long-term debt
105,000
180,000
Operating lease long-term liabilities
5,110
6,618
Deferred compensation
2,950
2,375
Accumulated pension obligation
4,261
7,431
Other liabilities
3,850
2,897
Deferred income taxes
27,770
2,282
Accrued income taxes
1,895
1,820
Total liabilities
$
192,500
$
238,751
Commitments and contingencies (Note 21)
Equity
First Serial Preferred Stock, $1.00 par value: Authorized 100,000 shares; none issued
-
-
Common stock, $.10 par value: Authorized 20,000,000 shares; 9,504,075 shares at August 31, 2023 and 9,462,765 shares at August 31, 2022 issued and outstanding
Additional paid-in capital
24,142
21,409
Accumulated other comprehensive loss
(11,310)
(20,367)
Retained earnings
394,522
370,840
Total equity
408,306
372,829
Total liabilities and equity
$
600,806
$
611,580
See accompanying notes to the Consolidated Financial Statements.
CHASE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
In thousands, except share and per share amounts
Years Ended August 31,
Revenue
Sales
$
400,882
$
322,462
$
289,802
Royalties and commissions
3,133
3,198
3,534
404,015
325,660
293,336
Costs and Expenses
Cost of products and services sold
258,574
202,708
174,660
Selling, general and administrative expenses
77,117
54,438
52,100
Research and product development costs
6,035
4,415
4,056
Operations optimization costs (Note 19)
1,992
Acquisition-related costs (Note 14)
4,299
4,000
Loss on impairment/write-off of long-term assets (Note 3, 8)
1,689
-
Loss on contingent consideration (Note 14)
1,664
Operating income
53,607
58,825
59,651
Interest expense
(8,981)
(425)
(297)
Other (expense) income
(1,435)
(760)
Income before income taxes
43,191
58,598
58,594
Income taxes (Note 7)
10,009
13,927
13,674
Net income
$
33,182
$
44,671
$
44,920
Net income available to common shareholders, per common and common equivalent share (Note 17)
Basic
$
3.49
$
4.72
$
4.75
Diluted
$
3.48
$
4.70
$
4.73
Weighted average shares outstanding
Basic
9,424,729
9,399,085
9,383,085
Diluted
9,458,616
9,434,341
9,428,416
Annual cash dividends declared per share
$
1.00
$
1.00
$
0.80
See accompanying notes to the Consolidated Financial Statements.
CHASE CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
In thousands, except share and per share amounts
Years Ended August 31,
Net income
$
33,182
$
44,671
$
44,920
Other comprehensive income (loss):
Net unrealized gain (loss) on restricted investments, net of tax
(354)
Change in funded status of pension plans, net of tax
3,420
Pension settlement, net of tax
-
-
Foreign currency translation adjustment
5,385
(9,582)
1,295
Total other comprehensive income (loss)
9,057
(9,157)
1,882
Comprehensive income
$
42,239
$
35,514
$
46,802
See accompanying notes to the Consolidated Financial Statements.
CHASE CORPORATION
CONSOLIDATED STATEMENTS OF EQUITY
In thousands, except share and per share amounts
Additional
Accumulated Other
Total
Common Stock
Paid-In
Comprehensive
Retained
Stockholders'
Shares
Amount
Capital
Income (Loss)
Earnings
Equity
Balance at August 31, 2020
9,439,082
$
$
16,674
$
(13,092)
$
298,266
$
302,792
Restricted stock grants, net of forfeitures
10,245
(2)
-
-
-
Amortization of restricted stock grants
-
2,351
-
-
2,351
Amortization of stock option grants
-
-
-
Exercise of stock options
7,546
-
-
Common stock received for payment of stock option exercises
(1,809)
-
(206)
-
-
(206)
Common stock retained to pay statutory minimum withholding taxes on common stock
(7,159)
(1)
(777)
-
-
(778)
Cash dividend paid, $0.80 per share
-
-
-
(7,557)
(7,557)
Change in funded status of pension plans, net of tax $585
-
-
-
Foreign currency translation adjustment
-
-
1,295
-
1,295
Net unrealized gain on restricted investments, net of tax $75
-
-
-
Net income
-
-
-
44,920
44,920
Balance at August 31, 2021
9,447,905
$
$
18,959
$
(11,210)
$
335,629
$
344,324
Restricted stock grants, net of forfeitures
20,615
(2)
-
-
-
Amortization of restricted stock grants
-
2,255
-
-
2,255
Amortization of stock option grants
-
-
-
Exercise of stock options
2,533
-
-
-
Common stock received for payment of stock option exercises
(435)
-
(40)
-
-
(40)
Common stock retained to pay statutory minimum withholding taxes on common stock
(7,853)
(1)
(695)
-
-
(696)
Cash dividend paid, $1.00 per share
-
-
-
(9,460)
(9,460)
Change in funded status of pension plans, net of tax $255
-
-
-
Foreign currency translation adjustment
-
-
(9,582)
-
(9,582)
Net unrealized gain on restricted investments, net of tax $116
-
-
(354)
-
(354)
Net income
-
-
-
44,671
44,671
Balance at August 31, 2022
9,462,765
$
$
21,409
$
(20,367)
$
370,840
$
372,829
Restricted stock grants, net of forfeitures
37,922
(4)
-
-
-
Amortization of restricted stock grants
-
2,854
-
-
2,854
Amortization of stock option grants
-
-
-
Exercise of stock options
18,330
-
-
Common stock received for payment of stock option exercises
(6,890)
-
(650)
-
-
(650)
Common stock retained to pay statutory minimum withholding taxes on common stock
(8,052)
(1)
(918)
-
-
(919)
Cash dividend on common stock, $1.00 per share
-
-
-
(9,500)
(9,500)
Change in funded status of pension plans, net of tax benefit ($703)
-
-
3,420
-
3,420
Pension settlement, net of tax $54
-
-
-
Foreign currency translation adjustment
-
-
5,385
-
5,385
Net unrealized gain (loss) on restricted investments, net of tax $31
-
-
-
Net income
-
-
-
33,182
33,182
Balance at August 31, 2023
9,504,075
$
$
24,142
$
(11,310)
$
394,522
$
408,306
See accompanying notes to the Consolidated Financial Statements.
CHASE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
In thousands
Years Ended August 31,
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
$
33,182
$
44,671
$
44,920
Adjustments to reconcile net income to net cash provided by operating activities
Loss on impairment/write-off of long-term assets
1,689
-
Loss on contingent consideration
1,664
Depreciation
8,906
3,547
3,946
Amortization
23,666
11,751
12,858
Inventory purchase accounting adjustment
2,242
-
-
Excess and obsolescence inventory adjustment
2,318
(365)
Provision for allowance for doubtful accounts
Stock-based compensation
3,656
3,147
2,978
Realized gain on restricted investments
(114)
(96)
(65)
Pension curtailment and settlement loss
-
-
Deferred taxes
(6,441)
(1,023)
(908)
Increase (decrease) from changes in assets and liabilities
Accounts receivable
8,009
(6,580)
(7,921)
Inventory
5,578
(23,316)
(545)
Prepaid expenses and other assets
(1,941)
(1,395)
(490)
Accounts payable
(6,764)
6,164
Accrued compensation and other expenses
(27)
1,506
Accrued income taxes
(749)
(2,084)
Net cash provided by operating activities
74,336
34,859
61,217
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment
(7,306)
(3,938)
(2,441)
Payments for acquisitions, net of cash acquired
(249,594)
-
(31,238)
Changes in restricted investments
(331)
(489)
(248)
Net cash used in investing activities
(257,231)
(4,427)
(33,927)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of principal on debt
(75,000)
-
-
Proceeds of principal on debt
-
180,000
-
Dividend paid
(9,500)
(9,460)
(7,557)
Proceeds from exercise of common stock options
-
Payments of taxes on stock options and restricted stock
(919)
(695)
(778)
Net cash (used) provided in financing activities
(85,418)
169,845
(8,248)
(DECREASE) INCREASE IN CASH & CASH EQUIVALENTS
(268,313)
200,277
19,042
Effect of foreign exchange rates on cash
1,837
(4,211)
1,319
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
315,495
119,429
99,068
CASH AND CASH EQUIVALENTS, END OF PERIOD
$
49,019
$
315,495
$
119,429
See Note 13 for supplemental cash flow information including non-cash financing and investing activities
See accompanying notes to the Consolidated Financial Statements.
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) moisture protective coatings and cleaning solutions, which are sold to the electronics industry for circuitry manufacturing, including circuitry used in automobiles, industrial controls and home appliances;
(ii) advanced adhesives, sealants, and coatings for automotive and industrial applications that require specialized bonding, encapsulating, environmental protection, or thermal management functionality;
(iii) polymeric microspheres utilized by various industries to allow for weight and density reduction and sound dampening;
(iv) polyurethane dispersions utilized for various coating products;
(v) superabsorbent polymers utilized for water and liquid management, remediation and protection in diverse markets including wire and cable, medical, environmental, infrastructure, energy and consumer products; and
(vi) highly differentiated polymers and polymerization technologies which are utilized in high-growth end markets such as personal care, polymer additives, coatings, diversified consumer products and masterbatches.
In our Industrial Tapes segment, these products consist of:
(i)
insulating and conducting materials for the manufacture of electrical and telephone wire and cable, electrical splicing, and terminating and repair tapes, which are marketed to wire and cable manufacturers;
(ii)
laminated film foils, including EMI/RFI shielding tapes, used in communication and local area network (LAN) cable;
(iii) industrial coated or laminate products and custom manufacturing services sold into medical, consumer, automotive, packaging, energy, telecommunications and other specialized markets;
(iv) laminated durable papers, including laminated paper with an inner security barrier used in personal and mail-stream privacy protection, which are sold primarily to the envelope converting and commercial printing industries;
(v) pulling and detection tapes used in the installation, measurement and location of fiber optic cable, water and natural gas lines, and power, data and video cable for commercial buildings; and
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
(vi) 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) waterproofing tapes and coatings used in waterproofing of the exterior of both commercial and industrial structures;
(iv) 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.
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.
Credit risk related to cash and cash equivalents is limited based on the creditworthiness of the financial institutions at which these funds are held. We maintain cash balances in multiple banks. Accounts located in the United States are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250. Certain of our account balances exceed the FDIC limit. Cash balances held outside the United States totaled $28,350 as of August 31, 2023.
Accounts Receivable
All trade accounts receivable are reported net of allowances for credit losses. The allowances for credit losses represent management’s best estimate of the credit losses expected from our trade accounts receivable over the life of the
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
underlying assets. Assets with similar risk characteristics are pooled together for determination of their current expected credit losses. The Company regularly performs detailed reviews of our pooled assets to evaluate the collectability of receivables based on a combination of past, current, and future financial and qualitative factors that may affect customers’ ability to pay. In circumstances where the Company is aware of a specific customer’s inability to meet its financial obligations, a specific reserve is recorded against amounts due to reduce the recognized receivable to the amount reasonably expected to be collected. Receivables are written off against these reserves in the period they are determined to be uncollectable.
Prior to September 1, 2020, the Company evaluated the collectability of accounts receivable balances based on a combination of factors. In cases where the Company was aware of circumstances that may have impaired a specific customer’s ability to meet its financial obligations to it, a specific allowance against amounts due to the Company was recorded, and thereby reduced the net recognized receivable to the amount the Company reasonably believed would be collected. For all other customers, the Company recognized allowances for doubtful accounts based on the length of time the receivables were past due, industry and geographic factors, the current business environment and its historical experience.
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 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.
Goodwill
Goodwill is stated at cost. The Company evaluates the potential impairment of goodwill annually each fourth quarter and whenever events or circumstances indicate the carrying value of the goodwill may not be recoverable. The Company performs a qualitative assessment of goodwill to determine whether further impairment testing is necessary. Factors that management considers in this assessment include general economic and industry conditions, overall financial performance (both current and projected), changes in strategy, changes in the composition or carrying amount of net assets, and market capitalization. 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 operating segments, that are used to evaluate the possible impairment of goodwill. If this qualitative assessment indicates that it is more likely than not that the fair value of a reporting unit is less than its carrying value, the Company would proceed to perform a quantitative impairment test. Under this quantitative analysis, the fair value of the reporting unit is compared with its carrying value, including goodwill. If the carrying value exceeds the fair value of the reporting unit, the Company recognizes an impairment charge. The Company estimates the fair value of its reporting unit using the income approach based on a discounted cash flow model. In addition, the Company uses the market approach, which compares the reporting unit to publicly-traded companies and transactions involving similar businesses, to support the conclusions based on the income approach.
Intangible Assets
Intangible assets consist of patents, formulas, trade names, customer relationships, developed technologies 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
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
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
to
years
Machinery and equipment
to
years
Leasehold improvements are depreciated over the lesser of the useful life or the term of the lease.
Leases
The Company accounts for Leases using ASC Topic 842. 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.
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 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
The Company accounts for revenue using ASC Topic 606 “Revenue from Contracts with Customers.” The Company accounts for revenue 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 15 to the consolidated financial statements for more information on our accounting for revenue.
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 $6,035, $4,415 and $4,056 for the years ended August 31, 2023, 2022 and 2021, 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, directors and consultants 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.
Expected volatility is determined by looking at a combination of historical volatility over the past six years as well as implied future volatility.
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, ABchimie, and NuCera Solutions businesses 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 financial position and results of operations of the NuCera Solutions operations in Singapore are measured using the Singapore dollar 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 (expense) income on the consolidated statements of operations and were (expense) income of ($961), $442 and ($512) for the fiscal years ended August 31, 2023, 2022 and 2021, 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
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
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.
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.
Business Combinations
Business Combinations are recorded using the acquisition method. We assign the value of the consideration transferred to acquire a business to the tangible assets, identifiable intangible assets acquired, and liabilities assumed on the basis of their fair values at the date of acquisition. Any excess purchase price over the fair value of the net tangible and intangible assets acquired is allocated to goodwill. Any excess of the purchase price is largely attributable to the synergies and economies of scale from combining operations, technologies and research and development capabilities.
The Company assesses 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. Some of the most significant assumptions used include the discount rate, forward-looking financial information, and estimated customer attrition rates. A change in one of these assumptions could have material changes on the value of the intangible assets and goodwill which will impact the amortization expense in future periods and the goodwill impairment evaluation.
Transaction costs and restructuring costs associated with a transaction to acquire a business are expensed as incurred.
Segments
ASC Topic 280 “Segment Reporting” of the Financial Accounting Standards Board (“FASB”) codification establishes standards for reporting information about operating segments. The Company is organized into three reportable operating segments: Adhesives, Sealants and Additives; Industrial Tapes; and Corrosion Protection and Waterproofing. 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 generally used in, or integrated into, another company’s products.
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
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, personal care, general industrial and environmental market verticals. The segment’s products include moisture protective coatings and cleaners and customized sealant and adhesive systems for electronics, polymeric microspheres, polyurethane dispersions, specialty polymers and superabsorbent polymers. Beginning September 1, 2022 (first day of fiscal 2023), the Adhesives, Sealants and Additives segment includes the acquired operations of NuCera Solutions, within the functional additives product line.
The Industrial Tapes segment features 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.
Contingent Consideration
In connection with accounting for the ABchimie acquisition on September 1, 2020, the Company recorded a contingent consideration liability included within Other liabilities on the consolidated balance sheet. The contingent consideration liability was valued using a Monte Carlo simulation model in an option pricing framework based on key inputs requiring significant judgments and estimates to be made by the Company, including forecasts of future earnings over the multiyear period encompassed by the earnout, and that are not all observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The Company assesses the fair value of the contingent consideration liability at each reporting period. Any subsequent changes in the estimated fair value of the liability are reflected in Loss on contingent consideration on the consolidated statement of operations until the liability is settled. If fully realized, the contingent consideration due would total €7,000 (approximately $8,330 at the time of the initial transaction)
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
Recently Adopted Accounting Standards
Fiscal 2023
No new accounting pronouncements were adopted in fiscal 2023.
Fiscal 2022
In October 2021, the FASB issued ASU No. 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers”, which amends the accounting for contract assets and contract liabilities from revenue contracts with customers in a business combination. The amendment requires that an entity acquiring the contract assets and contract liabilities in a business combination be recognized in accordance with ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”. The ASU is effective for all public entities for fiscal years beginning after December 15, 2022, and interim periods therein. The Company early adopted ASU 2021-08 on February 28, 2022 and any impact on the consolidated financial statements will be dependent on the magnitude and nature of future acquired entities.
Fiscal 2021
In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting”. The ASU applies to all entities that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The ASU provides optional expedients and exceptions for applying generally accepted accounting principles (GAAP) to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The expedients and exceptions provided by the ASU do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022 for which an entity has elected certain optional expedients and that are retained through the end of the hedging relationship. The ASU is effective for all entities as of March 12, 2020 through December 31, 2022. ASU 2020-04 has not had, and the Company does not expect it to have in future periods, a material impact on the Company's consolidated financial statements and disclosures. The Company adopted ASU 2020-04 on September 1, 2020.
In June 2016, the FASB issued 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. This 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 therein. The Company adopted ASU 2016-13 on September 1, 2020, using the modified retrospective transition method which resulted in no material impact on the consolidated financial statements.
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, 2023 and 2022:
August 31,
August 31,
Raw materials
$
33,576
$
37,909
Work in process
9,789
9,569
Finished goods
26,211
15,561
Total Inventory
$
69,576
$
63,039
Note 3-Property, Plant and Equipment
Property, plant and equipment consisted of the following as of August 31, 2023 and 2022:
August 31,
August 31,
Land and improvements
$
8,844
$
4,994
Buildings
16,848
16,771
Machinery and equipment
78,425
49,458
Leasehold improvements
12,900
4,774
Construction in progress
5,130
122,147
76,751
Accumulated depreciation
(61,678)
(52,503)
Property, plant and equipment, net
$
60,469
$
24,248
R&D relocation of the Houston, TX facility
The Company wrote-off $120 of fixed assets primarily related to the R&D relocation of the Houston, TX facility in the third quarter of fiscal 2023. The total third quarter expense related to the move of $331 is included in the Loss on impairment/write-off of long-term asset in the Consolidated Statement of Operations. The project is now substantially complete and any future costs related to this move are not anticipated to be significant to the consolidated financial statements.
NuCera-related fixed asset disposals
In the fourth quarter of fiscal 2023, the Company wrote off $495 of construction in process, related to a discontinued engineering design study. In addition, the Company wrote off $3 in the fourth quarter of fiscal 2023 of a fixed asset disposal from our Barnsdall, OK facility.
Engineering Studies Related to Facility Consolidation and Rationalization Initiative
During the fourth quarter of fiscal 2019, the Company commissioned engineering studies of certain legacy operations, machinery and locations related to the Company’s facility rationalization and consolidation initiative. The Company completed its review of the data and recommendations provided by the study in the fourth quarter of fiscal 2020. During 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
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
related to the machinery. The Company recognized an additional $100 in the fourth quarter of fiscal 2021, to fully write-down the equipment’s value. 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.
Fixed asset disposals (noted above) are expensed in Loss on impairment/write-off of long-term assets within the consolidated statement of operations.
Note 4-Goodwill and Intangible Assets
The changes in the carrying value of goodwill, by operating segment, were as follows:
Adhesives, Sealants and Additives
Industrial Tapes
Corrosion Protection and Waterproofing
Consolidated
Balance at August 31, 2021
$
65,945
$
21,215
$
10,706
$
97,866
Foreign currency translation adjustment
(2,673)
-
(33)
(2,706)
Balance at August 31, 2022
$
63,272
$
21,215
$
10,673
$
95,160
Acquisition of NuCera Solutions
81,482
-
-
81,482
Foreign currency translation adjustment
1,552
-
1,568
Balance at August 31, 2023
$
146,306
$
21,215
$
10,689
$
178,210
For its 2023 annual analysis of goodwill, management elected to perform a qualitative assessment. Based on this assessment, management believes it is more likely than not that the fair value of the reporting unit exceeds its carrying value. The Company did not record impairment charges related to goodwill in 2023, 2022, or 2020.
As of August 31, 2023 and 2022, the Company had a total goodwill balance of $178,210 and $95,160, respectively, related to its acquisitions, of which $25,223 and $27,472 respectively, remained deductible for income taxes.
Intangible assets subject to amortization consisted of the following as of August 31, 2023 and 2022:
Weighted Average
Gross Carrying
Accumulated
Net Carrying
Amortization Period
Value
Amortization
Value
August 31, 2023
Patents and agreements
14.6
years
$
1,760
$
1,733
$
Formulas and technology
7.9
years
24,254
11,922
12,332
Trade names
6.3
years
14,852
9,478
5,374
Customer lists and relationships
11.1
years
244,324
102,806
141,518
$
285,190
$
125,939
$
159,251
August 31, 2022
Patents and agreements
14.6
years
$
1,760
$
1,724
$
Formulas and technology
7.8
years
10,730
9,961
Trade names
5.9
years
8,673
8,407
Customer lists and relationships
9.1
years
113,735
81,145
32,590
$
134,898
$
101,237
$
33,661
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
Aggregate amortization expense related to intangible assets for the years ended August 31, 2023, 2022 and 2021 was $23,666, $11,751 and $12,858, respectively. As of August 31, 2023 estimated amortization expense for the next five fiscal years is as follows:
Years ending August 31,
$
19,675
18,075
17,277
14,730
14,112
Thereafter
75,382
$
159,251
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, 2023 and 2022:
John Hancock
$
4,450
$
4,450
Cash surrender value of life insurance policies
$
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.
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, 2023 and 2022:
All-revolving credit facility with a borrowing capacity of $200,000
$
105,000
$
180,000
Long-term debt
$
105,000
$
180,000
On July 27, 2021 (the fourth quarter of fiscal 2021), the Company entered into the Second Amended and Restated Credit Agreement (the “Credit Agreement”) by and among the Company and NEPTCO Incorporated (“NEPTCO”), each as borrowers, the guarantor subsidiaries party thereto, the financial institutions party thereto as Lenders, and Bank of America, N.A., as administrative agent, with participation from Wells Fargo Bank, N.A., PNC Bank, N.A. and JPMorgan Chase Bank, N.A. The Credit Agreement is used to provide for additional liquidity to finance acquisitions, working capital and capital expenditures, and for other general corporate purposes. The Credit Agreement includes a revolving credit loan (the “Revolving Facility”), with borrowing capabilities not to exceed $200,000 at any time, with the ability to request an increase in this amount by an additional $100,000 at the individual or collective option of any of the Lenders. Effective February 1, 2023, the Credit Agreement transitioned to a secured overnight financing rate (SOFR) in substitution for the London Interbank Offered Rate (LIBOR) and will commence at the next interest rate renewal period. The applicable interest rate for the Revolving Facility and Term Loan (defined below) is based on the effective SOFR base rate plus a SOFR adjustment based on the term of the interest rate period plus a spread ranging from 1.00% to 1.75%, depending on the consolidated net leverage ratio of Chase and its subsidiaries. The SOFR adjustment is based on interest rate periods of 1-month at .1%, 3-months at .15%, and 6-months at .25%. Prior to the transition to SOFR, the applicable interest rate for the Revolving Facility and Term Loan was based on the effective LIBOR plus a spread ranging from 1.00% to 1.75%, depending on the consolidated net leverage ratio of Chase and its subsidiaries. As of August 31, 2023, the Company had $105,000 in long-term debt related to the acquisition of NuCera Solutions that closed on September 1, 2022. The long-term debt has a weighted average interest rate of 6.43% as of August 31, 2023.
The Credit Agreement has a five-year term with interest payments due at the end of the applicable LIBOR or SOFR period (but in no event less frequently than the three-month anniversary of the commencement of such LIBOR or SOFR period) and principal payment due at the expiration of the agreement, July 27, 2026. 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 new term loan twice during the term of the Revolving Facility (each, a “Term Loan”, and collectively with the Revolving Facility, the “Credit Facility”), which Term Loan shall be payable quarterly in equal installments sufficient to amortize the original principal amount of such Term Loan on a ten year amortization schedule.
The outstanding balance on the Credit Facility is guaranteed by all of Chase’s direct and indirect domestic subsidiaries, which collectively had a carrying value of approximately $336,388 at August 31, 2023. The Credit Facility is subject to restrictive covenants under the Credit Agreement, and financial covenants that require Chase and its subsidiaries to maintain certain financial ratios on a consolidated basis, including a consolidated net leverage ratio of no greater than 3.25 to 1.00 and a consolidated interest coverage ratio of no less than 3.50 to 1.00 (both defined in the Credit Agreement). The Credit Agreement requires lender permission for acquisitions over a certain size, and allows the company to temporarily modify the consolidated leverage ratio when an acquisition greater than $50,000 is consummated during an applicable measurement period. Due to the NuCera acquisition, the consolidated leverage ratio was not to exceed 3.75 to 1.00 as of the end of the four fiscal quarters following the acquisition. Prepayment is allowed by the Credit Agreement at any time during the term of the agreement, subject to customary notice requirements and the payment of customary LIBOR or SOFR breakage fees. Chase Corporation was in compliance with the debt covenants under the Credit Agreement as of August 31, 2023.
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
Note 7-Income Taxes
The Company has applied the U.S. statutory Federal rate of 21%, enacted as part of the Tax Cuts and Jobs Act (the “Tax Act”) in December 2017, for fiscal years end August 31, 2023, 2022 and 2021.
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, 2023, 2022 and 2021.
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 2023, 2022 or 2021.
In July 2020, the United States Internal Revenue Service (“IRS”) released final regulations (TD 9901) that ease documentation standards and provide greater flexibility for taxpayers claiming the deduction for Foreign-Derived Intangible Income (“FDII”). During fiscal 2023, the Company’s effective tax rate included a FDII deduction benefit of $903. In addition, during fiscal 2023, the Company recognized $69 of tax benefit due to the expiration of statute of limitations.
The Inflation Reduction Act ("IRA") was enacted into law on August 16, 2022. Included in the IRA was a provision to implement a 15% corporate alternative minimum tax on “adjusted financial statement income” for applicable corporations and a 1% excise tax on repurchases of stock. These provisions are effective for tax years beginning after December 31, 2022. We are in the process of evaluating the provisions of the IRA, but we do not currently believe the IRA will have a material impact on our reported results, cash flows or financial position when it becomes effective.
Domestic and foreign pre-tax income for the years ended August 31, 2023, 2022 and 2021 was:
Year Ended August 31,
United States
$
32,239
$
49,015
$
52,182
Foreign
10,952
9,583
6,412
$
43,191
$
58,598
$
58,594
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
The provision (benefit) for income taxes for the years ended August 31, 2023, 2022 and 2021 was:
Year Ended August 31,
Current:
Federal
$
10,868
$
10,346
$
11,677
State
2,436
2,589
Foreign
3,146
2,015
2,123
Total current income tax provision
16,450
14,950
14,582
Deferred:
Federal
(5,212)
(775)
(832)
State
(783)
(124)
Foreign
(446)
(295)
Total deferred income tax benefit
(6,441)
(1,023)
(908)
Total income tax provision
$
10,009
$
13,927
$
13,674
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 2023, 2022 and 2021, net of offsets generated by federal, state and foreign tax benefits, was 23.2%, 23.8% and 23.3%, 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, 2023, 2022 and 2021:
Year Ended August 31,
Federal statutory rates
21.0
%
21.0
%
21.0
%
Adjustment resulting from the tax effect of:
State and local taxes, net of federal benefit
2.0
%
2.3
%
2.3
%
Foreign tax rate differential
0.5
%
(0.3)
%
(0.3)
%
Adjustment to uncertain tax position
(0.1)
%
(0.5)
%
0.1
%
Transaction costs not deductible
0.0
%
0.8
%
0.0
%
Research credit generated
(0.3)
%
(0.1)
%
(0.1)
%
Stock Compensation
0.1
%
0.0
%
(0.3)
%
Permanent items
1.1
%
2.2
%
1.1
%
GILTI and Subpart F, net of foreign tax credit
0.4
%
0.2
%
0.3
%
Deferred income tax remeasurement
0.0
%
(0.5)
%
0.1
%
Foreign Derived Intangible Income
(2.1)
%
(1.2)
%
(1.1)
%
Performance-based earnout contingency
0.4
%
0.2
%
0.6
%
Other
0.2
%
(0.3)
%
(0.4)
%
Effective income tax rate
23.2
%
23.8
%
23.3
%
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:
As of August 31,
Deferred tax assets:
Allowance for doubtful accounts
$
$
Inventories
1,296
Accruals
Research and development
1,211
-
Warranty reserve
Pension accrual
2,345
1,872
Deferred compensation
Foreign currency loss on previously taxed income
-
Loan finance costs
(40)
-
Restricted stock grants
Non-qualified stock options
Lease liability
1,898
2,208
Unrealized gain/loss on foreign exchange
-
Other
9,667
7,361
Deferred tax liabilities:
Prepaid liabilities
(117)
(38)
Foreign intangibles
(3,616)
(2,099)
Right-of-use asset
(1,818)
(2,154)
Depreciation and amortization
(31,883)
(37,434)
(3,880)
Net deferred tax assets (liabilities)
$
(27,767)
$
3,481
In fiscal 2021, the Company included $599 of net operating loss carry forwards which offset future taxable income. The entire $599 of net operating loss carry forwards was utilized in fiscal 2022 and the operating loss for the year was $0. The net operating loss for fiscal 2023 was $0.
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, 2023 and 2022, respectively, 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.
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, 2023, 2022 and 2021 are as follows:
Balance, at beginning of the year
$
1,820
$
2,190
$
1,941
Increase for tax positions related to the current year
-
Decreases for currency translation adjustments
(71)
-
Increase (decrease) for tax positions related to prior years
-
1,180
Decreases for settlement of uncertain tax positions
(30)
-
(705)
Increase for interest and penalties
Decrease for lapses of statute of limitations
(495)
(434)
Balance, at end of year
$
1,895
$
1,820
$
2,190
The unrecognized tax benefits mentioned above include an aggregate of $619 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 $35, net of Federal tax expense, was recorded as a tax expense during the current fiscal year. The Company anticipates that its accrual for uncertain tax positions could change by approximately $510 over the next twelve-month period due to statute of limitations expiration.
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 2019. For foreign jurisdictions, the statute of limitations remains open in the U.K and France for fiscal years subsequent to 2019.
Note 8-Leases
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, 2023 and 2022:
August 31,
August 31,
Assets
Operating lease right-of-use assets
$
6,986
$
8,596
Liabilities
Current (accrued expenses)
$
1,485
$
1,448
Operating lease long-term liabilities
5,110
6,618
Total lease liability
$
6,595
$
8,066
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
Lease cost
The components of lease costs for the years ended August 31, 2023, 2022, and 2021 are as follows:
Year Ended August 31,
Operating lease cost (a)
$
4,055
$
3,332
$
3,772
(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, 2023 was as follows:
Future Operating
Year ending August 31,
Lease Payments
1,664
1,439
1,101
2029 and thereafter
1,675
Less: Interest
(575)
Present value of lease liabilities
$
6,595
The weighted average remaining lease term and discount rates are as follows:
August 31,
August 31,
Lease Term and Discount Rate
Weighted average remaining lease terms (years)
Operating leases
5.9
6.5
Weighted average discount rate (percentage)
Operating leases
3.2
%
2.8
%
Other Information
Supplemental cash flow information related to leases is as follows:
Year Ended August 31,
Operating cash outflows from operating leases
$
2,621
$
1,725
Total cash paid for amounts included in the measurement of lease liabilities
$
2,621
$
1,725
Total rental expense for all operating leases amounted to $4,055, $3,332 and $3,772 for the years ended August 31, 2023, 2022 and 2021, respectively.
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
Woodlands, TX - Lease Impairment/write-off
During the third quarter of 2023, Chase moved out of the Woodlands, TX facility (previously NuCera Corporate and R&D headquarters) to a smaller R&D facility in Houston, TX. On the last day of the third fiscal quarter, the Company signed a sublease agreement for the Woodlands office and expensed $211 as a lease impairment related to this facility in the third quarter of the fiscal period. The project is now substantially complete, and any future costs related to the facility relocation are not anticipated to be significant to the consolidated financial statements.
Woburn, MA - Lease Impairment/write-off
On the last day of the second fiscal quarter, the Company signed a termination agreement for the Woburn, MA facility and wrote off the right-of-use asset and liability of the Woburn, MA lease, expensing $314 in the second fiscal quarter of 2023. Additionally, the Company expensed $548 as a lease impairment related to the Woburn, MA facility in the first quarter of fiscal 2023.
The lease impairment/write-off (noted above) are included in the loss on impairment/write-off of long-term assets within the consolidated statements of operations.
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 three 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.
The Company’s contribution expense for all 401(k) plans was $1,905, $942, and $844 for the years ended August 31, 2023, 2022 and 2021, 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 restricted investments under the plans were $2,938 and $2,367 at August 31, 2023 and 2022, respectively, and corresponding deferred compensation liabilities were $2,950 and $2,375 on August 31, 2023 and 2022, respectively.
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, 2023.
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
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.
The following tables reflect the status of the Company’s pension plans for the years ended August 31, 2023 2022 and 2021:
Year Ended August 31,
Change in benefit obligation
Projected benefit obligation at beginning of year
$
16,798
$
20,261
$
20,663
Service cost
Interest cost
Actuarial (gain) loss
(2,256)
(2,202)
Benefits paid
(2,371)
(2,027)
(1,754)
Projected benefit obligation at end of year
$
13,047
$
16,798
$
20,261
Change in plan assets
Fair value of plan assets at beginning of year
$
7,802
$
9,280
$
8,168
Actual return on plan assets
(1,369)
1,301
Employer contribution
1,564
1,917
1,565
Benefits paid
(2,371)
(2,026)
(1,754)
Fair value of plan assets at end of year
$
7,368
$
7,802
$
9,280
Funded status at end of year
$
(5,679)
$
(8,996)
$
(10,981)
Year Ended August 31,
Amounts recognized in consolidated balance sheets
Noncurrent assets
$
$
-
$
-
Current liabilities
(1,565)
(1,565)
(1,565)
Noncurrent liabilities
(4,261)
(7,431)
(9,416)
Net amount recognized in consolidated balance sheets
$
(5,679)
$
(8,996)
$
(10,981)
Actuarial present value of benefit obligation and funded status
Accumulated benefit obligations
$
11,649
$
15,093
$
17,898
Projected benefit obligations
$
13,047
$
16,798
$
20,261
Plan assets at fair value
$
7,368
$
7,802
$
9,280
Amounts recognized in accumulated other comprehensive income
Prior service cost
$
$
$
Net actuarial loss
5,734
8,659
9,674
Adjustment to pre-tax accumulated other comprehensive income
$
5,767
$
8,696
$
9,714
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
Year Ended August 31,
Other changes in plan assets and benefit obligations recognized in other comprehensive income
Net (gain)/loss
$
(385)
$
(439)
$
(884)
Amortization of loss
(455)
(593)
(656)
Supplemental plan assumption change
(1,873)
Amortization of prior service cost
(3)
(3)
(3)
Effect of settlement on accumulated other comprehensive income
(213)
-
-
Total recognized in other comprehensive income
(2,929)
(1,018)
(924)
Net periodic pension cost
1,177
Total recognized in net periodic pension cost and other comprehensive income
$
(1,752)
$
(67)
$
Estimated amounts that will be amortized from accumulated comprehensive income over the next fiscal year
Prior service cost
$
$
$
Net actuarial loss
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.
Components of net periodic pension cost for the fiscal years ended August 31, 2023, 2022 and 2021 included the following:
Components of net periodic benefit cost
Service cost
$
$
$
Interest cost
Expected return on plan assets
(370)
(411)
(391)
Amortization of prior service cost
Amortization of accumulated loss
Curtailment and settlement loss
-
-
Net periodic benefit cost
$
1,177
$
$
Weighted average assumptions used to determine benefit obligations as of August 31, 2023, 2022 and 2021 are as follows:
Discount rate
Qualified plan
5.00
%
4.21
%
2.15
%
Supplemental plan
5.27
%
4.36
%
1.95
%
Rate of compensation increase
Qualified and Supplemental plan
3.50
%
3.50
%
3.50
%
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
Weighted average assumptions used to determine net periodic benefit cost for the years ended August 31, 2023, 2022 and 2021 are as follows:
Discount rate
Qualified plan
4.21
%
2.15
%
1.92
%
Supplemental plan
4.36
%
1.95
%
1.65
%
Expected long-term return on plan assets
Qualified plan
5.55
%
4.85
%
5.25
%
Supplemental plan
-
%
-
%
-
%
Rate of compensation increase
Qualified and Supplemental plan
3.50
%
3.50
%
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.
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 $67 for the Qualified Plan and ($21) for the Supplemental Plan. 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 $48 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 6.65%. 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.
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
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, 2023, 2022 and 2021:
Target
Allocation
Percentage of Plan Assets as of August 31,
Asset Category
Range
Equity securities
10-80
%
%
%
%
Debt securities
20-75
%
%
%
%
Other
0-100
%
-
%
-
%
-
%
Total
%
%
%
%
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, 2023 and 2022 by asset category:
Fair value measurements at
Fair value measurements at
August 31, 2023
August 31, 2022
Significant
Significant
Quoted prices
other
Significant
Quoted prices
other
Significant
in active
observable
unobservable
in active
observable
unobservable
August 31,
markets
inputs
inputs
August 31,
markets
inputs
inputs
(Level 1)
(Level 2)
(Level 3)
(Level 1)
(Level 2)
(Level 3)
Asset Category
Equity securities
$
3,389
$
3,389
$
-
$
-
$
3,667
$
3,667
$
-
$
-
Debt securities
3,979
3,979
-
-
4,135
4,135
-
-
Total
$
7,368
$
7,368
$
-
$
-
$
7,802
$
7,802
$
-
$
-
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.
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
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,
Pension Benefits
$
2,970
1,760
1,743
1,153
1,072
2029-2033
3,525
$
12,223
The Company contributed $1,564, $1,917 and $1,565 to fund its obligations under the pension plans for the years ended August 31, 2023, 2022 and 2021, respectively. The Company plans to make the necessary contributions during fiscal 2024 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.
Note 10-Stockholders’ Equity
Amended and Restated 2013 Equity Incentive Plan
In December 2021, the Company adopted an amendment and restatement of the Chase Corporation 2013 Equity Incentive Plan (the “Amended 2013 Plan”). The Amended 2013 Plan was approved by stockholders in February 2022. The Amended 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 Equity Incentive Plan was initially 1,200,000. No additional shares were included as a result of the December 2021 amendments. Additional shares may become available in connection with share splits, share dividends or similar transactions. As of August 31, 2023, 836,142 shares remained available for future grant under the Amended 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 permitted 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 17,725 shares of common stock remained outstanding under the 2005 Plan as of August 31, 2023.
Restricted Stock
Employees and Executive Management
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 contained 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 vesting on
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
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 was 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 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 was an equity-based plan with a grant date of September 1, 2018. 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 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 was recognized on a ratable basis over the vesting period based on quarterly probability assessments; and (b) a time-based restricted stock grant of 3,068 shares in the aggregate, with a vesting date of August 31, 2021, for which compensation expense was recognized on a ratable basis over the vesting period.
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 contained 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 was 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 was recognized on a ratable basis over the vesting period.
Based on the fiscal year 2019 financial results, 2,694 shares of restricted stock already granted under the 2019 LTIP were forfeited subsequent to the end of fiscal year 2019 in accordance with the performance measurement criteria of the awards. No further performance-based measurements apply to this award. Compensation expense relating to the remaining portion was 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 was an equity-based plan with a grant date of September 1, 2019 and contained 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, 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 3,689 shares in the aggregate, with a vesting date of August 31, 2022, for which compensation expense was 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 had a vesting date of August 31, 2022. Compensation expense was recognized on a ratable basis over the vesting period.
During the second quarter of fiscal 2020, additional grants of 432 shares, 616 shares 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.
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
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 was recognized on a ratable basis over the vesting period.
In August 2020, the Board of Directors of the Company approved the fiscal year 2021 LTIP for the executive officers and other members of management. The 2021 LTIP was an equity-based plan with a grant date of September 1, 2020 and contained the following equity components: (a) a performance and service-based restricted stock grant of 3,798 shares in the aggregate, subject to adjustment based on fiscal 2021 results, with a vesting date of August 31, 2023, 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 4,919 shares in the aggregate, with a vesting date of August 31, 2023, for which compensation expense was recognized on a ratable basis over the vesting period.
In the first quarter of 2021, restricted stock in the amount of 952 shares related to the second quarter of fiscal 2020 grant was forfeited in conjunction with the termination of employment of non-executive members of management of the Company.
In January 2021, restricted stock in the amount of 4,409 shares of common stock was forfeited in conjunction with the termination without cause of a now former executive of the Company.
In February 2021, a performance and service-based restricted stock grant totaling 521 shares, and a time-vesting restricted stock grant in the amount of 261 shares, was granted in conjunction with the appointment of a new executive of the Company. The restricted shares vested on the same terms as those granted under the 2021 LTIP in September 2020. Compensation expense was recognized over the period of the award consistent with the vesting terms.
In the fourth quarter of 2021, restricted stock in the amount of 447 shares related to the second quarter of fiscal 2020 grant was forfeited in conjunction with the termination of employment of non-executive members of management of the Company.
In August 2021, the Board of Directors of the Company approved the fiscal year 2022 LTIP for the executive officers and other members of management. The 2022 LTIP is an equity-based plan with a grant date of September 1, 2021 and contains the following equity components: (a) a performance and service-based stock grant of 3,304 shares in the aggregate, subject to adjustment based on fiscal 2022 results, with a vesting date of August 31, 2024, for which compensation expense is recognized on a ratable basis over the vesting period based on quarterly probability assessments; and (b) a time-based restricted stock grant of 6,280 shares in the aggregate, with a vesting date of August 31, 2024, for which compensation expense is recognized on a ratable basis over the vesting period.
In the first and second quarters of fiscal 2022, restricted stock in the amount of 437 and 570 shares, respectively, related to the fiscal 2020 grant was forfeited in conjunction with the termination of employment of non-executive members of management of the Company.
In February 2022 (the second quarter of fiscal 2022), the Board of Directors of the Company approved an equity retention agreement with the Company’s Treasurer and Chief Financial Officer that included a restricted stock award in the amount of 5,332 shares with a vesting date of January 31, 2025. Compensation expense is recognized over the period of the award consistent with the vesting terms.
In the second and third quarters of fiscal 2022, restricted stock in the amount of 559 and 298 shares, respectively, related to the fiscal 2022 grant was forfeited in conjunction with the termination of employment of non-executive members of management of the Company.
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
During the fourth quarter of fiscal 2021, one additional grant totaling 641 shares of restricted stock was issued to a non-executive member of management, with a vesting date of July 27, 2022. Compensation expense was recognized on a ratable basis over the vesting period.
In the fourth quarter of fiscal 2022, restricted stock in the amount of 299, 461, and 407 shares related to the fiscal 2019, 2020, and 2021 grant, respectively, was forfeited in conjunction with the termination of employment of non-executive members of management of the Company.
In August 2022, the Board of Directors of the Company approved the fiscal year 2023 LTIP for the executive officers and other members of management. The 2023 LTIP is an equity-based plan with a grant date of September 1, 2022 and contains the following equity components: (a) a performance and service-based stock grant of 10,580 shares of time-based restricted stock in aggregate, subject to adjustment based on fiscal 2023 results, with a vesting date of August 31, 2025, for which compensation expense is recognized on a ratable basis over the vesting period based on quarterly probability assessments; and (b) a time-based restricted stock grant of 9,918 shares and 636 shares, with a vesting date of August 31, 2025 and August 31, 2023, respectively, for which compensation expense is recognized on a ratable basis over the vesting period.
In addition to the 2023 LTIP, the Board of Directors approved a retention grant with a grant date of September 1, 2022 of an aggregate of 10,015 shares of time-based restricted stock. Out of the 10,015 shares of time-based restricted stock granted, 2,056 shares vested on March 1, 2023, 3,705 shares vested on September 1, 2023, 1,418 shares are scheduled to vest on August 31, 2024, and 2,836 shares are scheduled to vest on August 31, 2026. Compensation expense is being recognized on a ratable basis over the vesting period.
In December 2022, restricted stock in the amount of 314 shares was issued to a non-executive member of management and is scheduled to vest on August 31, 2025. Compensation expense is being recognized on a ratable basis over the vesting period.
In the second quarter of fiscal 2023, restricted stock in the amount of 1,486 shares related to the fiscal 2023 retention grants were forfeited in conjunction with the termination of employment of non-executive members of management of the Company.
In the third quarter of fiscal 2023, restricted stock in the amount of 166 shares related to the fiscal 2020 grant were forfeited in conjunction with the termination of employment of a non-executive member of management of the Company.
In the third quarter of fiscal 2023, restricted stock in the amount of 1,129 shares was issued to a non-executive member of management, with 565 shares and 564 shares vesting on March 31, 2025 and March 31, 2027, respectively. Compensation expense is being recognized on a ratable basis over the vesting period.
Non-employee Consultants and Advisors
In February 2021, restricted stock in the amount of 2,306 shares was granted to a consultant of the Company, with a two-year vesting term including continued service requirements. Compensation expense was recognized over the period of the award consistent with the vesting terms.
Non-employee Board of Directors
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
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
January 31, 2021. The shares of restricted stock vested at the conclusion of this service period. Compensation expense was recognized on a ratable basis over the twelve-month vesting period.
In December 2020, restricted stock in the amount of 110 shares were granted to certain non-employee members of the board of directors in relation to their service on the board. These shares vested during the second fiscal quarter of 2021.
In February 2021, as part of their standard compensation for board service, non-employee members of the Board received a total grant of 4,525 shares of restricted stock for service for the period from January 31, 2021 through January 31, 2022. The shares of restricted stock vested at the conclusion of this service period. Compensation expense was recognized on a ratable basis over the twelve-month vesting period.
In February 2022, as part of their standard compensation for board service, non-employee members of the Board received a total grant of 5,000 shares of restricted stock for service for the period from January 31, 2022 through January 31, 2023. The shares of restricted stock vested at the conclusion of this service period. Compensation expense was recognized on a ratable basis over the twelve-month vesting period.
In July 2022, as part of the standard compensation for board service, a non-employee member of the Board received a grant of 456 shares of restricted stock for service on the board. These shares of restricted stock vested on January 31, 2023. Compensation expense was recognized on a ratable basis over the twelve-month vesting period.
In February 2023, as part of their standard compensation for board service, non-employee members of the Board received a total grant of 7,824 shares of restricted stock for service for the period January 31, 2023 through January 31, 2024. The shares of restricted stock will vest at the conclusion of this service period. Compensation expense 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, 2023, 2022 and 2021 is presented below:
Non Employee
Directors
Weighted Average
Grant Date
Fair Value
Non Employee
Consultants and Advisors
Weighted Average
Grant Date
Fair Value
Officers
and
Employees
Weighted Average
Grant Date
Fair Value
Unvested restricted stock at August 31, 2020
4,906
$
95.59
-
$
-
59,875
$
97.72
Granted
4,635
104.09
2,306
108.42
9,499
98.10
Vested
(5,016)
95.59
-
-
(19,978)
80.13
Forfeited or cancelled
-
-
-
-
(6,195)
103.86
Unvested restricted stock at August 31, 2021
4,525
$
104.09
2,306
$
108.42
43,201
$
107.31
Granted
5,456
93.48
-
-
18,190
105.16
Vested
(4,525)
104.04
-
-
(16,804)
100.22
Forfeited or cancelled
-
-
-
-
(3,031)
111.84
Unvested restricted stock at August 31, 2022
5,456
$
93.48
2,306
$
108.42
41,556
$
109.02
Granted
7,824
97.15
-
-
32,592
88.63
Vested
(5,456)
93.48
(2,306)
108.42
(14,957)
98.32
Forfeited or cancelled
-
-
-
-
(2,494)
98.80
Unvested restricted stock at August 31, 2023
7,824
$
97.15
-
$
-
56,697
$
100.57
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
Stock Options
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 was 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 vested 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 was 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 vested in three equal installments on August 31, 2019, 2020 and 2021, and will expire on August 31, 2028. Compensation expense was 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 was 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 vested 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 was recognized over the period of the award consistent with the vesting terms.
In August 2019, the Board of Directors of the Company also 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 vested on August 31, 2022 and will expire on August 31, 2029. Compensation expense was recognized on a ratable basis over the vesting period.
In August 2020, the Board of Directors of the Company approved the fiscal year 2021 LTIP for the executive officers and other members of management. The 2021 LTIP was an equity-based plan with a grant date of September 1, 2020 and included options to purchase 14,845 shares of common stock in the aggregate with an exercise price of $97.57 per share. The options vested in three equal annual installments ending on August 31, 2023. Of the options granted, 6,730 options will expire on August 31, 2030, and 8,115 options will expire on September 1, 2030. Compensation expense was recognized over the period of the award consistent with the vesting terms.
In January 2021, options to purchase 18,129 shares of common stock were forfeited in conjunction with the termination without cause of a now former executive of the Company. Options to purchase an additional 306 shares of common stock were forfeited in April 2021 related to this same termination.
In February 2021, options to purchase 749 shares of common stock with an exercise price of $104.04 per share were granted in conjunction with the appointment of a new executive of the Company. The stock options vested on the same terms as those granted in September 2020 under the 2021 LTIP. Compensation expense was recognized over the period of the award consistent with the vesting terms.
In August 2021, the Board of Directors of the Company approved the fiscal year 2022 LTIP for the executive officers and other members of management. The 2022 LTIP is an equity-based plan with a grant date of September 1, 2021 and included options to purchase 12,942 shares of common stock in the aggregate with an exercise price of $114.50 per share. The options vest in three equal installments ending on August 31, 2024. Of the options granted, 5,804 options will expire on August 31, 2031, and 7,138 options will expire on September 1, 2031. Compensation expense is being recognized over the period of the award consistent with the vesting terms.
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
In February 2022, the Board of Directors of the Company also approved an equity retention agreement with the Treasurer and Chief Financial Officer. The agreement included an award to purchase 14,480 shares of common stock with a grant date of February 1, 2022 and an exercise price of $94.88 per share. The options will vest on January 31, 2025 and will expire on February 1, 2032. Compensation expense is being recognized on a ratable basis over the vesting period.
In April 2022, options to purchase, 836 shares of common stock were forfeited in conjunction with the termination without cause of a now former employee of the Company.
In July 2022, options to purchase, 2,351 shares of common stock were forfeited in conjunction with the termination without cause of a now former employee of the Company.
In August 2022, the Board of Directors of the Company approved the fiscal year 2023 LTIP for the executive officers and other members of management. The 2023 LTIP is an equity-based plan with a grant date of September 1, 2022 and included options to purchase 25,987 shares of common stock in the aggregate with an exercise price of $88.16 per share. The options vest in three equal installments ending on August 31, 2025 and will expire on September 1, 2032. Compensation expense is being recognized over the period of the award consistent with the vesting terms.
In October 2022, options to purchase 2,733 shares of common stock were forfeited in conjunction with the termination without cause of a now former employee of the Company.
In December 2022, options to purchase 791 shares of common stock were awarded to a non-executive member of management in the aggregate with an exercise price of $95.00 per share. The options will vest in three annual installments beginning on August 31, 2023 and ending on August 31, 2025 and will expire on September 1, 2032. Compensation expense is being recognized over the period of the award consistent with the vesting terms.
The following table summarizes information about stock options outstanding as of August 31, 2023:
Options Outstanding
Options Exercisable
Exercise Prices
Number
Outstanding
Weighted Avg.
Remaining
Contractual
Life
Weighted
Average
Exercise Price
Aggregate
Intrinsic
Value
Number
Exercisable
Weighted
Average
Exercise Price
Aggregate
Intrinsic
Value
$
35.50
10,479
1.0
$
35.50
$
10,479
$
35.50
$
$
39.50
10,072
2.0
$
39.50
$
10,072
$
39.50
$
$
64.37
31,089
3.0
$
64.37
$
1,932
31,089
$
64.37
$
1,932
$
93.50
7,813
4.0
$
93.50
$
7,813
$
93.50
$
$
94.88
14,480
8.4
$
94.88
$
-
$
94.88
$
-
$
97.57
12,269
7.0
$
97.57
$
12,269
$
97.57
$
$
100.22
49,017
6.0
$
100.22
$
1,288
49,017
$
100.22
$
1,288
$
104.00
4.5
$
104.00
$
$
104.00
$
$
104.04
7.0
$
104.04
$
$
104.04
$
$
114.50
10,964
8.0
$
114.50
$
7,310
$
114.50
$
$
123.95
7,410
5.0
$
123.95
$
7,410
$
123.95
$
$
88.16
25,987
9.0
$
88.16
$
8,669
$
88.16
$
$
95.00
9.0
$
95.00
$
$
95.00
$
181,726
5.7
$
86.21
$
7,324
145,746
$
84.37
$
6,141
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
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.
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, 2023, 2022 and 2021:
Expected dividend yield
1.1
%
0.8
%
0.7
%
Expected life
6.0
years
6.3
years
6.0
years
Expected volatility
39.1
%
38.7
%
39.5
%
Risk-free interest rate
3.3
%
1.3
%
0.4
%
Stock based compensation expense recognized in fiscal years 2023, 2022 and 2021 was $3,656, $3,147 and $2,978, respectively.
A summary of the transactions of the Company’s stock option plans for the years ended August 31, 2023, 2022 and 2021 is presented below:
Officers
and
Employees
Weighted
Average
Exercise Price
Options outstanding at August 31, 2020
164,696
$
75.21
Granted
15,594
$
97.88
Exercised
(7,546)
$
38.79
Forfeited or cancelled
(18,435)
$
100.62
Options outstanding at August 31, 2021
154,309
$
76.24
Granted
27,422
$
104.14
Exercised
(2,533)
$
16.00
Forfeited or cancelled
(3,187)
$
108.36
Options outstanding at August 31, 2022
176,011
$
80.88
Granted
26,778
$
88.36
Exercised
(18,330)
$
35.52
Forfeited or cancelled
(2,733)
103.98
Options outstanding at August 31, 2023
181,726
$
86.21
Options exercisable at August 31, 2023
145,746
$
84.37
The weighted average grant date fair value of options granted in the years ended August 31, 2023, 2022 and 2021 was $33.77, $37.71 and $34.45 per share, respectively.
The total pretax intrinsic value of stock options exercised was $1,142, $195 and $558 for the years ended August 31, 2023, 2022, and 2021, respectively.
Excluding the effects of common stock reserved for issuance upon exercise of the 181,726 outstanding options, there were 836,142 shares of common stock available for future issuance under the Company’s Amended and Restated 2013 Equity Incentive Plan on August 31, 2023. Based on historic experience, management estimates all outstanding stock options will vest.
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
The income tax benefit realized from stock options exercised, vesting of restricted stock and issuance of stock pursuant to grants of restricted stock units was $140, $20 and $114 for the years ended August 31, 2023, 2022 and 2021, respectively.
As of August 31, 2023, unrecognized expense related to all stock-based compensation described above was $3,042 (including $2,400 for restricted stock and $642 for stock options), which will be recognized over the next four fiscal years.
Note 11-Segment Data
The Company is organized into three reportable operating segments: Adhesives, Sealants and Additives; Industrial Tapes; and Corrosion Protection and Waterproofing. 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 generally 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, appliances, medical, personal care, 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, specialty polymers and superabsorbent polymers. Beginning September 1, 2022 (first day of fiscal 2023), the Adhesives, Sealants and Additives segment includes the acquired operations of NuCera, within the functional additives product line.
The Industrial Tapes segment features 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 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.
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:
Years Ended August 31,
Revenue
Adhesives, Sealants and Additives
$
207,900
$
135,770
$
126,864
Industrial Tapes
153,660
143,954
120,873
Corrosion Protection and Waterproofing
42,455
45,936
45,599
Total
$
404,015
$
325,660
$
293,336
Income before income taxes
Adhesives, Sealants and Additives
$
29,314
(a), (b)
$
37,657
(d)
$
36,520
(f)
Industrial Tapes
47,694
41,387
37,407
Corrosion Protection and Waterproofing
14,729
17,415
15,913
(g)
Total for reportable segments
91,737
96,459
89,840
Corporate and common costs
(48,546)
(c)
(37,861)
(e)
(31,246)
(h)
Total
$
43,191
$
58,598
$
58,594
Includes the following costs by segment:
Adhesives, Sealants and Additives
Interest
$
8,981
$
$
Depreciation
6,423
1,065
Amortization
23,658
10,466
10,685
Industrial Tapes
Interest
$
-
$
$
Depreciation
1,270
1,568
1,718
Amortization
1,280
1,537
Corrosion Protection and Waterproofing
Interest
$
-
$
$
Depreciation
Amortization
(a) Includes a $702 year-to-date loss on the upward adjustment of the performance-based earn out contingent consideration associated with the September 2020 acquisition of ABchimie, $516 in operation optimization costs related to the move from Woburn, MA to O’Hara Township, PA, $862 loss on impairment/write-off of long-term asset related to the Woburn, MA facility, $331 year-to-date loss on impairment/write-off of long-term asset related to the relocation of the Woodlands, TX facility to the new NuCera-related R&D facility in Houston, TX, and $492 and $3 year-to-date loss on impairment/write-off of long-term asset related to a discontinued NuCera-related engineering design study and fixed asset disposal from our Barnsdall, OK facility
(b) Includes $2,242 of purchase accounting inventory adjustment related to the Company’s NuCera business and $2,280 of backlog amortization fully amortized related to the Company’s NuCera business both incurred during the first quarter of the fiscal year
(c) Includes $1,476 in operations optimization costs related to the Company’s ERP upgrade, $4,270 of acquisition-related expenses attributable to the merger agreement signed on July 21, 2023, $29 of acquisition-related expenses attributable to NuCera,
(d) For 2022, includes a $432 loss on the upward adjustment of the performance-based earn-out contingent consideration associated with the September 2020 acquisition of ABchimie, $463 in operation optimization costs related to the move from Woburn, MA to O’Hara Township, PA and $147 of operations optimization costs related to the move from Newark, CA to Hickory, NC
(e) For 2022, includes $232 of operations optimization costs related to the Company’s move to the new corporate headquarters within Westwood, MA, and $4,000 of acquisition-related expenses attributable to NuCera
(f) For 2021, includes $1,664 in loss on the upward adjustment of the performance-based earn out contingent consideration associated with the September 2020 acquisition of ABchimie and $977 in exit costs related to the movement of the sealants system business out of the Newark, CA location and into the Hickory, NC location during fiscal 2021
(g) For 2021, includes expense of $100 for the write-down of certain assets under construction
(h) For 2021, includes $128 in acquisition-related expense attributable to the February 2021 acquisition of the operations of Eti
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
August 31,
August 31,
Total Assets
Adhesives, Sealants and Additives
$
415,361
$
153,784
Industrial Tapes
82,929
87,751
Corrosion Protection and Waterproofing
33,043
33,037
Total for reportable segments
531,333
274,572
Corporate and common assets (a)
69,473
337,008
Total
$
600,806
$
611,580
(a) Corporate and common assets at August 31, 2022 include $180,000 in cash drawn from the Company’s revolving credit facility and $70,000 of cash on hand in anticipation of the acquisition of NuCera, which closed on the first day of fiscal year 2023.
Note 12-Export Sales and Foreign Operations
Export sales from continuing domestic operations to unaffiliated third parties were $77,773, $36,305 and $33,439 for the years ended August 31, 2023, 2022 and 2021, respectively. The increase in export sales from fiscal 2023 to fiscal 2022 is reflective of the company-wide year-over-year increase in revenue attributed to NuCera in the current fiscal period.
The Company’s products are sold worldwide. Revenue for the years ended August 31, 2023, 2022 and 2021, are attributed to operations located in the following countries:
Years Ended August 31,
Revenue
United States
$
345,121
$
281,754
$
245,476
United Kingdom
23,668
22,295
24,846
France
24,828
9,734
10,927
All other foreign (1)
10,398
11,877
12,087
Total
$
404,015
$
325,660
$
293,336
(1) Consists of sales from royalty revenue attributable to its licensed manufacturer in Asia and sales originated from the Company’s foreign operations in China, India and Singapore.
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
As of August 31, 2023 and 2022, 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:
August 31,
August 31,
Long-Lived Assets
United States
Property, plant and equipment, net
$
57,593
$
21,300
Goodwill and Intangible assets, less accumulated amortization
303,214
105,216
United Kingdom
Property, plant and equipment, net
1,719
1,832
Goodwill and Intangible assets, less accumulated amortization
3,598
3,318
France
Property, plant and equipment, net
Goodwill and Intangible assets, less accumulated amortization
29,996
20,130
All other foreign
Property, plant and equipment, net
Goodwill and Intangible assets, less accumulated amortization
Total
Property, plant and equipment, net
$
60,469
$
24,248
Goodwill and Intangible assets, less accumulated amortization
$
337,461
$
128,821
Note 13-Supplemental Cash Flow Data
Supplemental cash flow information for the years ended August 31, 2023, 2022 and 2021 is as follows:
Income taxes paid
$
16,700
$
15,017
$
17,074
Interest paid
$
8,975
$
$
Noncash Investing and Financing Activities
Common stock received for payment of stock option exercises
$
$
$
Property, plant and equipment additions included in accounts payable
$
$
$
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
Note 14-Acquisitions
Fiscal 2023
Merger Agreement
On July 21, 2023, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among the Company, Formulations Parent Corporation, a Delaware corporation (“Parent”), Formulations Merger Sub Corporation, a Delaware corporation and a direct, wholly owned subsidiary of Parent (“Merger Sub”), pursuant to which Merger Sub will merge with and into the Company, with the Company surviving as a wholly owned subsidiary of Parent (the “Merger”).
The consummation of the Merger (the “Closing”) is subject to certain customary mutual conditions, including (i) the approval of the Company’s shareholders holding at least two thirds of the outstanding shares of Company Common Stock entitled to vote on the adoption of the Merger Agreement, (ii) the expiration or termination of any waiting period (and any extension thereof) applicable to the consummation of the Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and the approvals, clearances or expiration of applicable waiting periods of the Merger, as applicable, under the antitrust and foreign investment laws of certain other jurisdictions, and (iii) the absence of any order, injunction, decree or law issued or enforced by any governmental authority of competent jurisdiction that prohibits, renders illegal or enjoins the consummation of the Merger.
The 30-day waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), in connection with the Merger expired at 11:59 p.m. on September 5, 2023. The expiration of the HSR Act waiting period satisfies one of the conditions to the closing of the Merger.
On October 6, 2023, the Company convened a special meeting of shareholders to consider and vote upon certain proposals related to the Merger Agreement. Each proposal was approved by Shareholders at the Special Meeting. Shareholder approval satisfies one of the conditions to the closing of the Merger.
The Company incurred $4,270 of acquisition-related costs (in the fourth fiscal quarter) of fiscal 2023, related to the Plan of Merger.
Acquisition of NuCera Solutions
On September 1, 2022 (the first day of fiscal 2023), the Company acquired all of the capital stock of NuCera Solutions (“NuCera”). The NuCera acquisition extends our global reach in the production and development of highly differentiated specialty polymers and polymerization technologies serving demanding applications, offering products critical to enabling end-product functionality, performance and reliability for new blue-chip customers and high-growth end markets such as personal care, polymer additives, coatings, diversified consumer products and masterbatches
The Company acquired all of the capital stock of NuCera for a purchase price of $250,000, net of debt, accrued income taxes, cash at closing, and working capital adjustments resulting in a purchase price consideration of $250,092. The Company paid $249,594, net of $498 of cash acquired. The purchase was funded by utilizing $180,000 from the Company’s existing revolving credit facility and the remaining $70,000 from available cash on hand. The Company recorded transaction costs of $29 and $4,000 as of August 31, 2022 and 2023, respectively, related to this acquisition which are excluded from the purchase price. Acquisition-related costs consist of legal and professional fees related to the NuCera acquisition.
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
The NuCera acquisition has been accounted for using the acquisition method of accounting in accordance with Accounting Standards Codification Topic 805, Business Combinations, (“ASC 805”). The purchase price consideration has been allocated to the assets acquired and liabilities assumed of NuCera based upon their fair values as of the acquisition date. Fair values of the assets acquired and liabilities assumed are measured in accordance with ASC Topic 820, Fair Value Measurements, (“ASC 820”), using the discounted cash flows and other applicable valuation techniques. For certain assets and liabilities, those fair values are consistent with historical carrying values.
Refer to the table summarizing the purchase consideration and the purchase price allocation to estimate fair values of the identifiable assets acquired and liabilities assumed as of the acquisition date (in thousands).
Allocation of the Purchase Price
Purchase Price Allocation
Amount
Cash consideration
$
250,092
Total fair value of consideration transferred
250,092
Assets acquired:
Cash and cash equivalents
$
Accounts receivable
10,392
Inventory
16,062
Prepaid and other current assets
4,848
Property, plant & equipment
38,292
Operating lease right-of-use assets
Goodwill
81,482
Intangible assets
148,021
Other assets
Total assets acquired
300,386
Liabilities assumed:
Accounts payable
$
4,731
Accrued expenses
6,644
Income taxes payable
Operating lease long-term liabilities
Deferred income taxes
38,179
Accrued income taxes
Total liabilities assumed
50,294
Net assets acquired
$
250,092
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
The purchase price allocation resulted in goodwill of $81,482 of which $1,147 is deductible for income tax purposes. Goodwill consists of the excess of the purchase price over the fair value of the acquired assets and assumed liabilities representing the estimated economic value attributable to future operations
Under the acquisition method of accounting for business combinations, if we identified changes to acquired deferred tax asset valuation allowances or liabilities related to uncertain tax positions during the measurement period, and they are related to new information obtained about facts and circumstances that existed as of the acquisition date, those changes are considered a measurement-period adjustment, and we record the offset to goodwill. The Company recorded all other changes to deferred tax asset valuation allowances and liabilities related to uncertain tax positions in current-period income tax expense. This accounting applies to all of our acquisitions, regardless of acquisition date.
The revenue and net loss for the results of operations for NuCera was $69,669 and ($11,850) for the year-to-date period of fiscal 2023.
The pro forma summary below presents the results of operations as if the NuCera acquisition occurred on September 1, 2021. Proforma adjustments for the twelve months ended August 31, 2022 includes $15,068 of incremental amortization expense from acquired intangible assets, $2,242 of inventory step-up, $8,910 of incremental interest expense, and the tax related impact. The pro forma summary uses estimates and assumptions based on information available at the time. Management believes the estimates and assumptions to be reasonable; however, actual results may have differed significantly from this pro forma financial information. The pro forma information does not reflect any cost savings, operating synergies or revenue enhancements that might have been achieved from combining the operations. The unaudited pro forma summary is provided for illustrative purposes only and does not purport to represent Chase’s actual consolidated results of operations had the acquisition been completed as of the date presented, nor should it be considered indicative of Chase’s future consolidated results of operations.
Twelve Months Ended August 31,
Revenue
$
404,016
$
415,525
Net income
32,386
39,285
Fiscal 2021
Acquisition of Emerging Technologies, Inc. (“ETi”)
On February 5, 2021, the Company acquired certain assets of Emerging Technologies, Inc. (“ETi”), a superabsorbent polymers solutions provider, located in Greensboro, NC. The business was acquired for a purchase price of $9,997, comprising $8,997 paid on February 5, 2021 and $1,000 paid on August 4, 2022 (eighteen months after the purchase), subsequent to final working capital adjustments, and excluding acquisition-related costs. As part of this transaction, Chase acquired substantially all working capital and fixed assets of the business and entered a multi-year lease at ETi’s existing location. The Company expensed $128 of acquisition-related costs in fiscal 2021 associated with this acquisition. The purchase was funded with available cash on hand. ETi is a solutions provider and formulator of absorbent polymers for use in the packaging, recreational, consumer, and sanitation markets. The acquisition broadens the Company’s superabsorbent polymers product offerings and formulation capabilities while expanding its market reach. The Company finalized purchase accounting during the first quarter of fiscal 2022, with no significant change to amounts initially recorded. Since the effective date of the acquisition, the financial results of ETi’s acquired operations have been included in the Company’s financial statements within the functional additives product line, contained within the Adhesives, Sealants and Additives operating segment. The ETi acquisition does not represent a significant business combination so pro forma financial information is not provided.
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
The excess of the purchase price over the net tangible and intangible assets acquired resulted in goodwill of $2,451 that is largely attributable to the synergies and economies of scale from combining the operations, technologies and research and development capabilities of ETi and Chase, particularly as they pertain to the expansion of the Company's product and service offerings, the established workforce and marketing efforts. This goodwill is deductible for income tax purposes.
Refer to the table summarizing the identifiable assets acquired and liabilities assumed as of the acquisition date (in thousands).
Acquisition of Emerging Technologies, Inc (ETi)
Accounts receivable
$
Inventory
Prepaids and other current assets
Property, plant & equipment
Goodwill
2,451
Intangible assets
6,650
Accounts payable and accrued liabilities
(519)
Other liabilities (due to sellers)
(1,000)
Payments for acquisitions
(8,997)
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
Acquisition of ABchimie
On September 1, 2020 (first day of fiscal 2021), the Company acquired all the capital stock of ABchimie for €18,654 (approximately $22,241 at the time of the transaction) net of cash acquired, subsequent to final working capital adjustments, excluding acquisition-related costs totaling $274 recognized in fiscal 2020 and with a performance-based earn out (measured over four years post-acquisition) potentially worth an additional €7,000 (approximately $8,330 at the time of the transaction). The Company accrued $3,538 and $2,584 at August 31, 2023 and 2022, respectively, within Other liabilities on the consolidated balance sheet related to its current estimate of the earn out. Following its initial recording at the acquisition date, a $702, $432 and $1,664 increase in the performance-based earn out accrual was recorded within Loss on contingent consideration in the consolidated statement of operations for the year ended August 31, 2023, 2022 and 2021, respectively. See Note 16 to the consolidated financial statements for additional information on the estimate of contingent consideration payable.
ABchimie is a Corbelin, France headquartered solutions provider for the cleaning and protection of electronic assemblies, with ‎further formulation, production, and research and development capabilities‎. The transaction was funded with available cash on hand. The financial results of the business are 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 finalized purchase accounting during the fourth quarter of fiscal 2021, with no significant change to amounts initially recorded. The ABchimie acquisition does not represent a significant business combination so pro forma financial information is not provided.
Refer to the table summarizing the identifiable assets acquired and liabilities assumed as of the acquisition date (in thousands).
Acquisition of ABchimie
Accounts receivable
$
Inventory
Prepaids and other current assets
Property, plant & equipment
Goodwill
13,055
Intangible assets
12,055
Operating lease right-of-use asset
Deferred tax liability
(3,387)
Accounts payable and accrued liabilities
(431)
Operating lease liabilities (inclusive of short- and long-term)
(473)
Other liabilities (due to sellers)
(928)
Payments for acquisitions, net of cash received
(22,241)
The excess of the purchase price over the net tangible and intangible assets acquired resulted in goodwill preliminarily measured at $13,055 that is largely attributable to the synergies and economies of scale from combining the operations, technologies and research and development capabilities of ABchimie and Chase, particularly as they pertain to the expansion of the Company's product and service offerings, the established workforce and marketing efforts. A portion of this goodwill is deductible in the U.S. for calculation of GILTI period costs but is nondeductible for French income tax purposes.
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
Note 15-Revenue from Contracts with Customers
The Company accounts for revenue in accordance with ASC 606, “Revenue from Contracts with Customers. 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, 2023 and 2022:
August 31,
August 31,
Contract Assets
Adhesives, Sealants and Additives
$
$
Industrial Tapes
Corrosion Protection and Waterproofing
Total
$
$
The Company did not have any contract liabilities as of August 31, 2023 and 2022.
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, 2023, 2022 and 2021 was as follows:
Year Ended August 31, 2023
Adhesives, Sealants
Industrial
Corrosion Protection
Consolidated
and Additives
Tapes
and Waterproofing
Revenue
Revenue
North America
$
109,998
$
136,995
$
35,794
$
282,787
Asia\Middle East
51,062
6,804
4,345
62,211
Europe
45,633
7,304
1,986
54,923
All other foreign
1,207
2,557
4,094
Total Revenue
$
207,900
$
153,660
$
42,455
$
404,015
Year Ended August 31, 2022
Adhesives, Sealants
Industrial
Corrosion Protection
Consolidated
and Additives
Tapes
and Waterproofing
Revenue
Revenue
North America
$
87,249
$
127,988
$
40,282
$
255,519
Asia\Middle East
25,917
7,430
3,022
36,369
Europe
21,910
6,168
2,511
30,589
All other foreign
2,368
3,183
Total Revenue
$
135,770
$
143,954
$
45,936
$
325,660
Year Ended August 31, 2021
Adhesives, Sealants
Industrial
Corrosion Protection
Consolidated
and Additives
Tapes
and Waterproofing
Revenue
Revenue
North America
$
76,388
$
106,084
$
37,879
$
220,351
Asia\Middle East
28,033
7,903
4,933
40,869
Europe
21,846
4,657
2,591
29,094
All other foreign
2,229
3,022
Total Revenue
$
126,864
$
120,873
$
45,599
$
293,336
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
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
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.
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.
The Company utilizes the best available information in measuring fair value. Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The financial assets classified as Level 1 and Level 2 as of August 31, 2023 and 2022 represent investments that are restricted for use in nonqualified 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, 2023 and 2022:
Fair value measurement category
Quoted prices
Significant other
Significant
Fair value
in active markets
observable inputs
unobservable inputs
measurement date
Total
(Level 1)
(Level 2)
(Level 3)
Assets:
Restricted investments
August 31, 2023
$
2,938
$
2,704
$
$
-
Restricted investments
August 31, 2022
$
2,367
$
2,125
$
$
-
The following table presents the fair value of the Company’s liabilities that are accounted for at fair value on a recurring basis as of August 31, 2023 and 2022:
Fair value measurement category
Quoted prices
Significant other
Significant
Fair value
in active markets
observable inputs
unobservable inputs
measurement date
Total
(Level 1)
(Level 2)
(Level 3)
Liabilities:
Long-term debt
August 31, 2023
$
105,000
$
-
$
105,000
$
-
Contingent consideration
August 31, 2023
$
3,538
$
-
$
-
$
3,538
Long-term debt
August 31, 2022
$
180,000
$
-
$
180,000
$
-
Contingent consideration
August 31, 2022
$
2,584
$
-
$
-
$
2,584
The long-term debt (including any current portion of long-term debt) had a $105,000 and $180,000 balance as of August 31, 2023 and 2022, respectively. The carrying value of the long-term debt approximates its fair value and has an interest rate of 6.43% as of August 31, 2023. 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.
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
In connection with accounting for the ABchimie acquisition on September 1, 2020, the Company recorded a contingent consideration liability included within Other liabilities on the consolidated balance sheet of €780 (approximately $928) on the acquisition date, representing the then fair value of contingent consideration payable upon the achievement of a performance-based target. The contingent consideration liability was valued using a Monte Carlo simulation model in an option pricing framework based on key inputs that are not all observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The Company assesses the fair value of the contingent consideration liability at each reporting period. Any subsequent changes in the estimated fair value of the liability are reflected in Loss on contingent consideration on the consolidated statement of operations until the liability is settled. As of August 31, 2023, the liability increased to $3,538 predominantly due to changes in non-market data assumptions as well as a shorter period to the payment date. See Note 14 to the consolidated financial statements for additional information on the acquisition of ABchimie.
Note 17-Net Income Per Share
The determination of earnings per share under the two-class method is as follows:
Years Ended August 31,
Net income
$
33,182
$
44,671
$
44,920
Less: Allocated to participating securities
Available to common shareholders
$
32,908
$
44,374
$
44,611
Basic weighted average shares outstanding
9,424,729
9,399,085
9,383,085
Additional dilutive common stock equivalents
33,887
35,256
45,331
Diluted weighted average shares outstanding
9,458,616
9,434,341
9,428,416
Net income available to common shareholders, per common and common equivalent share
Basic
$
3.49
$
4.72
$
4.75
Diluted
$
3.48
$
4.70
$
4.73
For the years ended August 31, 2023, 2022 and 2021, stock options to purchase 78,562, 96,912 and 59,508 shares of common stock, respectively, 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.
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
Note 18-Accumulated Other Comprehensive Income
The changes in accumulated other comprehensive income (loss), net of tax, were as follows:
Change in Funded
Foreign Currency
Restricted
Status of
Translation
Investments
Pension Plans
Adjustment
Total
Balance at August 31, 2021
$
$
(7,979)
$
(3,749)
$
(11,210)
Other comprehensive gains (losses) before reclassifications
(282)
(9,582)
(9,534)
Reclassifications to net income of previously deferred (gains) losses
(72)
-
Other comprehensive income (loss)
(354)
(9,582)
(9,157)
Balance at August 31, 2022
$
$
(7,200)
$
(13,331)
$
(20,367)
Balance at August 31, 2022
$
$
(7,200)
$
(13,331)
$
(20,367)
Other comprehensive gains (losses) before reclassifications
3,076
5,385
8,639
Reclassifications to net income of previously deferred (gains) losses
(85)
-
Other comprehensive income (loss)
3,579
5,385
9,057
Balance at August 31, 2023
$
$
(3,621)
$
(7,946)
$
(11,310)
The following table summarizes the reclassifications from accumulated other comprehensive income (loss) to the consolidated statements of income:
Amount of Gain (Loss)
Reclassified from
Location of Gain (Loss)
Accumulated Other
Reclassified from
Comprehensive Income
Accumulated
(Loss) into Income
Other Comprehensive
Twelve Months Ended
Income (Loss)
August 31, 2023
August 31, 2022
into Income
Gains on Restricted Investments:
Realized loss (gain) on sale of restricted investments
$
(114)
$
(96)
Selling, general and administrative expenses
Tax expense (benefit)
Gain net of tax
$
(85)
$
(72)
Loss on Funded Pension Plan adjustments:
Amortization of prior pension service costs and unrecognized losses
$
$
Other (expense) income
Settlement and curtailment loss
-
Other (expense) income
Tax expense (benefit)
(168)
(147)
Loss net of tax
$
$
Total net loss reclassified for the period
$
$
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
Note 19-Operations Optimization Costs
ERP System Upgrade
During the first quarter of fiscal 2023, the Company began the process of upgrading our current Oracle Legacy ERP System to the Oracle Fusion Cloud Platform. This upgrade will position us with a more advanced system to support business expansion, access to upgrades in functionality and a more modern system for operations. Additionally, the upgrade will be a multi-year, phased-in approach designed to mitigate any disruptions to our business. The Company recognized $1,476 in operations optimization expense related to the ERP system upgrade in fiscal 2023.
Relocation of Adhesives Systems Manufacturing to O'Hara Township, PA
During the third quarter of fiscal 2021, Chase announced to the employees at its Woburn, MA location that its adhesives systems operations, part of the Adhesives, Sealants and Additives segment’s electronic and industrial coatings product line, would be consolidating into the Company’s existing O'Hara Township, PA location. This rationalization and consolidation initiative-related announcement aligns with the second quarter announcement of the Company’s plan to move its sealant systems production from Newark, CA to Hickory, NC, described in more detail below. Chase Corporation obtained both the adhesive and sealants systems as part of its fiscal 2017 acquisition of the operations of Resin Designs.
The Company expensed $516, $463 and $0 in fiscal 2023, 2022 and 2021, respectively, related to the move. The project was completed in fiscal 2023 and no future costs related to this move are anticipated.
Relocation of Sealants Systems Manufacturing to Hickory, NC
During the second quarter of fiscal 2021, Chase began moving the sealant systems operations, part of the Adhesives, Sealants and Additives segment’s electronic and industrial coatings product line, from its Newark, CA 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. The sealant systems operations and Newark, CA location came to Chase Corporation as part of the fiscal 2017 acquisition of the operations of Resin Designs, and the Company’s lease in Newark, CA terminated in fiscal 2021.
The Company recognized $0, $147 and $977 in operations optimization expense related to the move in fiscal 2023, 2022, and 2021, respectively. The project was completed in fiscal 2022 and no future costs related to the move are anticipated.
Relocation of Chase Corporate Headquarters
The Company completed the relocation of its corporate headquarters to another location within Westwood, MA during the year ended August 31, 2022. The move, part of the Company’s ongoing consolidation and optimization initiative, capitalizes on the hybrid work model utilized by many of Chase’s corporate and administrative employees and is expected to provide future operational cost savings. The new facility also consolidates and houses research and development operations previously conducted at the previous Westwood, MA and Woburn, MA locations.
The company recognized $0 and $232 in fiscal 2023 and 2022, respectively, in operations optimization costs related to the Westwood move. The project was completed in fiscal 2022 and no future costs related to the move are anticipated.
CHASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share amounts
Note 20-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 of its litigation and threatened litigation as to the probability of ultimately incurring a liability and records its best estimate of the ultimate loss in situations where it assesses the likelihood of loss as probable.
Note 21-Valuation and Qualifying Accounts
The following table sets forth activity in the Company’s accounts receivable and sales return reserve:
Year ended
Balance at
Beginning of
Year
Charges to
Operations
Deductions to
Reserves
Balance at
End of Year
August 31, 2023 (1)
$
$
2,967
$
(2,744)
$
August 31, 2022
$
$
$
(794)
$
August 31, 2021
$
$
$
(738)
$
(1) The increase in charges to operations for the year ended August 31, 2023 primarily relate to the addition of NuCera (including $1,300 of current year sales returns and $90 related to the opening balance adjustment).
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
Balance at
Beginning of
Year
Charges to
Operations
Deductions to
Reserves
Balance at
End of Year
August 31, 2023
$
-
$
-
$
-
$
-
August 31, 2022
$
-
$
-
$
-
$
-
August 31, 2021
$
-
$
-
$
-
$
-
Note 22 - Subsequent Event
Other than disclosed in Note 14, there are no subsequent events.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.

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ITEM 9A. CONTROLS AND PROCEDURES
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, 2023. Grant Thornton LLP, an independent registered public accounting firm, audited the effectiveness of our internal control over financial reporting as of August 31, 2023.
Changes in Internal Control Over Financial Reporting
The Company implemented financial internal controls on the operations associated with NuCera, acquired in September 2022, during the year-to-date fiscal 2023 period.
Other than the foregoing, there have not been any changes in the Company’s internal control over financial reporting during the quarter ended August 31, 2023 that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.
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, 2023, 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, 2023, 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, 2023, and our report dated November 9, 2023 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 9, 2023

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ITEM 9B. OTHER INFORMATION
Item 9b - Other Information
On July 26, 2023, following the Company’s execution of the Merger Agreement, Adam P. Chase, the Company’s President and Chief Executive Officer, terminated a pre-arranged trading plan that he had originally adopted on November 16, 2022. The plan was intended to satisfy the affirmative defense conditions of Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. As originally adopted, the plan provided for the potential sale of up to 18,000 shares by the Adam P. Chase Trust, in accordance with the instructions of the plan, over a period ending no later than December 23, 2023.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10 - Directors, Executive Officers and Corporate Governance
Executive Officers
The following table sets forth information concerning our Executive Officers as of October 31, 2023. Each of our Executive Officers is selected by our Board of Directors and holds office until his successor is elected and qualified.
Name
Age
Offices Held and Business Experience during the Past Five Years
Adam P. Chase
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.
Peter R. Chase
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.
Michael J. Bourque
Chief Financial Officer of the Company since February 2021. Previously, Chief Financial Officer of Keystone Dental, Inc., since April 2019. Prior to that, Mr. Bourque was employed at Analogic Corporation since 2014, most recently as Senior Vice President, Chief Financial Officer and Treasurer.
Jeffery D. Haigh
Vice President, General Counsel and Corporate Secretary since February 2021. Previously, Vice President, General Counsel since joining Chase in July 2020. Prior to that, Mr. Haigh worked in private practice from 2018 to 2020, having worked at Clean Harbors, Inc. from 2008 to 2018, most recently as Senior Counsel.
Board of Directors
Set forth below is information regarding the members of the Board of Directors of the Company (the “Board), including their ages as of October 31, 2023 and their key skills and professional qualifications.
Business Experience During Past Five Years,
Has Been a
Name
Age
Other Directorships and Qualifications
Director Since
Adam P. Chase
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.
Adam Chase has over two decades of experience at Chase Corporation in various capacities including finance and operations as well as over ten years as an executive officer of the Company. His background in the day-to-day management of sales and operations as well as his current perspective as Chief Executive Officer gives him insight into the critical components of strategy and tactics that will help grow the Company. The Board believes that it is important to have the insight of the Chief Executive Officer of the Company reflected in its strategic thinking.
Peter R. Chase
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. He is currently a director of AIM Mutual Insurance Company.
Peter R. Chase was named an executive officer of the Company in 1988 and has more than 50 years’ experience in various positions since starting with Chase Corporation. He has extensive knowledge of both the day-to-day operations of the Company and its strategic vision. The Board believes that Peter Chase's deep understanding of the Company's operations, its history and its industry benefit the Board of Directors in its deliberations and in setting strategy for the Company.
Business Experience During Past Five Years,
Has Been a
Name
Age
Other Directorships and Qualifications
Director Since
Mary Claire Chase
President of Chase Partners, LTD., an executive search firm specializing in financial services and management consulting, since August 2000. Prior to launching Chase Partners, Ms. Chase served as Senior Vice President, Director of Executive Search for Putnam Investments and Director of Global Staffing and Development for Arthur D. Little, Inc.
Mary Claire Chase has an extensive background in human resources. Her experience with evaluating executive talent gives her insight into organizational structure which is critical to executing strategic plans.
Thomas D. DeByle
Retired. Previously CFO of Plastic Industries, Senior Vice President and CFO at NN, Inc. (NASDAQ: NNBR), Vice President and Chief Financial Officer of Standex International (NYSE: SXI) from March 2008 through September 2019. He also is a director and audit chair of a privately held company Good Foods, LLC.
Mr. DeByle's financial background and broad expertise, including experience as an executive for publicly traded companies that manufacture a variety of products and provide services for diverse commercial and industrial markets, offers a valuable contribution to the Board, particularly on issues relating to corporate finance, business strategy, strategic acquisitions and divestitures, managerial issues, and banking relationships.
John H. Derby III
President at Derby Management, a management consulting firm specializing in business planning, sales and marketing in both emerging and middle market growth companies, since 1990. Mr. Derby is also the Chairman of Let's All Do Good, a software developer for mobile apps for nonprofits, since November 2022. He has held prior president and EVP positions at Datamedix, CB Sports, Mayer Electronics, EarCheck and Becton Dickinson Medical Systems.
Mr. Derby is a Professor of Marketing and Sales at Tufts University within the Derby Entrepreneurship Center where he has taught for 16 years and is a lecturer at MIT where he has taught business planning for 21 years. Mr. Derby has been a director of 21 privately and publicly held companies with current positions at Chase Corporation and privately held Loci Controls, AVIANT Healthcare and Associated Industries of Massachusetts.
Mr. Derby’s strong executive, consulting and sales experience and insight benefit the Company, particularly through his core expertise in sales, marketing and strategic planning.
Business Experience During Past Five Years,
Has Been a
Name
Age
Other Directorships and Qualifications
Director Since
Chad A. McDaniel
Since November 1, 2022, Mr. McDaniel has been the Chief Administrative Officer of Axel Johnson, Inc., a private operating company that invests in and helps grow industry-leading business in the medical technology, water, housing, and specialized manufacturing sectors. Mr. McDaniel was the Senior Vice President and General Counsel of Unifrax Holdings until January 4, 2022. On October 1, 2021, Unifrax acquired and merged with Lydall, Inc. (NYSE: LDL), where Mr. McDaniel was the Executive Vice President, General Counsel and Chief Administrative Officer, leading the Company's global Legal and Environmental, Health & Safety organizations. He was with Lydall since 2013.
Mr. McDaniel's legal and human resource background and broad expertise, including experience working for publicly traded manufacturing companies, offers a valuable contribution to the Board, particularly on issues relating to corporate legal and regulatory matters, strategic acquisitions, managerial issues, banking relationships, corporate finance and business strategy.
Dana Mohler-Faria
Dr. Mohler-Faria is currently President Emeritus of Bridgewater State University, after having served as president from 2002 to 2015, and is a former member of the Massachusetts Board of Elementary and Secondary Education. He chairs and is involved in multiple non-profits focused on leadership and higher education. He was formerly the Special Advisor for Education to the Governor of Massachusetts prior to the creation of a cabinet-level Secretary of Education in 2008.
Dr. Mohler-Faria's higher education background, including his prior executive role overseeing one of the largest public universities in Massachusetts, along with his experience advising state government, offers a valuable contribution to the Board, particularly on matters relating to leadership of a diverse organization, working with state government, finance and strategic vision.
Business Experience During Past Five Years,
Has Been a
Name
Age
Other Directorships and Qualifications
Director Since
Ellen Rubin
Ms. Rubin is currently CEO and Founder of Causely, a new venture in the IT Operations space. She was previously CEO and Founder of ClearSky Data (acquired by Amazon), and later served as General Manager at Amazon Web Services for several hybrid cloud services. Previously, she was CEO and Founder of CloudSwitch (acquired by Verizon). Earlier in her career she was VP Marketing at Netezza, a leader in the data warehousing market that went public in 2007 and was subsequently acquired by IBM. Ms. Rubin has been recognized as one of the Top 10 Women in the Cloud by CloudNOW, and currently serves as an independent Board Director at Corvus Insurance. Ms. Rubin has an MBA from Harvard Business School.
Ms. Rubin's proven leadership and knowledge within the information technology space, combined with her unique experience serving as CEO and founder across multiple innovation-based organizations and hands-on capital markets activity and acquisition experience are well-aligned with Chase's strategy and strengthen our Board's perspective and skill sets.
Joan Wallace-Benjamin
Dr. Wallace-Benjamin, currently the founder and president of J Wallace-Benjamin Consulting LLC, an executive coaching practice, since 2019, has a 38-year career in senior executive roles, during 27 of which she served as a Chief Executive Officer in the non-profit, governmental, and private sectors. Dr. Wallace-Benjamin last served for 15 years, through 2018, as the President and CEO of The Home for Little Wanderers, which is America’s oldest and one of New England’s largest child and family services organizations. She also served as the President and CEO of the Urban League of Eastern Massachusetts. She was the Director of Operations for the Boys and Girls Clubs of Boston; served as an executive search consultant with Whitehead Mann, a global executive search firm headquartered in London; and as the first Chief of Staff for Massachusetts Governor Deval Patrick.
Dr. Wallace-Benjamin’s extensive background and executive leadership as a CEO for complex organizations brings a wealth of experience to the Board. Her experience with challenging executive decision-making, work with M&A, enterprise integration and transformation, strategic planning and management, and advising CEOs, are valuable assets for the Board.
Business Experience During Past Five Years,
Has Been a
Name
Age
Other Directorships and Qualifications
Director Since
Thomas Wroe, Jr.
Retired. Chairman of the Board of Apex Tool Group, LLC from 2013 to 2020. Mr. Wroe served as CEO of Apex Tool Group, LLC from 2014 to 2016. He served as Chairman of the Board of Sensata Technologies (NYSE:ST) from its IPO in 2010 until 2015, and served on its Board until 2020. Mr. Wroe was also CEO of Sensata Technologies through 2012.
Mr. Wroe’s strong executive experience, including serving as chief executive of a large public company, provides a well-rounded global perspective. He has experience in the oversight of complex operations and engineering, acquisitions and integration, manufacturing and customer relations, and offers additional business development expertise to the Board.
Adam P. Chase, President and Chief Executive Officer of the Company, is the son of Peter R. Chase, grandson of Edward L. Chase (deceased) and the nephew of Mary Claire Chase.
Peter R. Chase, Executive Chairman of the Company, is the father of Adam P. Chase, the son of Edward L. Chase (deceased) and the brother of Mary Claire Chase.
Mary Claire Chase is the daughter of Edward L. Chase (deceased), the sister of Peter R. Chase and the aunt of Adam P. Chase.
Delinquent Section 16(a) Reports
The Company’s directors, executive officers and ten percent shareholders file reports with the SEC indicating the number of shares of any class of the Company’s equity securities that they owned when they became a director, executive officer or ten percent shareholder and, after that, any changes in their ownership of the Company’s equity securities. The Company believes that all reporting persons filed on a timely basis the reports required by Section 16(a) of the Securities Exchange Act of 1934, as amended, during the most recent fiscal year.
Code of Ethics
The Company has adopted the Chase Corporation Code of Ethics, which is applicable to all Chase employees, including our Executive Chairman, President and Chief Executive Officer, Treasurer and Chief Financial Officer, General Counsel, and other employees in the financial reporting process. The Company has also adopted a Code of Business Conduct and Ethics for Directors of Chase Corporation, which is applicable to members of our Board of Directors. The Chase Corporation Code of Ethics and the Code of Business Conduct and Ethics for Directors of Chase Corporation are both available on the Chase Corporation website (www.chasecorp.com). The Company will disclose any amendment to the codes of ethics, applicable to our directors and executive officers, and any waiver, including an implicit waiver, from the provisions of these codes of ethics as they relate to such directors and officers, on its website.
Audit Committee
The Audit Committee of the Board of Directors recommends to the Board of Directors the engagement of the Company’s registered public accounting firm, reviews the scope and extent of its audit of the Company’s financial statements, reviews the annual financial statements with the registered public accounting firm and with management, and makes recommendations to the Board of Directors regarding the Company’s policies and procedures as to internal accounting and financial controls. The current members of the Audit Committee are Thomas D. DeByle, Chairman, Chad A. McDaniel, Joan Wallace-Benjamin, and Ellen Rubin. Each member of the committee meets the criteria for
independent directors, as defined in the listing standards of the NYSE American and the applicable regulations of the Securities and Exchange Commission. The Board has determined that each of Mr. DeByle and Mr. McDaniel are audit committee financial experts as defined in Securities and Exchange Commission regulations. The Audit Committee operates under a written charter that is available through the Company’s website at www.chasecorp.com.

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ITEM 11. EXECUTIVE COMPENSATION
Item 11 - Executive Compensation
Executive Officer and Director Compensation - Compensation Discussion and Analysis
Introduction
This Compensation Discussion and Analysis is intended to provide a context for the disclosures contained with respect to the compensation paid to our executive officers. Compensation information is presented below for our Executive Chairman, Peter R. Chase, our President and Chief Executive Officer, Adam P. Chase, our Treasurer and Chief Financial Officer, Michael J. Bourque and our General Counsel, Jeffery D. Haigh. Collectively, these officers are referred to as our “named executive officers.” Specifically, this Compensation Discussion and Analysis will explain the objectives and material elements of their compensation during the fiscal year ended August 31, 2023.
The Compensation and Management Development Committee of our Board of Directors has the responsibility of developing and overseeing a comprehensive compensation philosophy, with strategies and principles that have the support of the Board of Directors and management, and that ensure the fair and consistent administration of our compensation program. The Compensation and Management Development Committee makes recommendations to the full Board for approval relative to the total compensation to be paid to the named executive officers, including salary, performance bonus, equity awards, long-term awards, benefits, and perquisites.
The members of the committee are Thomas Wroe, Jr., Chairman, Thomas D. DeByle, and John H. Derby III. Each member of the committee is independent, as independence for Compensation and Management Development Committee members is defined under the listing standards of the NYSE American and the applicable regulations of the Securities and Exchange Commission. The Compensation and Management Development Committee operates under a written charter that is available through the Company’s website at www.chasecorp.com.
In this analysis, we refer to the Compensation and Management Development Committee as “the Committee” or “the Compensation and Management Development Committee.”
Philosophy and Objectives of Our Compensation Program
The primary objectives of the Compensation and Management Development Committee are to ensure that our executive compensation and benefits programs:
●
retain executive talent by offering compensation that is commensurate with pay at other public companies of a similar size in the same or similar industries in the region, as adjusted for individual factors, and considering the complexity of the Company’s business;
●safeguard company interests and the interests of our shareholders;
●
are effective in driving executive performance by having, for members of the senior management team, pay at risk, so actual pay is tied to company-wide goal achievement and superior performance is rewarded;
●foster teamwork on the part of management;
●are consistent and competitive with Chase Corporation’s compensation peer group;
●are cost-efficient and fair to employees, management, and shareholders; and
●are well-communicated to and understood by program participants.
Our Compensation and Management Development Committee believes that the most effective compensation program is one that will provide incentives that are directly linked to the achievement of company strategies through easily measured, company-wide performance targets, while providing a reasonable level of income security to the named executive officers through competitive base salaries and retirement benefits. Our executive compensation reflects a balance of cash and non-cash compensation, and a mix of currently paid compensation and long-term incentives. The Compensation and Management Development Committee does not set a rigid target for these mixes, and the mix will necessarily vary from year to year based upon our underlying financial performance. Our incentive plans combine financial targets to reward performance with time-based vesting to assist retention.
Committee Purposes and Responsibilities
One of the primary purposes of the Compensation and Management Development Committee is to determine the total target compensation levels for the senior executive officers of the Company and to establish and annually review the programs that will determine the actual rewards as compared to established targets.
The Committee is charged with ensuring that the target compensation levels, and the allocation of short-term and long-term components are sufficient to attract, motivate, and retain seasoned professional managers, while at the same time ensuring that the pay is reasonable and fair to our shareholders in light of the Company’s financial performance and when compared to executive officers of similar position and responsibility at comparable businesses.
The Committee is also responsible for reviewing the annual compensation for service on the Board of Directors or for service as a member or chair of any of the various committees of the Board of Directors, and, when appropriate, recommending any changes to the Board for approval.
The Committee has the authority to retain and terminate any legal counsel or any compensation or other consultant to be used to assist in the evaluation of director or executive compensation and has sole authority to approve the consultant’s fees or other retention terms.
The Committee also reviews and administers our equity compensation plans, and reviews any existing or proposed employment agreement, change in control or severance agreement, or any special or supplemental benefits not offered as part of a broad-based plan that are made available to our named executive officers. Where appropriate, it recommends adoption, amendment, or termination of such programs or agreements to the full Board of Directors.
Role of Executive Officers in Compensation Decisions
Our Compensation and Management Development Committee makes all determinations affecting the compensation for our named executive officers, including our Executive Chairman and our Chief Executive Officer, and recommends those determinations to the full Board of Directors for approval. Our Executive Chairman and Chief Executive Officer may from time-to-time attend meetings of the Committee as non-voting advisory members, except that they are not present for any discussion of their own compensation. The Compensation and Management Development Committee receives and considers our Executive Chairman’s and our Chief Executive Officer’s evaluations of, and their recommendations as to all elements of compensation of, our Chief Financial Officer and our General Counsel. The Committee expressly reserves the right to exercise its discretion in modifying any adjustments or awards recommended by our Executive Chairman or our Chief Executive Officer, although historically the Committee has given significant weight to these recommendations.
Use of Compensation Consultants and Benchmarking Data
A description of the extent to which we have historically benchmarked our base salary levels against other companies is described below under “Principal Elements of our Fiscal 2023 Compensation Program - Base Salary.” The Committee has taken advice from expert compensation consultants to set the position values and salary ranges for executive officers. The Committee adjusts base salaries annually for the Company to remain competitive with respect to executive compensation. The compensation consultants have used similar benchmarking data in recommending the performance-based components of the executive compensation package. The Committee most recently engaged a compensation consultant, Pearl Meyer & Partners (“Pearl Meyer”) in August 2022 for benchmarking purposes in fiscal 2023. Pearl Meyer provided the Committee and management with recommendations based on its review at that time. Prior to this most recent engagement, the Company had last hired Pearl Meyer to perform a similar assessment in 2017.
Principal Elements of our Fiscal 2023 Compensation Program
The principal elements of compensation for our named executive officers, other than our Executive Chairman, during fiscal 2023 were:
●base salary;
●
a cash bonus component based on the performance of our business against corporate objectives under our annual cash incentive plan;
●long term incentive compensation in the form of equity awards including:
●
a restricted stock award based on the performance of our business against different corporate objectives (representing 50% of the total equity component target value);
●
a time-based vesting restricted stock award (representing 25% of the total equity component target value); and
●
stock options (representing 25% of the total equity component target value).
In fiscal year 2017 the Committee determined that Peter R. Chase, our Executive Chairman, would not participate in the cash incentive program component of the Company’s executive compensation programs. This shift in the allocation of annual pay components for Peter R. Chase away from the cash incentive program reflected a shift in the day-to-day responsibilities of the Executive Chairman following Adam P. Chase’s appointment to the Chief Executive Officer role in fiscal 2015. Peter R. Chase has not participated in the Company’s equity incentive programs since 2013, in recognition by the Committee of the diminishing incremental benefit of additional equity grants in achieving the shareholder alignment and retention objectives of the equity program considering Mr. Chase’s accumulation of equity from prior years of service. The Executive Chairman’s compensation for fiscal 2023, therefore, consisted primarily of his salary, as it had in the prior six years.
For our named executive officers other than the Executive Chairman, the financial measurement metrics and targets used in both the annual cash incentive plan and the annual equity award plan are subject to annual review by the Committee, which reserves the right to set different objectives on either the cash incentive plan or equity award program as it feels appropriate considering the annual and long-term objectives of the Company. As discussed in more detail below, the Committee utilizes differing financial performance targets for the cash incentive plan and the equity awards program. The two programs also differ in the dollar value of the target awards and in their vesting provisions, since payments under the cash incentive plan are made after the end of each fiscal year, and the equity awards (including those that are subject to additional performance-based vesting criteria) customarily vest over a period of three years from the time of grant. The total compensation packages for our Chief Executive Officer, Chief Financial Officer, and General Counsel thus provide a mix of (1) current cash payments in the form of salary, independent of year-to-year financial performance; (2) annual cash payments determined by reference to the Company’s actual results of operations for the
year compared to a target; and (3) equity awards, subject (in the case of our Chief Executive Officer and Chief Financial Officer) to vesting provisions relating to the Company’s financial results, together with restricted stock and stock options that are not specifically tied to financial performance, but all of which are subject to time-based vesting provisions in order to foster our retention objectives.
The cash incentive plan for fiscal 2023 set target compensation levels with reference to targeted earnings before interest expense, taxes, depreciation and amortization (“EBITDA”), as adjusted to exclude costs and gains or losses related to our acquisitions and divestitures, costs of products sold related to inventory step-up to fair value, settlement gains or losses resulting from lump sum distributions to participants in our defined benefit plans, and other significant items (“Adjusted EBITDA”), less the effects of foreign transaction gains or loss (“Adjusted EBITDAX” or the “Adjusted EBITDA-based target”). The performance-based equity award program sets target compensation levels with respect to a combination of (1) our earnings per share (“EPS”) for the fiscal year in question, as adjusted at the discretion of the Committee, and (2) our return on invested capital (ROIC) over a three-year period. Our calculation of each such metric under both plans is described in more detail below. As a result, a substantial proportion of our named executive officers’ total compensation under both the cash and equity incentive programs is tied to our earnings in each fiscal year. The Committee determined for 2023 that an Adjusted EBITDA-based target is the most appropriate tool for measuring the underlying performance of the Company and its management team for the annual cash incentive plan, while EPS and ROIC are used for the equity plan as they are more common and consistent measures for longer term incentive programs and align with how shareholders are rewarded. In addition, the Committee has chosen to emphasize company-wide achievement of financial objectives in this manner, as opposed to emphasizing more subjective individual performance criteria or measurements based upon business segments or other operating data, because it believes it is important to use a metric that is easily measured and understood from the beginning of the year, that fosters teamwork among the management team, and that most directly aligns the interest of the named executive officers participating in the program with those of all shareholders. The Committee does retain discretion to adjust or supplement the cash incentive awards paid, either upward or downward.
The following discussion seeks to explain why the Compensation and Management Development Committee has chosen to pay each compensation element, how it determines the amount of each element, and how the element and the Committee’s decisions regarding that element in fiscal 2023 fit into the Company’s overall compensation objectives and affect decisions regarding other elements.
Base Salary. Each of our named executive officers receives a base salary. The objective is to provide base compensation comparable to base compensation that the executive could earn in a similar position at other companies. To better understand the compensation practices of similar companies, the Compensation and Management Development Committee from time to time, reviews data from a custom peer group. The peer group used for benchmarking 2023 salary ranges was identified by our compensation consultant, Pearl Meyer, in 2022. Peer group information serves as the primary reference point for the Compensation and Management Development Committee with Pearl Meyer market survey data used as a secondary reference in attempting to keep salary ranges competitive.
The following companies comprised of our peer group for fiscal 2023:
● Balchem Corporation
● CSW Industrials, Inc.
● FutureFuel Corp.
● GCP Applied Technologies Inc,
● Hawkins, Inc.
● Insteel Insutries, Inc.
● Livent Corporation
● LSB Industries, Inc.
● Quaker Chemical Corporation
● Ramaco Resources, Inc.
● Ranpak Holdings Corp.
● Trecora Resources
● UFP Technologies, Inc.
● United States Lime & Minerals, Inc.
This peer group used for benchmarking was developed based on comparability to the Company in terms of industry and size, with data gathered from peer group proxy statements.
Cash Incentive Plan. At the beginning of each fiscal year, following the annual budget presentation by management to the Board of Directors, the Committee sets a corporate performance target for the upcoming fiscal year to be used in connection with the Company’s incentive compensation programs. For the reasons discussed above, our Executive Chairman does not participate in the cash incentive plan. As noted above, for the cash incentive plan the financial target was established as an Adjusted EBITDA-based target for fiscal 2023. The Adjusted EBITDA-based target was set by the Committee with reference to both historical performance and expected future performance. The Committee believes that the targets set as a general matter should be reasonably attainable through consistent performance as compared to recent years, and it is the Committee’s expectation that the actual awards granted under the relevant plan will exceed the “target” awards where management achieves growth over historical annual Adjusted EBITDAX levels. The Adjusted EBITDA-based targets are set in a way that tends to generally reflect improvement over historical results, at least during periods of multi-year growth in Adjusted EBITDAX.
At the end of the fiscal year, actual results are compared to the target established at the beginning of the year. In establishing the compensation program, it is the Board’s intent to exclude from actual performance measurements the effect of items generally consistent with items excluded in the Company’s historical definition of Adjusted EBITDA. The Committee consequently has the discretion to decide and has decided from time to time in the past, to exclude certain items or to make other adjustments in order to fairly reflect our underlying operating performance for the year.
In order for any amounts to be payable under the plan, the Company must meet a threshold level of 80% of the Adjusted EBITDA-based target for any amounts to be paid as part of the plan. Actual payments are made under the plan by reference to the target awards established by the Committee for each of the named executive officers as a percentage of their base salaries, although they can be subject to adjustment as described below. The maximum award under the cash incentive plan is reached at 120% of the target performance measure. The Company’s actual Adjusted EBITDAX was $96.8 million for fiscal 2023 and represented achievement at approximately 81% of the target amount for the year, resulting in the payout of 52.25% of the target award under the cash incentive plan.
The reconciliation from net income, the most directly comparable financial measure presented in accordance with U.S. GAAP, to Adjusted EBITDAX for fiscal 2023 and 2022 is as follows (in thousands):
Year Ended August 31,
Net income
$
33,182
$
44,671
Interest expense
8,981
Income taxes
10,009
13,927
Depreciation expense
8,906
3,547
Amortization expense
23,666
11,751
EBITDA(1)
$
84,744
$
74,321
Loss on contingent consideration
Operations optimization costs
1,992
Acquisition-related costs
4,299
4,000
Purchase accounting adjustments
2,242
-
Pension settlement loss
-
Loss on impairment/write-off of long-term assets
1,689
-
Adjusted EBITDA(1)
$
95,881
$
79,595
Foreign transaction (gains) losses
(442)
Adjusted EBITDAX
$
96,842
$
79,153
(1) Our calculations of EBITDA and Adjusted EBITDA, non-GAAP financial measures, are explained in greater detail in our cautionary note on Form 10-K. As outlined above, Adjusted EBITDAX further excludes the impact of foreign transaction gains or losses.
Amounts potentially payable under the cash incentive plan, as a percentage of salary at the beginning of the year, and amounts actually paid are reflected in the table below for fiscal year 2023.
Cash Awards Payable for 2023
Actual FY 2023 Payment
Award as
percentage
Final
At 80% of
At 100%
At 120%
of annual
payments
Name of executive
target
of target
of target
salary
made
(as percentage of base salary)
Adam P. Chase
%
%
%
%
$
320,000
Michael J. Bourque
%
%
%
%
$
107,000
Jeffery D. Haigh
12.5
%
%
%
%
$
34,000
A similar cash incentive program was approved by the Committee and maintained and paid out of a bonus pool, with payments determined by reference to our Adjusted EBITDA-based target, for other key employees at the Company. In fiscal 2023, approximately 584 employees participated in that program, with most payments at the discretion of the Executive Chairman and the Chief Executive Officer.
Equity Incentive Plan. The third element of our compensation program is our equity-based long-term incentive plan. In 2023 our equity incentive plan used a combination of three types of equity awards: performance-based restricted stock, time-vesting restricted stock, and stock options. For the reasons discussed above, Peter R. Chase does not participate in the equity incentive plan.
The performance-based element measures annual performance against (1) an earnings per share (“EPS”) base target and (2) a return on invested capital (“ROIC”) base target (weighted 80% and 20%, respectively, of the total performance-based equity award target value for 2023). The performance-based equity award target represented 50% of the total target equity award value for Adam P. Chase, Michael J. Bourque, and Jeffery D. Haigh for 2023. The other half of the total target equity award value for Adam P. Chase, Michael J. Bourque and Jeffery D. Haigh was split evenly between time-based vesting restricted stock and stock options.
The following table shows, for each of the named executive officers participating in the equity incentive plan, the total target equity awards for each officer as determined at the beginning of the fiscal year.
Target Equity
Performance
Time Vesting
Award as % of
Value at
Shares at
Shares at
Stock Options at
Name
Salary (1)
Grant Date
Grant Date (2)
Grant Date (3)
Grant Date (4)
Adam P. Chase
%
$
1,530,000
8,677
4,339
11,367
Michael J. Bourque
%
$
204,600
1,160
1,520
Jeffery D. Haigh
%
$
131,000
(1)
Total target equity award as a percentage of salary in the table represents the initial amount determined on September 1, 2022 (the first day of fiscal 2023).
(2)
Value represents 50% of the total equity award target for Adam P. Chase, Michael J. Bourque and Jeffery D. Haigh assuming achievement at 100% of the performance targets, using the closing share price on the last day of the prior fiscal year. Based upon actual fiscal 2023 financial performance, the total actual payout for the performance share component of the equity compensation plan for fiscal 2023 was 1,124 shares for Adam P. Chase, 150 shares for Michael J. Bourque and 96 shares for Jeffery D. Haigh due to achieving below the performance target, calculated in the manner described under “Performance-based restricted stock” below. Consequently, 7553, 1010, and 647 stock awards from the original performance grants were forfeited by Adam P. Chase, Michael J. Bourque, and Jeffery D. Haigh, respectively, subsequent to August 31, 2023.
(3)
Value represents 25% of the total equity award targets for Adam P. Chase, Michael J. Bourque and Jeffery D. Haigh using the closing share price on the last day of the prior fiscal year.
(4)
Value represents 25% of the total equity award for Adam P. Chase, Michael J. Bourque and Jeffery D. Haigh, using the Black-Scholes value of the options on the last day of the prior fiscal year.
In the event of a named executive officer’s retirement, death, disability, or dismissal without cause before the scheduled vesting date, the awards will vest pro rata to the date of the termination of employment. In the event of a named executive officer’s voluntary termination of employment or termination for cause, all unvested portions of the award will be forfeited. Upon a change of control of the Company, any unvested restricted stock awards will automatically vest, and any unvested stock options may vest at the discretion of the Committee.
Each of the three types of equity awards that collectively comprise our equity incentive plan are described in more detail below:
Performance-based restricted stock. The performance-based restricted stock awards are made at the beginning of the year based upon the target performance levels, with the target number of shares being determined by dividing the target equity award value by our stock price on the grant date. For fiscal 2023, the EPS target set by the Committee was $5.97 and the ROIC target set by the Committee was 21.4%.
The final award amounts are determined after the end of the fiscal year by reference to our actual performance for the year. For any payments to be made under the EPS component or the ROIC component of the equity incentive plan, the Company must achieve at least 80% of the EPS target or the ROIC target, as applicable. The EPS target was weighted as 80% of the target performance-based equity award, and the ROIC target was weighted as 20% of the target performance-based equity award. If the Company achieves less than 80% of both performance targets, the full award would be forfeited. If the Company achieves 80% of either of the targets, then the actual payment would be 50% of the target shares available under that target (with the other 50% being forfeited). Achievement between 80% and 100% of either target would be pro-rated. If the Company achieves 120% of either target, then the executive’s equity award would be 200% of the targeted share amount available under that target. Achievement between 100% and 120% of either target would be pro-rated. The total opportunity is capped at 200% of the targeted share amount. Accordingly, there is no incremental award in 2023 at performance levels above 120% of either target.
EPS as defined in the plan may differ from earnings per share as calculated under generally accepted accounting principles, since the plan uses the fully diluted number of shares outstanding as of the first day of the fiscal year and may include other adjustments as determined by the Compensation and Management Development Committee. Our basic and diluted EPS as reported under U.S. generally accepted accounting principles for fiscal 2023 were $3.49 and $3.48 per share, respectively. Using the fully diluted number of shares outstanding as of August 31, 2022, the EPS used for purposes of evaluating performance under the 2023 equity plan was $3.52, or less than the 80% threshold of the target EPS of $5.97. The actual payments made under the EPS performance share component of the plan thus represented 0% of the targeted share amount for that component due to being under the 80% threshold of the target EPS of $5.97.
ROIC is defined in the plan as the three-year average earnings before interest expense and income tax, divided by the three-year average of the sum of equity and debt less cash on hand at year-end. The fiscal 2023 target was set as the trailing three-year average ROIC, calculated using the fiscal 2023 budget and fiscal 2022 and 2021 actual results. Actual ROIC for the measurement period was calculated using actual results for the three years ended August 31, 2023. The ROIC used for purposes of evaluating performance under the 2023 equity plan was 18.4%, or approximately 86% of the target ROIC of 21.4%. The actual payments made under the ROIC performance share component of the plan thus represented approximately 64.75% of the targeted share amount for that component.
The final share amounts are calculated and approved by the Compensation and Management Development Committee upon finalization of our financial results for the fiscal year. Equity awards made for fiscal 2023 fell below the threshold for the EPS and between the threshold and target levels for ROIC. The restricted stock award under the plan will not vest until the last day of the second fiscal year following the fiscal year that is used as the performance period. In other words, the performance-based equity awards for fiscal 2023 will vest on August 31, 2025.
The Committee believes that the combination of performance measures to determine the number of shares of common stock underlying each award, and the “cliff” vesting of the award two years after the end of the performance period, is useful in accomplishing the dual objectives of rewarding superior performance and encouraging retention of its qualified executives.
Time-based vesting restricted stock. The Committee also incorporates time-based vesting shares into our long-term incentive plan for participating executive officers. The purpose of the time vesting restricted stock grant is to provide a long-term incentive in the form of a fixed award that is not subject to a performance measurement target. The number of shares is determined by reference to the value of the award (25% of the total target equity award value for Adam P. Chase, Michael J. Bourque and Jeffery D. Haigh) divided by the closing market price of our common stock on the last day of the prior fiscal year. The shares vest in three years from their grant, or on August 31, 2025.
Stock options. The Committee incorporates stock option grants into our long-term incentive plan on a formulaic basis as part of the overall long-term incentive plan for certain executive officers. Thus, 25% of the total target value of the equity plan awards for 2023 for Adam P. Chase, Michael J. Bourque and Jeffery D. Haigh, was made in options to purchase common stock. The purpose of the option grant was to further align the executives’ interests with that of the shareholders, to encourage equity participation among management team members and provide a long-term incentive for their future commitment as key members of the executive management team. The option grant was made effective as of
September 1, 2022, with an exercise price equal to the fair market value of the common stock on the grant date. The number of shares of common stock subject to these option grants was determined by taking 25% of the total equity award opportunity and dividing it by the Black-Scholes value of an individual option on the date of grant. The options granted in fiscal 2023 will vest in three equal annual installments, beginning on August 31, 2023.
Discretionary Bonuses. The Committee does not consider discretionary cash bonuses to be a material part of the executive compensation program, outside of the cash incentive plan described above. As noted above, the Committee has the discretion to adjust an award determined under the cash incentive plan upward or downward and has exercised that discretion in the prior years in a manner that has historically had a small impact on total compensation compared to the objective components. No such adjustments were made with respect to the fiscal 2023 compensation program.
Voting and Dividends on Stock Awards. Participants in the equity award program can vote and receive dividends upon their restricted shares before the shares vest. The Committee has determined that permitting the participants to vote and receive dividends prior to the vesting of the awards was appropriate and consistent with the Committee’s retention and pay for performance objectives. The Committee considered the fact that dividends on unvested awards would typically represent a small percentage of the executives’ total compensation. Dividends paid on unvested awards are not required to be repaid if the vesting provisions are not met, but the underlying shares themselves remain subject to forfeiture through the vesting date, putting the bulk of the economic value of the award at risk and subject to the performance and time-based vesting conditions.
Retirement Programs
In addition to the primary components of executive pay described above, we maintain certain retirement plans and benefits for our executive officers. Many of these plans are available to larger groups of employees. The Committee feels that the opportunity to participate in programs that assist the executives and other employees in saving for retirement is an important part of those employees’ compensation package.
●
The named executive officers may elect to make contributions to a retirement account in our Chase Deferred Salary Savings Plan (the “401(k) plan”), which is available to substantially all employees of certain businesses of the Company and under which we made a matching contribution to each participant in each of the last three fiscal years. The matching contribution under the 401(k) plan is the equivalent of 100% of the first one percent of the employee’s pre-tax contribution to the plan plus 50% thereafter, up to an amount equal to three and one-half percent of the employee’s annual salary. Our matching contributions to the accounts of the named executive officers are shown in the “All Other Compensation” column in the Summary Compensation Table.
●
We also maintain a non-qualified Supplemental Savings Plan covering selected employees, including our named executive officers. Participants may elect to defer a portion of their compensation for future payment in accordance with the terms of the plan. Our Executive Chairman, Peter R. Chase, received a full payout of his non-qualified Supplemental Savings Plan balance in fiscal 2017 after entering a separation of service letter with the Company, reducing the level of services that he performs as the Executive Chairman to no more than 20% of the average level of services performed in the previous 36 months.
●
We maintain a tax-qualified defined benefit pension plan and a non-qualified Supplemental Pension Plan. The Supplemental Pension Plan covers those of our employees who from time to time may be designated by our Board of Directors. During fiscal 2023, our Executive Chairman, Peter R. Chase, and our President and Chief Executive Officer, Adam P. Chase, were designated as being covered. These plans are described in more detail under “Executive Compensation-Other Executive Plans-Pension Plans”. As noted in that section, benefits are paid at a higher rate to employees who became employed prior to May 1, 1995 or who are covered by certain collective bargaining agreements and meet certain other qualifications, as compared to those who were employed after that date. Our Executive Chairman, Peter R. Chase, began collecting his non-qualified Supplemental Pension Plan balance in fiscal 2017 after entering a separation of service letter with the Company, as noted above.
Other Benefits
The Company owns a life insurance policy on Peter R. Chase as a mechanism available for use to fund obligations of the Company, including the unfunded, non-qualified Supplemental Pension Plan described above.
We provide our named executive officers a car allowance of $1,000 per month. We provide our Executive Chairman, Chief Executive Officer, Chief Financial Officer and General Counsel with reimbursements for certain financial planning and tax services up to $5,000 per year. Our Compensation and Management Development Committee considers these arrangements to be fair and reasonable considering the relatively low cost to the Company.
Named executive officers may also participate in our medical and dental insurance offerings by electing to make payroll deductions designed to cover approximately 35% of the cost of these programs (with the company covering the other 65% of the cost). We also provide disability and life insurance coverage for our named executive officers and pay a portion of the related premiums.
Stock Ownership Guidelines
The Board of Directors believes that it is important to align the interests of our senior management and directors with those of our shareholders. As described above, the Committee takes this principle into account in designing the compensation programs in which our executive officers participate. The Board has established stock ownership guidelines that encourage the accumulation and retention of our common stock to further foster these objectives.
Our current stock ownership guidelines are expressed as a multiple of base salary or, in the case of directors, a multiple of annual cash compensation. Under the guidelines, each of our Executive Chairman and our Chief Executive Officer are required to acquire and hold stock with a fair market value of at least five times base salary. For our Chief Financial Officer, the multiple is three times base salary, and for our General Counsel and other vice presidents, the multiple is one times base salary. Non-employee directors are required to acquire and hold stock with a fair market value of at least five times annual cash compensation. Directors are required to achieve compliance 36 months from the first election to the Board. Newly appointed executives and covered individuals who accept an appointment to a position requiring a higher retention level are required to comply with this policy within 36 months of their appointment (or 60 months in the case of vice presidents). Shares of stock subject to time-based vesting provisions count toward the ownership guidelines but shares subject to performance-based vesting conditions and shares underlying stock options do not count toward the ownership guidelines. The Compensation and Management Development Committee retains the discretion to grant waivers or make exceptions to the policy under appropriate circumstances.
The full stock ownership guidelines are available on our corporate website, www.chasecorp.com.
Prohibitions on Hedging and Pledging
Our insider trading policy specifically prohibits Directors of Chase Corporation, officers, and selected other employees from (a) holding Company securities in a margin account or pledging Company securities as collateral for a loan, or (b) purchasing any financial instruments or entering into any other transactions that are designed to hedge or offset any decrease in the market value of the Company’s common stock owned directly or indirectly by them (commonly referred to as “hedging”) or entering into certain other speculative transactions.
This policy, referred to as the Chase Corporation Responsibilities and Requirements of Directors, Officers and Employees of a Publicly Held Company, is available on our corporate website, www.chasecorp.com.
Severance Agreements
We have arrangements with our named executive officers pursuant to which they would be entitled to receive severance upon certain enumerated events. The events that trigger payment are generally those related to termination of
employment without cause or detrimental changes in the executive’s terms and conditions of employment. See “Payments Upon Termination or Change of Control” below for a more detailed description of these triggering events and the resulting benefits. We believe that this structure will help: (i) assure that the named executive officers can give their full attention and dedication to us, free from distractions caused by personal uncertainties and risks related to a pending or threatened change in control, (ii) assure the named executives’ objectivity in considering shareholders’ interests, (iii) assure the named executives of fair treatment in case of involuntary termination following a change in control, and (iv) attract and retain key executive talent in a competitive market.
Consideration of the Previous Shareholder Advisory Vote on Executive Compensation
At the Company’s 2023 annual meeting of shareholders held February 7, 2023, approximately 89% of votes cast at the meeting with respect to the proposal were voted to approve, on an advisory basis, the compensation of our named executive officers. No specific component of our 2023 executive compensation program was altered based upon this voting result. However, the Committee will continue to monitor shareholder feedback as it reviews and establishes future executive compensation plans and determines awards for our named executive officers. Our Board of Directors determined in 2018 that an advisory vote will be conducted on an annual basis.
Compensation Risks
The Compensation and Management Development Committee has considered the components of the Company’s compensation policies and practices. We believe that risks arising from our compensation policies and practices for our employees, including our executive officers, are not likely to have a material adverse effect on the Company. In addition, although a significant portion of executive compensation is performance based and “at-risk,” the Committee believes that the mix and design of the elements of executive compensation do not encourage management to assume excessive risk.
The Committee has reviewed the elements of executive compensation to determine whether any portion of executive compensation encourages excessive risk-taking. It concluded that:
●
the Company’s significant weighting toward long-term incentive compensation, including performance targets and time-based vesting provisions used in tandem, discourages excessive risk taking;
●
the Company’s performance goals are appropriately identified in order to avoid targets that, if not met, result in a large percentage loss of compensation;
●
assuming achievement of at least a minimum level of performance, payouts under the Company’s performance-based plans result in some compensation at levels below full target achievement, rather than an “all or nothing” approach; and
●
as a manufacturing company, the Company is not generally subject to the types of risks that may be present in a corporation involved in financial services, trading, or investment activities.
Report of the Compensation and Management Development Committee
The Compensation and Management Development Committee of the Chase Corporation Board of Directors has reviewed and discussed the foregoing Compensation Discussion and Analysis with management and based on such review and discussion we recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Form 10-K.
By the Compensation and Management Development Committee
Thomas Wroe, Jr. (Chairman)
Thomas D. DeByle
John H. Derby III
Executive Compensation
The following table contains a summary of the compensation paid or accrued during the fiscal years ended August 31, 2023, 2022 and 2021 to our named executive officers.
Change in
Pension Value
and Non-
Qualified
Non-Equity
Deferred
Incentive Plan
Compensation
All Other
Fiscal
Salary
Bonus
Stock Awards
Option Awards
Compensation
Earnings
Compensation
Total
Name and Principal Position
Year
($) (2)
($)
($) (3)
($) (3)
($) (4)
($) (5)
($) (6)
($)
Peter R. Chase
600,000
-
-
-
-
-
24,144
624,144
Executive Chairman
600,000
-
-
-
-
-
23,269
623,269
600,000
-
-
-
-
-
28,465
628,465
Adam P. Chase
612,000
-
1,147,491
382,500
320,000
(117,457)
99,610
2,444,144
President & Chief
567,000
-
425,253
141,739
468,000
(427,068)
103,758
1,278,682
Executive Officer
567,000
-
425,308
141,735
1,134,000
367,233
103,358
2,738,634
Michael J. Bourque (1)
341,000
-
153,398
51,148
107,000
-
40,886
693,432
Treasurer & Chief
316,000
-
648,109
553,382
156,000
-
34,020
1,707,511
Financial Officer
179,910
-
81,359
27,129
215,892
-
13,894
518,184
Jeffery D. Haigh (1)
262,000
-
98,210
32,741
34,000
-
25,945
452,896
General Counsel
238,000
-
47,632
47,614
49,000
-
24,876
407,122
230,000
-
45,955
46,008
115,000
-
21,295
458,258
(1)
Michael J. Bourque joined the Company on February 2, 2021. Jeffery D. Haigh was promoted to Vice President, General Counsel and Corporate Secretary on the same date.
(2)Salary includes amounts earned in the fiscal year, whether or not deferred.
(3)
Amounts under “Stock Awards” reflect the net grant date fair value of the stock-based incentive awards granted under our equity incentive program in the indicated fiscal year (and for fiscal 2022 also includes the restricted stock portion of our equity retention awards for Michael J. Bourque). For the portion of the award subject to performance-based conditions, the amount is based on the estimated probable outcome of the award as of the grant date. Amounts under “Option Awards” reflect the grant date fair value of stock options awarded during the fiscal year, including those granted in fiscal 2022 as equity retention awards to Michael J. Bourque. In each case, amounts are reported whether or not the award had vested and was recorded as compensation expense in accordance with the accounting for stock-based compensation guidance during the year. Assumptions made in the valuation are described in more detail in Note 1 to our Consolidated Financial Statements for the fiscal year ended August 31, 2023. Using the grant date fair value but assuming the maximum performance target under the stock-based incentive plan were met or exceeded, the amounts reported under “Stock Awards” for 2023 would have been approximately $1,912,000 for Adam P. Chase, $256,000 for Michael J. Bourque, $164,000 for Jeffery D. Haigh. The total compensation column for such officers in 2023 would have correspondingly been increased by approximately $765,000, $102,000 and $66,000 for Adam P. Chase, Michael J. Bourque, and Jeffery D. Haigh, respectively. Based on the financial results for fiscal 2023, the amount between the threshold
and the target performance amount was achieved. The equity incentive program is described in the Compensation Discussion and Analysis under the heading “Principal Elements of our Fiscal 2023 Compensation Program-Equity Incentive Plan”.
(4)
These amounts reflect incentive payments made under our annual cash incentive program earned during the applicable fiscal year and paid in November following the respective fiscal year end. The cash incentive program is described in the Compensation Discussion and Analysis under the heading “Principal Elements of our 2023 Compensation Program-Cash Incentive Plan”.
(5)
Represents the current year aggregate change in the actuarial present value of accumulated benefits under the qualified defined benefit plan and the supplemental pension plan as described under “-Other Executive Plans-Pension Plans”. Amounts for Peter R. Chase under this column are reported as zero under applicable SEC regulations because the aggregate change in actuarial present value of his accumulated benefits was a negative amount (a reduction of $1,389,868). This reflects a distribution of $1,554,708 from the supplemental pension plan during the year, as described in more detail under “-Other Executive Plans-Pension Plans”, net of an increase of $164,840 resulting from changes in actuarial assumptions from the prior year.
(6)These amounts include all other compensation as described in the following table:
Qualified
Life &
Automobile
401(k) and
Long-Term
Allowance
Supplemental
Disability
or Use of
Fiscal
Retirement Plan
Insurance
Company
Other
Name
Year
Contributions
Premiums
Car
(a)
Total
Peter R. Chase
$
11,550
$
$
12,000
$
-
$
24,144
10,675
$
$
12,000
$
-
23,269
14,915
12,894
-
28,465
Adam P. Chase
$
20,506
$
39,414
$
12,000
$
27,690
$
99,610
21,350
$
39,841
$
12,000
$
30,567
103,758
29,356
40,103
12,000
21,899
103,358
Michael J. Bourque
$
17,361
$
1,854
$
12,000
$
9,671
$
40,886
17,391
1,854
12,000
2,775
34,020
5,604
1,030
7,000
13,984
Jeffery D. Haigh
$
8,515
$
1,854
$
12,000
$
3,576
$
25,945
8,332
1,818
12,000
2,726
24,876
6,679
1,855
12,000
21,295
(a) These amounts represent payment of dividends on restricted stock, and all other compensation (consisting of reimbursement for financial planning and tax services) as follows:
Dividends on
Professional
Fiscal
Restricted
Service
Name
Year
Stock
Reimbursement
Total
Peter R. Chase
$
-
$
-
$
-
-
-
-
-
-
-
Adam P. Chase
$
22,690
$
5,000
$
27,690
25,567
5,000
30,567
16,899
5,000
21,899
Michael J. Bourque
$
9,286
$
$
9,671
2,425
2,775
-
Jeffery D. Haigh
$
2,001
$
1,575
$
3,576
1,839
2,726
-
Grants of Plan-Based Awards for Fiscal 2023
The following table sets forth information relating to potential payments to each of our named executive officers under our fiscal 2023 cash and equity-based incentive award programs. The actual amounts paid under each of these programs are described in more detail under our Compensation Discussion and Analysis under the heading “Principal Elements of our 2023 Compensation Program-Cash Incentive Plan,” “-Equity Incentive Plan” and “-Equity Retention Award” and, except in the case of restricted stock with performance-based vesting conditions, are reflected in the Summary Compensation Table and its footnotes.
All Other Option
Awards
Exercise
Number of
or Base
Estimated Possible Payouts Under Non-
Estimated Future Payouts Under
All Other
Securities
Price of
Grant Date
Equity Incentive Plan Awards (1)
Equity Incentive Plan Awards
Stock
Underlying
Option
Fair Value of
Grant
Approval
Threshold
Target
Maximum
Threshold
Target
Maximum
Awards
Options
Awards
Stock Awards
Name & Award
Date
Date
($)
($)
($)
(#)
(#)
(#)
(#)
(#)
($/Share)
($)
Adam P. Chase
Cash award
9/1/2022
8/30/2022
$
765,000
$
1,530,000
$
3,060,000
Performance restricted stock grant
9/1/2022
8/30/2022
4,339
8,677
17,354
$
764,964
Time vesting restricted stock grant
9/1/2022
8/30/2022
4,339
382,526
Option award
9/1/2022
8/30/2022
11,367
$
88.16
382,500
Michael J. Bourque
Cash award
9/1/2022
8/30/2022
$
102,300
$
204,600
$
409,200
Performance restricted stock grant
9/1/2022
8/30/2022
1,160
2,320
$
102,266
Time vesting restricted stock grant
9/1/2022
8/30/2022
51,133
Option award
9/1/2022
8/30/2022
1,520
$
88.16
51,148
Jeffery D. Haigh
Cash award
9/1/2022
8/30/2022
$
65,500
$
131,000
$
262,000
Performance restricted stock grant
9/1/2022
8/30/2022
1,486
$
65,503
Time vesting restricted stock grant
9/1/2022
8/30/2022
32,707
Option award
9/1/2022
8/30/2022
$
88.16
32,741
(1)
The non-equity incentive plan award ranges shown reflect payout opportunities based on salary levels at the beginning of fiscal 2023 (grant date).
Amounts in the table above under “Threshold” represent cash amounts payable under the cash incentive plan if 80% of the Adjusted EBITDA-based performance target was achieved, representing a specified percentage of the named executive officers’ base salaries at the grant date, and share amounts payable under the performance-based equity incentive program if 80% of the EPS-based performance target and 80% of the ROIC-based performance target were achieved. Below those performance levels, no payments would be made under the respective plans or plan components. It is possible that a lower share amount payout could be made if less than 80% of the target is achieved under one but not both EPS-based or ROIC-based performance targets, as occurred in 2023. The maximum payout under either the cash incentive plan or the performance-based equity award program is 200% of the target award. The Compensation and Management Development Committee of the Board of Directors formally approved the equity awards on August 30, 2022. The grant date fair value of the possible equity awards reflects the fair value of our common stock on September 1, 2022, the first day of our fiscal year and the date on which awards were initially granted, multiplied by the total number of shares of restricted stock to be awarded assuming the target was met (assumed to be the probable outcome of the performance conditions at the initial grant date). The awards were paid in accordance with the plans upon finalization of our annual financial results and certification of the awards by the Compensation and Management Development Committee in November 2023. The actual results for fiscal year 2023 reflected achievement between threshold and target for the participating officers in the cash incentive plan. The actual results for fiscal year 2023 for the EPS based element of the performance-based equity award was below threshold and the ROIC-based element of the performance-based equity award was between threshold and target for the participating officers.
Outstanding Equity Awards at Fiscal Year-End 2023
The following table sets forth information relating to options and unvested restricted stock outstanding as of August 31, 2023 that were granted pursuant to our Amended and Restated 2013 Equity Incentive Plan or predecessor plans to our named executive officers.
Stock Awards
Market
Option Awards
Number of
Value of
Number of
Number of
Shares or
Shares or
Securities
Securities
Units of
Units of
Underlying
Underlying
Option
Stock That
Stock That
Unexercised
Unexercised
Exercise
Option
Have Not
Have Not
Options
Options
Price
Expiration
Vested
Vested
Name
# Exercisable
# Unexercisable
($)
Date
(#)
($)
Peter R. Chase
-
-
$
-
-
$
-
Adam P. Chase
7,438
-
$
35.50
8/31/2024
7,246
-
$
39.50
8/31/2025
29,159
-
$
64.37
8/31/2026
4,591
-
$
93.50
9/1/2027
3,468
-
$
123.95
9/1/2028
42,824
-
$
100.22
9/1/2029
4,125
-
$
97.57
9/1/2030
2,316
1,158
$
114.50
9/1/2031
3,789
7,578
$
88.16
9/1/2032
16,099
$
2,036,524
Michael J. Bourque
-
$
104.04
9/1/2030
$
114.50
9/1/2031
-
14,480
$
94.88
2/1/2032
1,013
$
88.16
9/1/2032
8,103
$
1,025,030
Jeffery D. Haigh
1,339
-
$
97.57
9/1/2030
$
114.50
9/1/2031
$
88.16
9/1/2032
1,530
$
193,545
The stock option awards noted in the table above with September 2030 expiration dates vested in three equal annual tranches beginning August 31, 2021 through August 31, 2023. The stock option awards noted in the table above with September 2031 expiration dates vest in three equal annual tranches beginning August 31, 2022 through August 31, 2024. The stock option award noted in the table above with a February 2032 expiration date vest January 31, 2025. The stock option awards noted in the table above with September 2032 expiration date vest August 31, 2023 through August 31, 2025. Each such vesting date is subject to continued service requirements.
Amounts under the “Stock Awards” columns reflect restricted stock issued under our equity incentive programs for fiscal 2023 and 2022, and our Chief Financial Officer’s equity retention award in the case of fiscal 2022. The columns include the value of the share amounts issued during fiscal 2023 and 2022, even though the final number of shares comprising the 2023 award was not certified until after the fiscal year end and remained subject to increase or decrease as of August 31, 2023. The market value of all restricted stock is based on the closing price of our common stock on the last trading day in the fiscal year. The closing price as reported by the NYSE American on August 31, 2023 was $126.50.
For Adam P. Chase, Michael J. Bourque, and Jeffery D. Haigh, stock awards for fiscal 2022 will vest on August 31, 2024. For Adam P. Chase and Jeffery D. Haigh, stock awards for fiscal 2023 will vest on August 31, 2025. For Michael J. Bourque, stock awards for fiscal 2023 will vest on August 31, 2025 or, with respect to his equity retention award only, January 31, 2025. These schedules are outlined in the table below (as of August 31, 2023):
Name
August 31, 2024
January 31, 2025
August 31, 2025
Adam P. Chase
3,083
13,016
Michael J. Bourque
1,031
5,332
1,740
Jeffery D. Haigh
1,114
As noted above, subsequent to August 31, 2023, 7553, 1010, and 647 stock awards from the original performance grants were forfeited by Adam P. Chase, Michael J. Bourque, and Jeffery D. Haigh, respectively, under our equity incentive program for fiscal 2023 under the financial performance measures applicable to that plan. Because the amounts were determined after August 31, 2023, based on our fiscal year performance, these forfeitures are not reflected in the tables above. See the discussion under “Principal Elements of our 2023 Compensation Program-Equity Incentive Plan” in our Compensation Discussion and Analysis above.
Option Exercises and Stock Vested for 2023
The following table sets forth information relating to options exercised by each of our named executive officers in the year ended August 31, 2023. The value realized on exercise of options represents the difference between the fair market value of the shares acquired on exercise, as determined by the closing price per share of our common stock on the exercise date, and the exercise price of the stock option. As a result, the value realized on exercise does not make any adjustment for those shares forfeited to us by the option holder to pay the exercise price or the amount of withholding tax due from the option holder upon exercise, pursuant to the exercise provisions of the plan under which the stock options were granted. The following table also sets forth information relating to stock vesting during fiscal 2023, which includes for Adam P. Chase and Jeffery D. Haigh the equity incentive awards granted on September 1, 2020 and Michael J. Bourque the inventive awards granted on February 2, 2021.
Option Awards
Stock Awards
Number of
Number of
Shares
Shares
Acquired on
Value Realized
Acquired on
Value Realized
Exercise
Upon Exercise
Vesting
on Vesting
Name
(#)
($)
(#)
($)
Peter R. Chase
-
$
-
-
$
-
Adam P. Chase
7,747
$
519,049
6,591
$
833,762
Michael J. Bourque
-
$
-
1,183
$
149,650
Jeffery D. Haigh
-
$
-
$
59,582
Payments Upon Termination or Change of Control
Executive Severance and Change in Control Agreements. The Company has entered severance arrangements with each of its named executive officers. A summary of these arrangements follows:
For our Executive Chairman, Chief Executive Officer and General Counsel, if (1) the officer’s employment with the Company is terminated at any time by the Company without cause, or (2) upon the change of control within 24 months (or 12 months for our General Counsel) immediately following a change in control, the officer’s employment is terminated by the Company without cause or the officer terminates his employment with the Company for good reason, the officer shall be entitled to severance benefits as outlined below.
For our Chief Financial Officer, if within 12 months immediately following a change in control, the officer’s employment is terminated by the Company without cause or the officer terminates his employment with the Company for good reason, the officer shall be entitled to severance benefits as outlined below.
In the case of any of the above triggering events, the named executive officer will receive the following benefits:
●
Severance pay in an amount equal to a multiple (2.0x in the case of Peter R. Chase and Adam P. Chase and 1.0x in the case of Michael J. Bourque and Jeffery D. Haigh) of the greater of the named executive’s annual salary in effect prior to the change in control or his annual salary in effect immediately prior to termination. For these purposes, the named executive officer’s salary will include bonuses, calculated by taking the average of the prior two years’ annual bonuses.
●
Continued participation in benefits in effect for the named executive as of the date of termination, subject to the terms and conditions of the respective plans and applicable law, for a period of one year following the termination date, or two years in the case of Adam P. Chase.
The named executive shall be entitled to his salary through the period ending with the date of such termination and any accrued benefits if terminated for cause. In case of death, disability or retirement, the named executive shall be entitled to such benefits as may be provided to him pursuant to the Company’s employee benefit plans.
Restricted Stock and Option Awards. Under the terms of the applicable restricted stock awards, in the event of a termination without cause, unvested restricted stock awards will vest on a prorated basis through the date of termination.
In the event of a “change in control” as defined in the applicable award, unvested shares of restricted stock will automatically vest, and the vesting of outstanding but unvested stock options may be accelerated, at the discretion of the Board of Directors. For purposes of the table below, we have assumed the accelerated vesting of stock options upon the occurrence of a change in control.
Amounts that would have been owed to our named executive officers upon termination or a change of control assuming a triggering event took place on August 31, 2023, the last day of the Company’s most recently completed fiscal year, are presented below.
After
Change in
Control
Termination
Before
without
Change in
Cause or by
Control
the
Termination
Executive
Disability,
Voluntary or
without
for Good
Death or
Change in
Name
Benefit
For Cause
Cause
Reason
Retirement
Control
Peter R. Chase
Salary
-
$
1,200,000
$
1,200,000
-
-
Non-Equity Incentive Plan Compensation
-
-
-
-
-
Medical Benefits
-
16,872
16,872
-
-
All Other Compensation
-
12,144
12,144
-
-
Acceleration of Stock Options
-
-
-
-
-
Acceleration of Restricted Stock
-
-
-
-
-
Total
$
-
$
1,229,016
$
1,229,016
$
-
$
-
Adam P. Chase
Salary
-
$
1,224,000
$
1,224,000
-
-
Non-Equity Incentive Plan Compensation
-
788,000
788,000
-
-
Medical Benefits
-
36,200
36,200
-
-
All Other Compensation
-
143,840
143,840
-
-
Acceleration of Stock Options
-
-
304,407
-
304,407
Acceleration of Restricted Stock
-
808,841
2,036,524
$
808,841
$
2,036,524
Total
$
-
$
3,000,881
$
4,532,971
$
808,841
$
2,340,931
Michael J. Bourque
Salary
-
-
$
341,000
-
-
Non-Equity Incentive Plan Compensation
-
-
131,500
-
-
Medical Benefits
-
-
18,100
-
-
All Other Compensation
-
-
31,215
-
-
Acceleration of Stock Options
-
-
501,357
-
501,357
Acceleration of Restricted Stock
-
$
609,983
1,025,030
$
609,983
$
1,025,030
Total
$
-
$
609,983
$
2,048,201
$
609,983
$
1,526,386
Jeffery D. Haigh
Salary
-
$
262,000
$
262,000
-
-
Non-Equity Incentive Plan Compensation
-
41,500
41,500
-
-
Medical Benefits
-
18,100
18,100
-
-
All Other Compensation
-
22,369
22,369
-
-
Acceleration of Stock Options
-
-
29,535
-
29,535
Acceleration of Restricted Stock
-
82,056
193,545
$
82,056
$
193,545
Total
$
-
$
426,025
$
567,049
$
82,056
$
223,080
The Company will pay outplacement services for a period of up to one year for the Executive Chairman, Chief Executive Officer, or the General Counsel, if employment with the Company is terminated at any time without cause or for good reason within 24 months following a change in control. The Company will pay outplacement services for a period of up to one year for the Chief Financial Officer if employment with the Company is terminated within 12 months following a change in control by either the Company without cause or by the Chief Financial Officer for good reason. These services are not reflected in the table above, as the amount cannot be determined.
Other Executive Plans
Non-Qualified Retirement Savings Plan. The Company maintains a non-qualified Supplemental Savings Plan covering selected employees, including the named executive officers. The Supplemental Savings Plan covers those employees of the Company who from time to time may be designated by the Board of Directors and who meet other eligibility and salary criteria. For fiscal 2023, the Company’s Chief Executive Officer and Chief Financial Officer were the only named executive officers who participated in the plan. Participants may elect to defer a portion of their compensation for future payment in accordance with the terms of the plan. The following table gives details relating to our named executive officers’ participation in this plan.
Non-Qualified Deferred Compensation for 2023
Executive
Registrant
Aggregate Earnings
Contributions in
Contributions in
(Loss) in
Withdrawals
Aggregate Balance at
Name
Fiscal Year
Fiscal Year ($)(1)
Fiscal Year ($)(2)
Fiscal Year ($)(3)
Fiscal Year ($)(3)
Fiscal Year End ($)(4)
Adam P. Chase
306,180
10,253
62,941
-
1,045,513
Michael J. Bourque
10,245
6,526
1,607
-
40,481
(1)Amounts in this column are included in the “Salary” column in the Summary Compensation Table.
(2)
Amounts in this column are included in the “All Other Compensation” column in the Summary Compensation Table.
(3)Amounts in this column are not included in the Summary Compensation Table.
(4)
This column includes amounts in the named executive officer’s total deferred compensation account as of the last day of the fiscal year. In addition to the contribution for fiscal 2023, this column reports the portion of the aggregate balance that was reported as compensation in the Summary Compensation Table in each of the Company’s previous proxy statements and includes aggregate earnings on previously contributed amounts (if any).
All payments under the Supplemental Savings Plan to participants or their designated beneficiaries will be made in a lump sum. Distribution of these amounts will commence no later than the end of the year in which the participant has separated from service with the Company.
Effective January 1, 2017 (during fiscal year 2017), Peter R. Chase, Executive Chairman, entered a separation of service letter with the Company, reducing the level of services that he performs as the Executive Chairman to no more than 20% of the average level of services performed in the previous 36 months. In doing so, he qualified for payout of his benefits under the non-qualified Supplemental Savings Plan. Mr. Chase’s balance in the plan was distributed in full in July 2017 (fiscal 2017). Mr. Chase continues to serve as a director and as the Chairman of the Board of Directors.
Pension Plans. The Company maintains a tax-qualified defined benefit pension plan (“Pension Plan for Employees of Chase Corporation”) and a non-qualified excess benefit plan (“Supplemental Pension Plan”). The qualified pension plan covers substantially all employees of certain businesses of the Company who have attained the age of 21 and have completed three months of service. The Supplemental Pension Plan covers those employees of the Company who from time to time may be designated by the Board of Directors and who meet other eligibility and salary criteria. Currently, the Company’s Executive Chairman and the Company’s Chief Executive Officer have been designated by the Board of Directors as being covered by the excess benefit plan. Benefits under the qualified pension plan are determined based on final average base earnings (subject to Code-imposed limits on compensation and excluding bonuses, overtime, and other extraordinary amounts) and total years of service with the Company (up to a maximum of 40 years). Benefits under the Supplemental Pension Plan are determined based on final average earnings (including base salary and incentive-based bonuses and without regard to Code-imposed limits on compensation) and total years of service with the Company. A participant becomes fully vested in the Supplemental Pension Plan benefits upon completion of five years of service with the Company. Benefits are payable upon the participant’s separation from service with the Company, including the participant’s retirement or death. Benefits under the Supplemental Pension Plan are paid out on a monthly basis over a period of ten years.
The following table shows the actuarial present value of the accumulated benefits for each of the named executive officers at the end of fiscal 2023. The change in this present value between each fiscal year is reflected in the summary compensation table above.
Number of
Present Value of
Payments
Years Credited
Accumulated
During Last
Name
Plan Name
Service (#)
Benefit ($)
Fiscal Year ($)
Peter R. Chase
Pension Plan for Employees of Chase Corporation
maximum
$
-
$
-
Supplemental Pension Plan
maximum
4,765,791
1,554,708
Adam P. Chase
Pension Plan for Employees of Chase Corporation
$
318,605
$
-
Supplemental Pension Plan
763,096
-
Effective January 1, 2017 (during fiscal year 2017), Peter R. Chase, Executive Chairman, entered a separation of service letter with the Company, reducing the level of services that he performs as the Executive Chairman to no more than 20% of the average level of services performed in the previous 36 months. In doing so, he qualified for payout of his benefits under the Supplemental Pension Plan. His first payment occurred in July 2017, six months after entering the separation of services agreement. Payments continued through fiscal 2022 and are anticipated to continue monthly over a period of ten years.
See the Notes to financial statements found in Item 8 of the Company’s Annual Report on Form 10-K for more information about the Company’s pension plans. For participants who were employed prior to May 1, 1995 or are covered by a collective bargaining agreement, the monthly benefit is equal to the excess of (a) over (b) plus (c), where:
(a)
is 1.5% of the participant’s final average compensation multiplied by credited service up to a maximum of 35 years;
(b)
is 0.6% of the participant’s final average covered compensation multiplied by credited service up to a maximum of 35 years; and
(c)
is 0.8% of the participant’s average monthly compensation multiplied by credited service in excess of 35 years to a maximum of 40 years.
For participants who were employed on or after May 1, 1995 and before December 1, 2008, and are not covered by a collective bargaining agreement, the monthly benefit is equal to the excess of (a) over (b) plus (c), where:
(a)is 0.75% of the participant’s final average compensation multiplied by credited service up to a maximum of 35 years;
(b)is 0.3% of the participant’s final average covered compensation multiplied by credited service up to a maximum of 35 years; and
(c)is 0.4% of the participant’s average monthly compensation multiplied by credited service in excess of 35 years to a maximum of 40 years.
Effective December 1, 2008, we adopted a soft freeze in the qualified pension plan whereby no new employees hired will be admitted to the plan, except for 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 participants admitted to the plan prior to December 1, 2008 or July 15, 2012, as applicable will continue to accrue benefits as detailed in the plan agreements.
Chief Executive Officer Pay Ratio
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the total annual compensation of our median compensated employee and the total annual compensation of our Chief Executive Officer, Adam P. Chase.
For fiscal 2023, we identified our median compensated employee as of August 31, 2023, out of our total global employee population of 859 employees at the time, using a Consistently Applied Compensation Measure (“CACM”) of gross payroll earnings for the year-to-date period ending on such date. Gross payroll earnings consist of all compensation elements appearing in payroll records for each individual, which primarily includes base salary or wages, overtime, bonuses, and other pay components. For purposes of determining the median employee, the pay of those permanent employees that were hired or joined the Company after September 1, 2022 through August 31, 2023 was adjusted to reflect the full period’s gross payroll earnings. Where applicable, gross payroll earnings were converted to U.S. dollars using the average foreign exchange rates from September 1, 2022 through August 31, 2023.
Under applicable SEC rules, we are required to identify our median employee at least once every three years. Due to the acquisition of NuCera Solutions, the Company identified a new median employee for fiscal 2023.
For our fiscal year ended August 31, 2023, our median employee identified as described above had total compensation, determined in accordance with applicable SEC rules, of $49,404. As reported in the Summary Compensation Table, the 2023 annual total compensation for our Chief Executive Officer, Adam P. Chase, was $2,444,144 resulting in a pay ratio of 49:1.
This pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules. The SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices. As such, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
Compensation of Directors
The following table shows how non-employee Directors of the Company are compensated for service on both the Board of Directors and the Committees of the Board of Directors for both the twelve-month period ending January 31, 2024 (the “2024 Term”) and for the twelve-month period ended January 31, 2023 (the “2023 Term”).
2024 Term (1)
2023 Term (2)
Cash
Stock Awards
Cash
Stock Awards
($)
($)
($)
($)
Annual retainer
$
70,000
$
95,000
$
45,000
$
60,000
Committee membership (all members):
Audit
-
-
3,750
3,750
Compensation and Management Development
-
-
2,500
2,500
Nominating and Governance
-
-
1,875
1,875
Committee chairperson (in addition to Committee membership):
Audit
19,500
-
7,500
7,500
Compensation and Management Development
14,500
-
5,000
5,000
Nominating and Governance
10,000
-
3,750
3,750
Lead Independent Director
20,000
-
10,000
10,000
(1) The 2024 term begins on February 1, 2023 - January 31, 2024. The 2024 term covers seven months of fiscal 2023.
(2) The 2023 term begins on February 1, 2022 - January 31, 2023. The 2023 term covers five months of fiscal 2023.
The Compensation and Management Development Committee authorized a grant of an aggregate of 7,824 shares of restricted stock to non-employee members of the Board of Directors as compensation for their service to be performed for the period ending January 31, 2024. This restricted stock will vest on February 1, 2024, at which time the shares of common stock will be issued. The number of shares granted to each Director for the 2024 Term is equal to $95,000 divided by the closing price of the Company’s common stock at the time of grant, except that it additionally takes into consideration each Director’s involvement as a member or chairperson of any of the various committees of the Board, or in the role of Lead Independent Director as outlined above. If a Director notifies the Company of his or her election prior to January 1 of the relevant calendar year, any portion of the cash retainer may be taken in shares of stock, issued in equal quarterly installments.
Non-Qualified Retirement Savings Plan for the Board of Directors. The Company maintains the Non-Qualified Retirement Savings Plan for the Board of Directors. Participants may elect to defer a portion of their compensation for future payment in accordance with the terms of the plan.
The following table summarizes the total compensation paid to the directors who are not employees of the Company during fiscal 2023:
Fees Earned
or Paid in
Cash
Stock Awards
Total
($)
($) (a)
($)
Mary Claire Chase
$
59,583
$
80,417
$
140,000
Thomas D. DeByle
76,688
86,146
162,833
John H. Derby III
60,625
81,458
142,083
Chad A. McDaniel
61,927
82,760
144,688
Dana Mohler-Faria
83,594
86,927
170,521
Thomas Wroe, Jr.
72,729
85,104
157,833
Joan Wallace-Benjamin
61,927
82,760
144,691
Ellen Rubin
61,146
81,979
143,125
(a) The stock awards represented in the table above represent five months of the stock award dollar value of the 2023 Term and seven months of the stock award dollar value of the 2024 term. The restricted stock award from the 2024 term was issued on February 7, 2023 with a grant date fair value of $97.15 per share. The shares of restricted stock will vest at the conclusion of the current one-year service period.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12 - Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information regarding ownership of the Company’s common stock as of October 31, 2023, by (i) all persons known to the Company to be beneficial owners of more than 5% of the Company’s outstanding common stock, (ii) each of our directors, (iii) each of the executive officers named in our summary compensation table, and (iv) all our directors and executive officers as a group.
Nature and Amount of Beneficial Ownership
Number of
Shares
Total Shares
Percentage of
Shares
Subject to
Beneficially
Outstanding
Name
Owned (a)
Options (b)
Owned (c)
Shares
Glazer Capital LLC (d)
250 W 55th Street
New York, NY 10019
604,399
-
604,399
6.3
%
Edward L. Chase Revocable Trust (e)
39 Nichols Road
Cohasset, MA 02025
774,221
-
774,221
8.1
%
BlackRock, Inc. (f)
55 East 52nd Street
New York, NY 10055
511,301
-
511,301
5.4
%
Peter R. Chase
375 University Avenue
Westwood, MA 02090
840,519
-
840,519
8.8
%
Adam P. Chase (g)
334,500
104,956
439,456
4.6
%
Michael J. Bourque (h)
9,738
2,032
11,770
*
Jeffery D. Haigh (i)
5,657
2,442
8,099
*
Mary Claire Chase
8,407
-
8,407
*
Thomas D. DeByle
3,886
-
3,886
*
John H. Derby III
4,212
-
4,212
*
Chad A. McDaniel
4,177
-
4,177
*
Dana Mohler-Faria
5,209
-
5,209
*
Ellen Rubin
1,434
-
1,434
*
Joan Wallace-Benjamin
2,359
-
2,359
*
Thomas Wroe, Jr.
5,921
-
5,921
*
All executive officers and directors as a group (12 persons)
1,226,019
109,430
1,335,449
13.9
%
* Less than one percent
(a)Excludes shares that may be acquired through stock option exercises.
(b)
Pursuant to Rule 13d-3(d) (1) of the Exchange Act, includes shares that may be acquired through stock option exercises within the 60-day period following October 31, 2023. Excludes shares underlying stock options that have not vested and will not vest within the 60-day period.
(c)
The beneficial owners of these shares have sole voting and investment authority over such shares, except as otherwise indicated.
(d)
These shares are deemed to be beneficially owned by Glazer Capital LLC and Paul J. Glazer. This information is based upon the Schedule 13G filed on August 31, 2023 by Glazer Capital LLC.
(e)
The trustees of the Edward L. Chase Revocable Trust have voting and investment authority with respect to the shares. The trustees of the trust are Jean Chase, Sarah Chase, E. Stephen Chase, and Janet Gibson, each of whom has a business address c/o Edward L. Chase Revocable Trust, 39 Nichols Road, Cohasset, MA 02025. This information is based upon Schedule 13D filed on August 2, 2023.
(f)
These shares are deemed to be beneficially owned by BlackRock, Inc. and certain affiliates. Includes 14,916 shares over which the reporting person reports sole power to dispose but does not have voting power. This information is based upon the Schedule 13G/A filed on February 1, 2023 by BlackRock, Inc.
(g)
Of the total shares beneficially owned, 21,254 represent shares of restricted stock, subject to forfeiture under time-based vesting provisions, with respect to which the executive has the right to vote and receive dividends.
(h)
Of the total shares beneficially owned, 8,843 represent shares of restricted stock, subject to forfeiture under time-based vesting provisions, with respect to which the executive has the right to vote and receive dividends.
(i)
Of the total shares beneficially owned, 4,985 represent shares of restricted stock, subject to forfeiture under time-based vesting provisions, with respect to which the executive has the right to vote and receive dividends.
Equity Compensation Plans
The following table summarizes the Company’s equity compensation plans as of August 31, 2023. 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
Chase common
average exercise
Number of shares of
stock to be issued
price of
Chase common stock
upon the exercise of
outstanding
remaining available for
outstanding options
options
future issuance
2005 Incentive Plan
17,725
$
37.14
-
Amended and Restated 2013 Equity Incentive Plan
164,001
91.51
836,142
Total
181,726
$
86.21
836,142

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13 - Certain Relationships and Related Transactions, and director independence
The Company has adopted the Chase Corporation Code of Ethics, which is applicable to all Chase employees, including our Executive Chairman, President and Chief Executive Officer, Treasurer and Chief Financial Officer, General Counsel, and other employees in the financial reporting process. The Company has also adopted a Code of Business Conduct and Ethics for Directors of Chase Corporation, which is applicable to members of our Board of Directors. The Chase Corporation Code of Ethics and the Code of Business Conduct and Ethics for Directors of Chase Corporation are both available on the Chase Corporation website (www.chasecorp.com). The Company will disclose any amendment to the codes of ethics, applicable to our directors and executive officers, and any waiver, including an implicit waiver, from the provisions of these codes of ethics as they relate to such directors and officers, on its website.
Director Independence
The Board conducts an annual review to verify director independence. As a result of its most recent review, the Board has determined that the following directors are independent, as defined in the listing standards of the NYSE American: Thomas D. DeByle, John H. Derby III, Chad A. McDaniel, Dana Mohler-Faria, Ellen Rubin, Joan Wallace-Benjamin and Thomas Wroe, Jr. None of the independent directors, to the Company’s knowledge, has any business, financial, familial or other type of relationship with Chase Corporation or its management that would impact the director’s ability to exercise independent judgment.
Certain Transactions
The Audit Committee of the Board of Directors reviews and oversees any transactions with a “related person” within the scope of the SEC’s rules on disclosure of such transactions consistent with the requirements of the NYSE American. From time to time, the Board of Directors has formed a special independent committee of the Board comprised of independent and non-interested directors to review and oversee proposals relating to specific transactions with related persons on an ad hoc basis. The Company does not have a written policy relating to such review.
Other than the compensation and severance arrangements with the Company’s named executive officers and the director compensation arrangements described in Item 11 of this Annual Report on Form 10-K, each of which was reviewed and approved by the Company’s independent Compensation and Management Development Committee, the Company is not a participant in any transaction since the beginning of its last completed fiscal year, or any presently proposed transaction, involving more than $120,000 in which any shareholder holding more than 5% of the Company’s common stock, any of its executive officers, directors, director nominees or their immediate family members, has or will have a direct or indirect material interest.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14 - Principal Accountant Fees and Services
The Audit Committee of the Board of Directors is responsible for the appointment, compensation and oversight of the Company’s independent auditor. The Audit Committee annually reviews the independent auditor’s qualifications, performance, fees and independence.
The Company’s Audit Committee appointed Grant Thornton LLP (“Grant Thornton”) to serve as the Company’s independent registered public accounting firm for the year ended August 31, 2023. Additionally, Grant Thornton has served as the Company’s independent registered public accounting firm in connection with the audit for the fiscal years ended August 31, 2022 and August 31, 2021.
The following table sets forth fees for services provided by Grant Thornton LLP during fiscal years 2023 and 2022:
Audit fees to Grant Thornton LLP (1)
$
1,765,686
$
1,260,470
Audit-related fees
-
-
Tax fees
-
-
All other fees
-
-
Total
$
1,765,686
$
1,260,470
(1)Represents fees for professional services provided in connection with the audit of our annual financial statements and review of our quarterly financial statements. Audit fees in both fiscal years include services related to the review of the Company’s internal control over financial reporting.
Audit Committee Pre-Approval Policy
In accordance with its charter, the Audit Committee approves in advance any non-audit services provided by the independent registered public accounting firm, including tax planning services which will exceed $20,000 per project, before the services are rendered. In some cases, the Chairman of the Audit Committee has the delegated authority from the Audit Committee to pre-approve certain services, and such pre-approvals are communicated to the full Audit Committee at its next meeting. During fiscal years 2023, 2022 and 2021, all services were approved by the Audit Committee in accordance with this policy and applicable SEC regulations.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15 - Exhibits and Financial Statement Schedules
(a)(1) and (2)Financial Statements and Schedules:
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
Description
3.1.1
Articles of Organization of Chase Corporation (incorporated by reference from Exhibit 3.1 to the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2004, filed on November 24, 2004 (the “2004 Form 10-K”)).
3.1.2
Articles of Amendment to Articles of Organization of Chase Corporation (incorporated by reference from Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended February 29, 2008, filed on April 9, 2008).
3.2.1
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).
3.2.2
Amended and Restated By-Laws (incorporated by reference from Exhibit 3.1 to the Company’s current report on Form 8-K filed on July 24, 2023).
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 (incorporated by reference from Exhibit 10.3.1 to the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2021, filed on November 12, 2020).*
10.3.2
Amendment No. 1 to the Amended and Restated Chase Corporation Employee’s Supplemental Savings Plan, dated July 15, 2020 (incorporated by reference from Exhibit 10.3.2 to the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2021, filed on November 12, 2020).*
10.3.3
Amendment No. 2 to the Chase Corporation Employee’s Supplemental Savings Plan, dated April 6, 2021 (incorporated by reference to Exhibit 10.3.3 to the Company’s Quarterly Report on Form 10Q for the quarter ended May 31, 2021, filed on July 12, 2021).*
10.4
Chase Corporation Non-Qualified Retirement Savings Plan for the Board of Directors, amended and restated effective January 1, 2009 (incorporated by reference from Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended February 28, 2009, filed on April 9, 2009). *
10.5
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). *
10.7.1
Offer letter dated January 28, 2021 by and between the Company and Michael J. Bourque (incorporated by reference from Exhibit 10.1 to the Company’s current report on Form 8-K filed on February 3, 2021). *
10.7.2
Severance Agreement between the Company and Michael J. Bourque dated January 27, 2021 (incorporated by reference from Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the period ended May 31, 2021, filed on July 12, 2021).*
10.8.1
Offer letter dated July 6, 2020 by and between the Company and Jeffrey D. Haigh (incorporated by reference from Exhibit 10.8.3 to the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2021, filed on November 15, 2021). *
10.8.2
Severance Agreement between the Company and Jeffery D. Haigh dated November 11, 2021 (incorporated by reference from Exhibit 10.8.4 to the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2021, filed on November 15, 2021).*
10.9.1
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).*
10.9.2
Amended and Restated 2013 Equity Incentive Plan (incorporated by reference from Appendix A to the Company’s 2022 Proxy Statement filed on December 22, 2021).*
10.9.3
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).*
10.9.4
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).*
10.9.5
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).*
10.9.6
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). *
10.9.7
Form of stock option award issued to employees for Amended and Restated 2013 Incentive Plan.*
10.9.8
Form of restricted stock agreement for non-employee members of the Board of Directors for Amended and Restated 2013 Incentive Plan.*
10.9.9
Form of restricted stock agreement for employees or consultants for Amended and Restated 2013 Incentive Plan.*
10.10.10
Form of performance based restricted stock agreement of Executive Management for Amended and Restated 2013 Incentive Plan.*
10.10.1
Split Dollar Agreement between Chase Corporation and Peter R. Chase dated January 10, 2005 (incorporated by reference from Exhibit 10.2 to the Company’s current report on Form 8-K filed on January 14, 2005).*
10.10.2
Split Dollar Endorsement dated January 10, 2005 (incorporated by reference from Exhibit 10.3 to the Company’s current report on Form 8-K filed on January 14, 2005).*
10.11.1
FY 2022 Chase Corporation Annual Incentive Plan (incorporated by reference from Exhibit 10.11.3 to the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2022, filed November 15, 2021).*
10.11.2
FY 2022 Chase Corporation Long Term Incentive Plan (incorporated by reference from Exhibit 10.11.4 to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2021).*
10.11.3
FY 2023 Chase Corporation Annual Incentive Plan (incorporated by reference from Exhibit 99.1 to the Company’s current report on Form 8-K filed September 1, 2022).*
10.11.4
FY 2023 Chase Corporation Long Term Incentive Plan (incorporated by reference to Exhibit 99.2 to the Company’s current report on Form 8-K filed September 1, 2022).*
10.12
Second Amended and Restated Credit Agreement, dated as of July 27, 2021 by and among Chase Corporation, NEPTCO Incorporated, the Guarantors, Bank of America, N.A., as administrative agent and Lenders party thereto (incorporated by reference from Exhibit 10.1 to the Company’s current report on Form 8-K for filed on August 2, 2021).
10.13
10.14
Stock Purchase Agreement dated July 15, 2022 by and among the Company, NuCera Solutions Holdco LP and NuCera Holdings Inc. (incorporated by reference from Exhibit 10.1 to the Company’s current report on Form 8-K filed July 19, 2022).
Agreement and Plan of Merger by and among the Company, Formulations Parent Corporation and Formulations Merger Sub Corporation, dated as of July 21, 2023 (incorporated by reference to Exhibit 2.1 to the Company’s current report on Form 8-K filed July 24, 2023).
Subsidiaries of the Registrant
Consent of Independent Registered Public Accounting Firm - Grant Thornton LLP
31.1
Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1
Certification of principal executive officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2
Certification of principal financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
The following materials from the Chase Corporation Annual Report on Form 10-K for the fiscal year ended August 31, 2023 formatted in Inline Extensible Business Reporting Language (iXBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statement of Stockholders’ Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements.
Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)
* Identifies management plan or compensatory plan or arrangement.
(b) See (a)(3) above.
(c) None.