CHASE CORP - Annual Report: 2021 (Form 10-K)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED

AUGUST 31, 2021

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☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO

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Commission File Number: 1-9852

CHASE CORPORATION

(Exact name of registrant as specified in its charter)

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295 University Avenue, Westwood, Massachusetts 02090

(Address of Principal Executive Offices) (Zip Code)

(781) 332-0700

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to section 12(b) of the Act:

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Securities registered pursuant to section 12(g) of the Act: None

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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ◻  NO ⌧

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. YES ◻ NO ⌧

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ⌧ NO ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YES ⌧ NO ◻

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ⌧

The aggregate market value of the common stock held by non-affiliates of the registrant, computed by reference to the closing price as of the last business day of the Registrant’s most recently completed second fiscal quarter, February 28, 2021, was approximately $573,033,000.

As of October 31, 2021, the Company had outstanding 9,457,489 shares of common stock, $0.10 par value, which is its only class of common stock.

Documents Incorporated By Reference:

Portions of the registrant’s definitive proxy statement for the Annual Meeting of Shareholders, which is expected to be filed within 120 days after the registrant’s fiscal year ended August 31, 2021, are incorporated by reference into Part III hereof.

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CHASE CORPORATION

INDEX TO ANNUAL REPORT ON FORM 10-K

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For the Year Ended August 31, 2021

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Cautionary Note Concerning Forward-Looking Statements

This Annual Report on Form 10-K contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements, including without limitation forward-looking statements made under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” involve risks and uncertainties. Any statements contained in this Annual Report that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking statements include, without limitation, statements as to our future operating results; seasonality expectations; plans for the development, utilization or disposal of manufacturing facilities; future economic conditions; our expectations as to legal proceedings; the effect of our market and product development efforts; and expectations or plans relating to the implementation or realization of our strategic goals and future growth, including through potential future acquisitions. Forward-looking statements may also include, among other things, statements relating to future sales, earnings, cash flow, results of operations, use of cash and other measures of financial performance, statements relating to future dividend payments, as well as expected impact of the coronavirus disease 2019 (COVID-19) pandemic on the Company's businesses. Forward-looking statements may be identified through the use of words such as “believes,” “anticipates,” “may,” “should,” “will,” “plans,” “projects,” “expects,” “expectations,” “estimates,” “predicts,” “targets,” “forecasts,” “strategy,” and other words of similar meaning in connection with the discussion of future operating or financial performance. These statements are based on current expectations, estimates and projections about the industries in which we operate, and the beliefs and assumptions made by management. Because forward-looking statements relate to the future, they are subject to inherent risks, uncertainties and changes in circumstances that are difficult to predict. Accordingly, the Company’s actual results may differ materially from those contemplated by the forward-looking statements. Investors, therefore, are cautioned against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. Readers should refer to the discussions under Item 1A “Risk Factors” of this Annual Report on Form 10-K.

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PART I

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Item 1 – Business

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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, 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 and superabsorbent polymers. Beginning September 1, 2020, the Adhesives, Sealants and Additives segment includes the acquired operations of ABchimie, within the electronic and industrial coatings product line and beginning February 5, 2021, the acquired operations of Emerging Technologies, Inc (“ETi”), 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 produce products related to a combination of operating segments.

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A summary of our operating structure as of August 31, 2021 is as follows:

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Other Business Developments

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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 Adhesive, 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. No expense was recognized related to the adhesive systems initiative during fiscal 2021, with the majority of future costs anticipated to occur in the first half of fiscal 2022.

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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 $9,997,000 comprising $8,997,000 paid on February 5, 2021 and an accrual of $1,000,000 to be paid out up to eighteen months after 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 $128,000 of acquisition-related costs during 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 is currently in the process of finalizing purchase accounting, regarding a final allocation of the purchase price to tangible and identifiable intangible assets assumed, and anticipates completion within the first quarter of fiscal 2022. 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.

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During the second quarter of fiscal 2021, Chase began moving the sealant systems operations, part of the Adhesive, 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 there terminated in fiscal 2021. The Company recognized $977,000 in expense related to the move in fiscal 2021.

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On September 1, 2020 (the first day of fiscal 2021), the Company acquired all the capital stock of ABchimie for €18,654,000 (approximately $22,241,000 at the time of the transaction) net of cash acquired, subsequent to final working capital adjustment, excluding acquisition-related costs totaling $274,000 recognized in fiscal 2020 and with a potential earn out based on performance potentially worth an additional €7,000,000 (approximately $8,330,000 at the time of the transaction). ABchimie is a Corbelin, France headquartered solutions provider for the cleaning and protection of electronic assemblies, with ‎further formulation, production, and research and development capabilities‎. The transaction was funded with cash on hand. The financial results of the business were 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 its purchase accounting regarding the allocation of the purchase price to tangible and identifiable intangible assets assumed, including finalizing the recording of deferred taxes, during the fourth quarter of fiscal 2021, without any material adjustments from amounts initially recorded.

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Products and Markets

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Our principal products are specialty tapes, laminates, adhesives, sealants, coatings and chemical intermediates which are sold by our salespeople, manufacturers' representatives and distributors. 

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In our Adhesives, Sealants and Additives segment, these products consist of: 

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In our Industrial Tapes segment, these products consist of: 

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In our Corrosion Protection and Waterproofing segment, these products consist of:

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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).

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Human Capital Management

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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. In 2021, our employees continued to navigate the challenges of COVID-19, and, with an overarching commitment to health and safety, maintained a commitment to our customers, including providing products to critical industries such as healthcare, utilities, infrastructure and telecommunications.

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As of October 31, 2021, we employed approximately 661 people (including union employees). 81% were U.S. based and 19% international. 26% of our employees worked in administrative, selling and research and development functions, while 74% 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.

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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’s Human Rights and Supplier Code of Conduct policies and statements on Safety Performance, Environmental Impact and Energy and Resources are available on the Chase Corporation website (www.chasecorp.com).

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Backlog, Customers and Competition

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As of October 31, 2021, the backlog of customer orders believed to be firm was approximately $30,390,000.  This compared with a backlog of $15,949,000 as of October 31, 2020. The increase in backlog from the prior year amount was primarily due to: (a) raw material supply and logistics challenges broadly seen worldwide increasing the balance for the current year; and (b) a reduction from historical norms in the prior year given the impact of COVID-19 on that period. While we continue to work with our customers, venders and supply chain partners to prioritize the flow of goods, our backlog has increased to over one month’s worth of sales. During fiscal 2021 and 2020, 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.

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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.

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Raw Materials

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We obtain raw materials from a wide variety of suppliers, with alternative sources of most essential materials available within reasonable lead times.

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Patents, Trademarks, Licenses, Franchises and Concessions

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As of August 31, 2021, 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.

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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.

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Research and Development

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We expensed approximately $4,056,000, $4,007,000 and $4,021,000 for Company-sponsored research and development during fiscal 2021, 2020 and 2019, respectively, which was recorded within Research and Product Development Costs on the Consolidated Statement of Operations. Research and development costs have stayed relatively consistent from fiscal 2019 through fiscal 2021 as the Company continued focused development work on strategic product lines.

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Available Information

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Chase maintains a website at http://www.chasecorp.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to such reports filed or furnished pursuant to section 13(a) or 15(d) of the Securities Exchange Act of 1934, as well as section 16 reports on Form 3, 4, or 5, are available free of charge on this site as soon as is reasonably practicable after they are filed or furnished with the SEC. Our Code of Conduct and Ethics and the charters for the Audit Committee, the Nominating and Governance Committee and the Compensation and Management Development Committee of our Board of Directors are also available on our internet website. The Code of Conduct and Ethics and charters are also available in print to any shareholder upon request. Requests for such documents should be directed to Shareholder and Investor Relations Department, at 295 University Avenue, Westwood, Massachusetts 02090. Our internet website and the information contained on it or connected to it are not part of nor incorporated by reference into this Form 10-K. Our filings with the SEC are also available on the SEC’s website at http://www.sec.gov.

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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

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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.

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Operational and Competitive Risks

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We currently operate in mature markets where increases or decreases in market share could be significant.

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Our sales and net income are largely dependent on sales from a consistent and well-established customer base. Organic growth opportunities are minimal; however, we have used and will continue to use strategic acquisitions as a means to build and grow the business. In this business environment, increases or decreases in market share could have a material effect on our business condition or results of operation. We face intense competition from a diverse range of competitors, including operating divisions of companies much larger and with far greater resources than we have. If we are unable to maintain our market share, our business could suffer.

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Fluctuations in the supply and prices of raw materials may negatively impact our financial results.

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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), 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.

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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.

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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.

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The Company’s results of operations have been adversely affected and could in the future be materially adversely impacted by the coronavirus disease 2019 (COVID-19) pandemic.

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The global spread of the coronavirus disease 2019 (COVID-19) pandemic has created significant volatility, uncertainty and economic disruption. The Company experienced lower sales as a result of the economic disruption (most acutely in the second half of fiscal 2020 and the first half of fiscal 2021), and has initiated cost-saving measures, including a targeted workforce reduction, in response to the uncertainties associated with the scope and duration of the pandemic. The extent to which the COVID-19 pandemic impacts the Company’s business, operations and financial results in future periods will depend on numerous evolving factors that it may not be able to accurately predict, including: the duration and scope of the pandemic; future domestic and international waves and variants of 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.

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Further, the effects of the 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. The effects of the pandemic, including remote working arrangements for employees, may also impact the Company’s financial reporting systems and internal control over financial reporting, including its ability to ensure information required to be disclosed in its reports under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to its management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.

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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.

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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.

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Strategic Risks

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Our business strategy includes the pursuit of strategic acquisitions, which may not be successful if they happen at all.

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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.

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Even if we do identify a suitable acquisition target and are able to negotiate and close a transaction (as we did in 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.

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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.

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International Risks

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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.

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Current and threatened tariffs on goods from China and other countries could result in lower revenue, profits and cash flows.

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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.

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Industry Risks

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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.

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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.

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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.

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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 (such as winter storm Uri’s effects on our Houston, TX location and the surrounding region in February 2021 and Hurricane Ida’s impact on the Gulf Coast region in August 2021), 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.

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Other Risks

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We are dependent on key personnel.

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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.

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Financial market performance may have a material adverse effect on our pension plan assets and require additional funding requirements.

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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.

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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.

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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.

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As discussed in our Annual Report on Form 10-K for the year ended August 31, 2018, our management concluded that, as of August 31, 2018, we had a material weakness in our internal control over financial reporting related to our business combination processes. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. We have remediated the identified material weakness, but no assurances can be given that management will not identify in the future other internal control deficiencies that constitute a material weakness in our internal control over financial reporting or that any such material weakness will be remediated in a timely fashion.

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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.

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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.

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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.

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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

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Not applicable.

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Item 2 – Properties

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The principal properties of the Company as of August 31, 2021 are situated at the following locations and have the following characteristics:

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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

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The Company is involved from time to time in litigation incidental to the conduct of its business. Although the Company does not expect that the outcome in any of these matters, individually or collectively, will have a material adverse effect on its financial condition, results of operations or cash flows, litigation is inherently unpredictable. Therefore, judgments could be rendered, or settlements agreed to, that could adversely affect the Company’s operating results or cash flows in a particular period. The Company routinely assesses all its litigation and threatened litigation as to the probability of ultimately incurring a liability and records its best estimate of the ultimate loss in situations where it assesses the likelihood of loss as probable.

item 4 – mine safety disclosures

Not applicable.

Item 4a – INFORMATION ABOUT OUR Executive OfficerS

The following table sets forth information concerning our Executive Officers as of October 31, 2021.  Each of our Executive Officers is selected by our Board of Directors and holds office until his successor is elected and qualified.

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PART II

Item 5 – Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock is traded on the NYSE American under the symbol CCF.  As of October 29, 2021 (last trading day before October 31, 2021), there were 263 shareholders of record of our Common Stock and we believe there were approximately 9,643 beneficial shareholders who held shares in nominee name. On that date, the closing price of our common stock was $96.00 per share as reported by the NYSE American.

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Single annual cash dividend payments were declared and scheduled to be paid subsequent to each year ended August 31, 2021, 2020 and 2019 in the amounts of $1.00, $0.80 and $0.80 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.

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Comparative Stock Performance

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The following line graph compares the yearly percentage change in our cumulative total shareholder return on the Common Stock for the last five fiscal years with the cumulative total return on the Standard & Poor's 500 Stock Index (the “S&P 500 Index”), and a composite peer index that is weighted by market equity capitalization (the “Peer Group Index”). The companies included in the Peer Group Index are Henkel AG & Co KGaA, H.B. Fuller Company, Intertape Polymer Group, Rogers Corporation and RPM International, Inc. Cumulative total returns are calculated assuming that $100 was invested on August 31, 2016 in each of the Common Stock, the S&P 500 Index and the Peer Group Index, and that all dividends were reinvested.

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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 – Reserved

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This item is reserved as a result of the Company’s adoption of Item 301 of Regulation S-K, pursuant to rules adopted by the Securities and Exchange Commission on November 19, 2020, which included removing the requirement to include selected financial data.

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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.

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The discussion of the comparison of our fiscal 2020 and fiscal 2019 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 12, 2020, and has been omitted from this section pursuant to Instruction 1 to Item 303(a) of Regulation S-K.

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Selected Relationships within the Consolidated Statements of Operations

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* denotes less than one percent

Note: Some percentage of revenue amounts may not sum due to rounding

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Overview

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General

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Fiscal 2021 was a year marked by strong revenue and margin performance as Chase Corporation rebounded and grew over the COVID-19 impacted fiscal 2020. The Adhesives, Sealants and Additives segment led the improvement by achieving both organic and inorganic growth, with sales into automotive, industrial, medical and consumer markets, and an upward trajectory in international markets. The results of both the Company’s current year acquisitions (the February 2021 acquisition of the operations of Emerging Technologies, Inc. (“ETi”) and the September 2020 acquisition of ABchimie) are reported under the Adhesives, Sealants and Additives segment and combined provided accretive results for the year. The Industrial Tapes segment achieved recovery in sales over the prior year, with especially strong comparative results in the fourth quarter of fiscal 2021. Due to lower sales into the pipeline line and transportation infrastructure markets, the Corrosion Protection and Waterproofing segment sales fell short of the prior year.

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All of Chase Corporation’s segments are currently facing global raw material inflationary pressures, supply chain challenges and an increasingly competitive landscape related to obtaining and retaining a manufacturing labor force. These challenges, most specifically those related to raw material costs and logistics complications, were seen in the Company’s fiscal third quarter and became even more pressing in its fourth fiscal quarter. Chase anticipates these trends to continue well into our fiscal 2022. Chase continues to meet its customers’ increasing demands by leveraging its global network, partnering with customers and suppliers and driving further efficiencies throughout the Company’s production and logistics processes. While the Company looks to drive cost savings, it will also continue to institute customer price adjustments as needed across all affected product lines to protect gross margins.

Business Development

Through mergers, acquisitions and divestitures, its marketing and product development efforts and its ability to rationalize and consolidate its operations, Chase Corporation remains focused on its core strategies for sustainable long-term growth.

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During the third quarter of fiscal 2021, Chase announced to the employees at its Woburn, MA location that its adhesives systems operations 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. The Company completed the Newark, CA to Hickory, NC move in the fourth quarter of fiscal 2021, and anticipates completing the Woburn, MA to O’Hara Township, PA relocation during the first half of fiscal 2022. Chase Corporation obtained both the adhesive and sealants systems as part of its fiscal 2017 acquisition of the operations of Resin Designs.

On February 5, 2021, the Company acquired certain assets of Emerging Technologies, Inc. (“ETi”), a Greensboro, NC-located solutions provider and formulator of absorbent polymers for use in the packaging, recreational, consumer and sanitation markets. Following its fiscal 2018 acquisition of Zappa Stewart, the acquisition of ETi expands Chase Corporation’s market share in the growing superabsorbent polymers vertical. This second quarter acquisition comes following the September 1, 2020 (first day of fiscal 2021) purchase of ABchimie, a Corbelin, France-headquartered solutions provider for the cleaning and protection of electronic assemblies, that includes additional formulation, production, and research and development capabilities. Both the fiscal 2021 acquisitions were funded with available cash on hand and broaden the Company’s specialty chemical offerings within the Adhesives, Sealants, and Additives reporting segment with high performance, environmentally-friendly technologies that are complementary to Chase’s existing product offerings.

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Revenue by Segment

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The Company has three reportable operating segments summarized below:

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Revenue from the Adhesives, Sealants and Additives segment increased in fiscal 2021 versus the prior year. Driven by Asian and European markets showing growth and the inorganic boost provided by the acquired operations of ABchimie, sales volumes within the electronic and industrial coatings product line increased. The Company’s North American-focused functional additives product line sales also experienced both organic and inorganic volume and price growth over the prior year, with the operations of ETi added to the product line following its February 5, 2021 acquisition.

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Sales showed recovery in the Industrial Tapes segment over the COVID-19 impacted prior year, with the pulling and detection, electronic materials, and specialty products product lines driving top-line improvements for the year-to-date period. The segment’s cable materials, specialty products and pulling and detection product lines all have a North American concentration, and (in addition to the Asian-focused electronic materials product line) showed combined volume and price growth in the fourth quarter to move the segment into a favorable comparative position for the year.

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The Corrosion Protection and Waterproofing segment’s sales fell short of the prior year in fiscal 2021. While the coating and lining systems and building envelope product lines sales were favorable to the prior year, declines in both domestic and international infrastructure markets resulted in lower sales volume in the pipeline coatings and bridge and highway product lines, and the segment as a whole.

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Balance Sheet and Cash Flow

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Chase Corporation’s balance sheet remained strong as of August 31, 2021, with cash on hand of $119,429,000, and a current ratio of 6.5. Cash provided by operating activities of $61,217,000 for fiscal 2021 surpassed the prior year mark of $55,734,000. The Company’s cash position remains healthy, with cash flow from operations more than offsetting the costs to acquire ETi and ABchimie, and to pay an annual dividend during the fiscal year.

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The Company held no outstanding balance on its $200,000,000 revolving credit facility as of August 31, 2021. The revolving credit facility, which was amended and restated in July 2021 (fourth quarter of fiscal 2021) to increase its capacity from $150,000,000 to $200,000,000, allows for the Company to pay down debt with excess cash, while retaining access to immediate liquidity to fund future accretive activities, including mergers and acquisitions, as they are identified. The new facility also gives Chase the ability to request an increase in this amount by an additional $100,000,000 ($300,000,000 in total borrowing capacity) at the individual or collective option of any of the lenders. Through amending and restating the credit agreement in the fourth quarter of fiscal 2021, Chase also extended the maturity date of the facility through July 2026.

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Results of Operations

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Revenue and Income Before Income Taxes by Segment are as follows:

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Total Revenue

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Total revenue in fiscal 2021 increased $32,174,000 or 12% to $293,336,000 from $261,162,000 in the prior year.

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Revenue in our Adhesives, Sealants and Additives segment increased $30,656,000 or 32% to $126,864,000 for the year ended August 31, 2021 compared to $96,208,000 in fiscal 2020. Organic revenue growth accounted $20,330,000 of the segment’s overall year-to-date period sales increase. The increase in revenue from the Adhesives, Sealants and Additives segment in fiscal 2021 was primarily due to the electronic and industrial coatings product line’s $22,392,000 organic and inorganic increase. The operations of ABchimie, acquired September 1, 2020 (first day of fiscal 2021), provided the product line accretive top-line gains, while strong organic gains were seen both domestically and internationally. Also positively impacting the segment’s sales were organic and inorganic increases in revenue from the North American-focused functional additives product line totaling $8,264,000 in the current year. The functional additives product line sales totals included the operations of ETi, following its acquisition on February 5, 2021 (second quarter of fiscal 2021).

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Revenue in our Industrial Tapes segment increased $1,913,000 or 2% to $120,873,000 for the year ended August 31, 2021 compared to $118,960,000 in fiscal 2020. The net increase in revenue for the segment was primarily due to the following: (a) the pulling and detection tapes product line saw sales growth of $867,000 over the prior year year-to-date period on a volume and price driven increase; (b) the electronic materials product line, which has a nearly exclusive Asian end-market, saw a volume-driven increase of $865,000 over the prior year-to-date period; and (c) a revenue increase of $329,000 for the year-to-date period for the specialty products product line, with current year growth achieved despite the Company ending its arrangement to provide low margin transitional toll manufacturing services in the second quarter of fiscal 2020 (prior year). Partially offsetting the segment’s sales growth was the North American-focused cable materials product line with a net sales decrease of $148,000 for the full year period.

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Revenue from our Corrosion Protection and Waterproofing segment decreased $395,000 or 1% to $45,599,000 for the year ended August 31, 2021 compared to $45,994,000 for fiscal 2020. The segment’s sales decrease in the current year was predominantly driven by: (a) the pipeline coatings product line’s $2,183,000 largely volume-driven reduction as compared to the prior year to-date period, with the Company’s North American and Rye, U.K.-based facility’s negatively impacted in the current year by industry-wide material supply challenges and a tight labor market; and (b) the bridge and highway product line sales falling short of repeating prior year results by $1,408,000 on lower project demand. Positively affecting the results of the segment were volume and price sales increases of $2,076,000 and $1,120,000 by the coating and lining systems and the building envelope product lines, respectively.

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Royalties and commissions in the Adhesive, Sealants and Additives and Industrial Tapes segments totaled $3,534,000 and $3,420,000 for the years ended August 31, 2021 and 2020, respectively. The increase in royalties and commissions in fiscal 2021 compared to fiscal 2020 was primarily due to increased sales of electronic and industrial coatings products by our licensed manufacturer in Asia.

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Export sales from domestic operations to unaffiliated third parties were $33,439,000 and $30,067,000 for the years ended August 31, 2021 and 2020, respectively.  The increase in export sales in fiscal 2021 compared to fiscal 2020 is reflective of the company-wide year-over-year increase in sales results, as the Company showed recovery and growth following the period most significantly affected by COVID-19.

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Cost of Products and Services Sold

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Cost of products and services sold increased $13,045,000 or 8% to $174,660,000 for the fiscal year ended August 31, 2021 compared to $161,615,000 in fiscal 2020. As a percentage of revenue, cost of products and services sold decreased to 60% in fiscal 2021 compared to 62% for fiscal 2020.

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The following table summarizes the relative percentages of cost of products and services sold to revenue for our three operating segments:

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Cost of products and services sold in our Adhesives, Sealants and Additives segment was $71,805,000 for the fiscal year ended August 31, 2021 compared to $55,902,000 in fiscal 2020. As a percentage of revenue, cost of products and services sold in this segment decreased to 57% for fiscal 2021 compared to 58% for fiscal 2020. Cost of products and services sold in our Industrial Tapes segment was $77,013,000 for the fiscal year ended August 31, 2021 compared to $80,351,000 in fiscal 2020. As a percentage of revenue, cost of products and services sold in this segment decreased to 64% in fiscal 2021 compared to 68% for fiscal 2020. Cost of products and services sold in our Corrosion Protection and Waterproofing segment was $25,842,000 for the fiscal year ended August 31, 2021 compared to $25,362,000 in fiscal 2020. As a percentage of revenue, cost of products and services sold in this segment increased to 57% in fiscal 2021 compared to 55% in fiscal 2020. As a percentage of revenue, cost of products and services overall decreased primarily due to: (a) more favorable sales mixes in the Adhesives, Sealants and Additives and Industrial Tapes segments, as higher margin products and offerings constituted a comparatively higher portion of total sales; and (b) net production and operational efficiencies realized in the Adhesives, Sealants and Additives and Industrial Tapes segments in the current year, including those gained in part through the facility rationalization and consolidation initiative. All of Chase Corporation’s segments are subject to current global raw material inflationary pressures and supply chain and labor market challenges, and the Company, in line with customer agreements, is addressing this by instituting customer price adjustments across impacted product lines. However, most notably in the fourth quarter of fiscal 2021, raw material cost increases outpaced customer price adjustments given customer agreement required lead times for price adjustments. Chase Corporation continues to monitor and adjust prices as needed to protect margins in the intermediate and long-term periods.

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With the composition of our finished goods and the markets we serve, the costs of certain commodities (including petroleum-based solvents, films, yarns, polymers and nonwovens, aluminum and copper foils, specialty papers, and various resins, adhesives and inks) both directly and indirectly affect the purchase price of our raw materials and the market demand for our product offerings. The Company diligently monitors raw material and commodities pricing across all its product lines in its efforts to preserve margins.

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Selling, General and Administrative Expenses

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Selling, general and administrative expenses increased $2,736,000 or 6% to $52,100,000 during fiscal 2021 compared to $49,364,000 in fiscal 2020. As a percentage of revenue, selling, general and administrative expenses decreased to 18% of total revenue in fiscal 2021 compared to 19% for fiscal 2020. The Company continues to closely monitor spending with an emphasis on controlling costs and leveraging existing resources.

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Research and Product Development Costs

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Research and Product Development Costs increased $49,000 or 1% to $4,056,000 during fiscal 2021, compared to $4,007,000 in fiscal 2020. Research and development stayed relatively consistent from fiscal 2020 to 2021 as the Company continued focused development work on strategic product lines.

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Operations Optimization Costs

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. No expense was recognized related to the adhesive systems initiative during fiscal 2021, with the majority of future costs anticipated to occur in the first half of fiscal 2022.

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 there terminated in the current fiscal year. The Company recognized $977,000 in expense related to the move during the fiscal year ended August 31, 2021. This project is now substantively completed, and any future costs related to this move are not anticipated to be significant to the consolidated financial statements.

During the third fiscal quarter of 2020, the Company implemented changes in its cost structure designed to address market changes brought on, in part, by COVID-19. These changes included a targeted reduction of approximately 4.5% of the Company’s global workforce. This reduction, which was contemplated pre-pandemic but catalyzed by COVID-19, resulted in the recognition of $183,000 in severance costs during the third quarter of fiscal 2020. The reduction in force, which impacted operations in the Blawnox, PA, Hickory, NC, Lenoir, NC, Evanston, IL, Oxford, MA and Westwood, MA facilities, was effective May 2020.

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During the first quarter of fiscal 2020, the Company commissioned third party led studies regarding the potential upgrading of the Company’s current worldwide ERP system. Chase is currently reviewing the data and recommendations provided by the study and may further utilize third-party engineering, IT and other professional services firms in the future for similar work, as well as work around the Company’s facilities rationalization and consolidation initiative. The Company recognized $150,000 in expense related to these services in the first quarter of fiscal 2020.

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During the third quarter of fiscal 2019, Chase began moving the pulling and detection operations housed in its Granite Falls, NC location to its Hickory, NC facility. This is in line with the Company’s ongoing initiative to consolidate its manufacturing plants and streamline its existing processes. At the time, the pulling and detection operations were the only Chase-owned production operations in Granite Falls, NC, with the remaining portions of the building being either utilized for research and development or leased to a third party. The process of moving, including moving internal research and development capabilities, was substantially completed during the second quarter of fiscal 2020. The Company recognized $559,000 in expense related to the move in the first half of fiscal 2020, having recognized $526,000 in expense during the second half of fiscal 2019. This project is substantively completed. No costs were recorded in the second half of fiscal 2020 or in fiscal 2021, and any future costs related to this move are not anticipated to be significant to the consolidated financial statements.

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During the fourth quarter of fiscal 2019, Chase commissioned engineering studies of certain legacy operations, machinery and locations related to the Company’s ongoing facility rationalization and consolidation initiative. Chase completed its review of the data and recommendations provided by the study in the fourth quarter of fiscal 2020 (prior year). The Company recognized $200,000 in expense related to these services in fiscal 2019, and a gain of $170,000 in fiscal 2020, as certain amounts expensed in fiscal 2019 were refunded. Chase may utilize third party engineering, IT and other professional services firms in the future for similar optimization-related work. Given the ongoing nature of the facility rationalization and consolidation initiative, an estimate of future costs cannot currently be determined.

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During the fourth quarter of 2018, the Company announced to its employees the planned closing of its Pawtucket, RI manufacturing facility effective August 31, 2018. The manufacture of products previously produced in the Pawtucket, RI facility was substantially moved to Company facilities in Oxford, MA and Lenoir, NC during a two-month transition period. The Company completed the sale of its Pawtucket, RI location to a third-party in April 2020, for net proceeds totaling $1,810,000. This transaction resulted in a gain of $760,000 which was recorded during the third quarter of fiscal 2020. Also, during the third quarter of fiscal 2020, the Company recognized $85,000 in final Pawtucket, RI transition and exit costs, with no further costs related to this initiative anticipated in future periods.

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Acquisition-Related Costs

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In the second quarter of fiscal 2021, the Company incurred $128,000 of costs related to our February 5, 2021 acquisition of Emerging Technologies, Inc (“ETi”). This acquisition was accounted for as a business combination in accordance with applicable accounting standards, and all related professional service fees (including legal, accounting and actuarial fees) were expensed as incurred within the second fiscal quarter of 2021.

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In fiscal 2020, the Company incurred $274,000 of costs related to our acquisition of ABchimie.  This acquisition was accounted for as a business combination in accordance with applicable accounting standards, and all related professional service fees (including banking, legal, accounting and actuarial fees) were expensed as incurred within the second, third and fourth quarters of fiscal 2020. The transaction was consummated at the beginning of fiscal 2021.

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Gain on Sale of Real Estate

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In August 2020, the Company finalized the sale of its Randolph, MA property for net proceeds of $1,805,000. This transaction resulted in a gain of $1,791,000 which was recorded during the quarter ended August 31, 2020 (fiscal 2020).

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In April 2020, the Company finalized the sale of its Pawtucket, RI location for net proceeds of $1,810,000. This transaction resulted in a gain of $760,000 which was recorded during the quarter ended May 31, 2020 (fiscal 2020).

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Write-down of certain assets under construction

In the fourth quarter of fiscal 2021, 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 $100,000 related to the machinery.

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In the fourth quarter of fiscal 2020, given the results and recommendations of a commissioned engineering study, the Company wrote down the value of certain non-operating production assets related to the pipeline coatings product line, within the Corrosion Protection and Waterproofing segment. Given the nature and prospects of the equipment, the Company determined its then carrying value exceeded its fair value and recognized an expense of $405,000 related to the machinery.

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Loss on Contingent Consideration

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As a component of the September 1, 2020 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, $1,664,000 in expense related to adjustments to the performance-based earn out accrual were recorded to the consolidated statement of operations for the year ended August 31, 2021.

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Interest Expense

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Interest expense increased $51,000 or 21% to $297,000 in fiscal 2021 compared to $246,000 in fiscal 2020. As the Company had no outstanding balance on its revolving debt facility for both periods, interest expense has remained relatively low.

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Other Income (Expense)

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Other expense was $760,000 in fiscal 2021 compared to other expense of $1,675,000 in fiscal 2020, a decrease of $915,000. Other income (expense) primarily includes foreign exchange gains (losses) caused by changes in exchange rates on transactions or balances denominated in currencies other than the functional currency of our subsidiaries, non-service cost components of periodic pension expense (including pension-related settlement costs due to the timing of lump-sum distributions), interest income, rental income and other non-trade/non-royalty/non-commission receipts. The decrease in total other expense in fiscal 2021 compared to fiscal 2020 was largely due to the recognition of a smaller foreign exchange loss in fiscal 2021 as compared to fiscal 2020.

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Income Taxes

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Our effective tax rate for fiscal 2021 was 23.3% as compared to 24.6% in fiscal 2020. 

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The current and prior years’ effective tax rates were most prominently affected by the passage of the Tax Cuts and Jobs Act (the “Tax Act”) in December 2017. For fiscal 2021 and 2020, the Company utilized the new 21% Federal tax rate enacted by the Tax Act. Please see Note 7 — “Income Taxes” to the Consolidated Financial Statements for further discussion of the effects of the Tax Act.

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Net Income

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Net income increased $10,763,000 or 32% to $44,920,000 compared to $34,157,000 in fiscal 2020. The increase in net income in the year-to-date period was primarily due to higher sales and an improved relative gross margin.

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Liquidity and Sources of Capital

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Our cash balance increased $20,361,000 to $119,429,000 at August 31, 2021 from $99,068,000 at August 31, 2020. The increased cash balance was primarily attributable to cash from operations of $61,217,000, net of $22,241,000 utilized to acquire ABchimie on September 1, 2020, $8,997,000 utilized to acquire the operations of Emerging Technologies, Inc. (“ETi”) on February 5, 2021 and the $7,557,000 dividend paid in December 2020. Of the above noted balances, $26,309,000 and $42,615,000 were held outside the U.S. by Chase Corporation and our foreign subsidiaries as of August 31, 2021 and 2020, respectively. Given our cash position and borrowing capability in the United States and the potential for increased investment and acquisitions in foreign jurisdictions, prior to the second quarter of fiscal 2018, we did not have a history of repatriating a significant portion of our foreign cash. With the passage of the Tax Cuts and Jobs Act (the “Tax Act”) in the second fiscal quarter of 2018, significant changes in the Internal Revenue Code were enacted, changing the U.S. taxable nature of previously unrepatriated foreign earnings. We repatriated $10,499,000 in U.K. foreign earnings in fiscal 2018 and $17,230,000 in fiscal 2019. We do not currently take the position that undistributed foreign subsidiaries’ earnings are considered to be permanently reinvested. See Note 7 — “Income Taxes” to the Consolidated Financial Statements included in this Report for further discussion of the effects of the Tax Act.

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Cash provided by operations was $61,217,000 for the year ended August 31, 2021 compared to $55,734,000 in fiscal 2020.  Cash provided by operations during fiscal 2021 was primarily due to operating income and increased accounts payable, partially offset by an elevated level of accounts receivable (resulting from increased sales).

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The ratio of current assets to current liabilities was 6.5 as of August 31, 2021 compared to 7.7 as of August 31, 2020. The decrease in our current ratio in fiscal 2021 was primarily attributable to increased accounts payable on normal trade activity during the period.

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Cash used in investing activities was $33,927,000 for the year ended August 31, 2021 compared to $2,077,000 in cash provided by investing activities in fiscal 2020. During fiscal 2021, cash used in investing activities was largely due to the cash on hand purchases of both ABchimie and ETi and cash spent on capital purchases of machinery and equipment.

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Cash used in financing activities was $8,248,000 for the year ended August 31, 2021 compared to $8,420,000 used in financing activities in fiscal 2020. Chase paid annual dividends of $7,557,000 and $7,539,000 in 2021 and 2020, respectively.

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On November 15, 2021, Chase announced a cash dividend of $1.00 per share (totaling approximately $9,457,000) to shareholders of record on November 30, 2021 and payable on December 9, 2021.

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On November 12, 2020, Chase announced a cash dividend of $0.80 per share (totaling $7,557,000) to shareholders of record on November 27, 2020 and payable on December 7, 2020.

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On July 27, 2021 (the fourth quarter of fiscal 2021), the Company entered into the Second Amended and Restated Credit Agreement (the “New Credit Agreement”) by and among the Company (the “Chase Borrower”), NEPTCO Incorporated (“NEPTCO”), the subsidiary guarantors 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 New Credit Agreement was entered into to amend, restate and extend the Company’s preexisting Amended and Restated Credit Agreement (the “Prior Credit Agreement”), which had a maturity date of December 15, 2021 and is discussed in more detail below, and to provide for additional liquidity to finance acquisitions, working capital and capital expenditures, and for other general corporate purposes. Under the New Credit Agreement, Chase obtained an increased revolving credit loan (the “New 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. The applicable interest rate for the New Revolving Facility and New Term Loan (defined below) is based on the effective London Interbank Offered Rate (LIBOR) plus a range of 1.00% to 1.75%, depending on the consolidated net leverage ratio of Chase and its subsidiaries. At August 31, 2021, there was no outstanding principal balance, and as such, no applicable interest rate. The New Credit Agreement has a five-year term with interest payments due at the end of the applicable LIBOR period (but in no event less frequently than the three-month anniversary of the commencement of such LIBOR period) and principal payment due at the expiration

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of the agreement, July 27, 2026. The New Credit Agreement contains provisions that may replace LIBOR as the benchmark index under certain circumstances. In addition, the Company may elect a base rate option for all or a portion of the New Revolving Facility, in which case interest payments shall be due with respect to such portion of the New Revolving Facility on the last business day of each quarter. Subject to certain conditions set forth in the New Credit Agreement, the Company may elect to convert all or a portion of the outstanding New Revolving Facility into a new term loan twice during the term of the New Revolving Facility (each, a “New Term Loan”, and collectively with the New Revolving Facility, the “New Credit Facility”), which New 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 New Credit Facility is guaranteed by all of Chase’s direct and indirect domestic subsidiaries. The New Credit Facility is subject to restrictive covenants under the New 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 3.25 to 1.00 and a consolidated interest coverage ratio of 3.50 to 1.00 (both defined in the New Credit Agreement). Chase Corporation was in compliance with the debt covenants as of August 31, 2021. The New Credit Agreement also places certain Lender-approval requirements as to the size of permitted acquisitions which may be entered into by the Company and its subsidiaries, and allows for a temporary step-up in the allowed consolidated leverage ratio for the four fiscal quarters ending after certain designated acquisitions. Prepayment is allowed by the New Credit Agreement at any time during the term of the agreement, subject to customary notice requirements and the payment of customary LIBOR breakage fees.

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In connection with entry into the New Credit Agreement, Chase amended and restated its Prior Credit Agreement, the full amount of which was substantially available as of July 27, 2021.

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The Prior Credit Agreement was an all-revolving credit facility with a borrowing capacity of $150,000,000, which could be increased by an additional $50,000,000 at the request of the Company and the individual or collective option of any of the lenders, and with an interest rate based on the effective LIBOR plus an additional amount in the range of 1.00% to 1.75%, depending on our consolidated net leverage ratio or, at the Company’s option, at the bank’s base lending rate. At August 31, 2020 there was no outstanding principal balance, and as such, no applicable interest rate. Chase Corporation was in compliance with the covenants under the Prior Credit Facility as of August 31, 2020 (prior year).

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The Company has several ongoing capital projects, as well as its facility rationalization and consolidation initiative, which are important to its long-term strategic goals. Machinery and equipment may be added as needed to increase capacity or enhance operating efficiencies in the Company’s production facilities.

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During the second and third fiscal quarters of 2021, respectively, the Company announced plans to consolidate its Newark, CA operations into its Hickory, NC facility, and its Woburn, MA operations into its O’Hara Township, PA facility. The consolidation of the Newark, CA facility was completed in the fourth quarter of fiscal 2021, and the consolidation of the Woburn, MA facility is anticipated to be completed in the first half of fiscal 2022. During the third fiscal quarter of 2020, the Company implemented changes in its cost structure designed to address market changes brought on, in part, by COVID-19. These changes included a targeted reduction of approximately 4.5% of the Company’s global workforce. During fiscal 2019, the Company announced it had begun moving the production of its pulling and detection products from its Granite Falls, NC location to its Hickory, NC location, with completion of the move occurring in the first half of fiscal 2020. During fiscal 2018, the Company announced the planned closing of its Pawtucket, RI manufacturing facility effective August 31, 2018. The manufacturing of products previously produced in the Pawtucket, RI facility was moved to Company facilities in Oxford, MA and Lenoir, NC, and the facility was subsequently sold in fiscal 2020. During the fourth quarter of fiscal 2019, the Company commissioned engineering studies to assess potential future operational changes and further plant rationalization and consolidation. These actions are in line with the Company’s ongoing efforts to consolidate its manufacturing plants and streamline its processes. A total of all potential future costs arising from any further plant rationalization and consolidation cannot be estimated at this time.

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We may acquire companies or other assets in future periods which are complementary to our business. The acquisition of ABchimie included a potential earnout based on performance of up to an additional €7,000,000 (approximately $8,330,000 at the time of the transaction), which the Company expects to pay with cash on hand if the applicable conditions are met. The acquisition of ETi includes a $1,000,000 withholding, which is payable by the Company within eighteen months of the acquisition. The Company believes that its existing resources, including cash on hand and the New Amended and Restated 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.

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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.

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We have no material off-balance sheet arrangements.

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Contractual Cash Obligations

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The following table summarizes our contractual cash obligations at August 31, 2021 under operating leases and the effect such obligations are expected to have on our liquidity and cash flow in future periods (dollars in thousands):

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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. Accordingly, the Company’s unrecognized tax benefits was $2,190,000 as of August 31, 2021. See Note 7 — “Income Taxes” to the Consolidated Financial Statements for further information.

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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, 2021, we had recognized an accrued benefit plan liability of $10,981,000 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.

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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.

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Recently Issued Accounting Standards

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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.

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Critical Accounting Policies, Judgments, and Estimates

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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.

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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.

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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.

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Business Combinations

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We assign the value of the consideration transferred to acquire a business to the tangible assets and identifiable intangible assets acquired, and liabilities assumed on the basis of their fair values at the date of acquisition. The Company’s assess the fair value of assets, including intangible assets, using a variety of methods, and each asset is measured at fair value from the perspective of a market participant. The method used to estimate the fair values of intangible assets incorporates significant assumptions regarding the estimates a market participant would make in order to evaluate an asset, including a market participant’s use of the asset and the appropriate discount rates for a market participant. Assets recorded from the perspective of a market participant that are determined to not have economic use for the Company are expensed immediately. Any excess purchase price over the fair value of the net tangible and intangible assets acquired is allocated to goodwill. Transaction costs and restructuring costs associated with a transaction to acquire a business are expensed as incurred.

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Contingent Consideration

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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 €7,000,000 (approximately $8,330,000 at the time of the initial transaction).

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Impact of Inflation

Inflation has not had a significant long-term impact on our earnings, with the impact of the current inflationary period most acutely limited to the fourth quarter of fiscal 2021.  In the event of significant inflation over an extended period of time, our continued efforts to recover cost increases could be hampered as a result of the competitive nature of the industries in which we operate. Future volatility of general price inflation or deflation and raw material cost and availability could adversely affect our financial results.

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Item 7a – Quantitative and Qualitative Disclosures about Market Risk

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We limit the amount of credit exposure to any one issuer. At August 31, 2021, other than our restricted investments (which are restricted for use in a non-qualified retirement savings plans for certain key employees and members of the Board of Directors), all of our funds were either in demand deposit accounts or investment instruments that meet high credit quality standards such as money market funds, government securities, or commercial paper.

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Our domestic operations have limited currency exposure since substantially all transactions are denominated in U.S. dollars. However, our European and Asian operations are subject to currency exchange fluctuations. We continue to review our policies and procedures to control this exposure while maintaining the benefit from these operations and sales not denominated in U.S. dollars. The effect of an immediate hypothetical 10% change in the exchange rate between the British pound or euro and the U.S. dollar would not have a material effect on the Company’s overall liquidity. As of August 31, 2021, the Company had cash balances in the following foreign currencies (with USD equivalents in thousands):

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The Company will continue to review its current cash balances denominated in foreign currency considering current tax guidelines, including the impact of the Tax Act to the U.S. Internal Revenue Code, working capital requirements, infrastructure improvements and potential acquisitions.

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The Company recognized a foreign currency translation gain for the year ended August 31, 2021 in the amount of $1,295,000 related to our European and Indian operations, which is recorded in accumulated other comprehensive income (loss) within our consolidated statement of equity. The functional currency for all our other operations is the U.S. Dollar. We do not have or utilize any derivative financial instruments.

We pay interest on our outstanding long-term debt at interest rates that fluctuate based upon changes in various base interest rates. There was no outstanding balance of long-term debt at August 31, 2021 and 2020. 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

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The following Consolidated Financial Statements of Chase Corporation are filed as part of this Annual Report on Form 10-K:

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Index to Consolidated Financial Statements:

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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Board of Directors and Shareholders

Chase Corporation

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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, 2021 and 2020, the related consolidated statements of operations, comprehensive income, equity, and cash flows for each of the three years in the period ended August 31, 2021, 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, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended August 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

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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, 2021, 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 15, 2021 expressed an unqualified opinion.

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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.

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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 supporting 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.

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Critical audit matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate 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 matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

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Valuation of the acquisition-date fair value of customer relationships

As described in Note 14 to the consolidated financial statements, on September 1, 2020 the Company acquired ABchimie for a total purchase price of $22.2 million. The Company’s accounting for this included estimating the fair value of the customer relationships intangible asset for $11.1 million. We identified the valuation of the acquisition-date fair value of the customer relationships intangible asset acquired in the ABchimie transaction as a critical audit matter.

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The principal considerations for our determination that the fair value of the customer relationships intangible asset is a critical audit matter is that a high degree of subjective auditor judgment was required in evaluating certain assumptions used in the valuation method to calculate the fair value of this asset. The valuation model included a number of internally developed assumptions for which there was limited observable market information, and the calculated fair value of this intangible asset was sensitive to possible changes in the following key assumptions: forecasted cash flows and the customer attrition rate.

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Our audit procedures related to the valuation of the acquisition-date fair value of the customer relationships intangible asset included the following, among others:

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Valuation of contingent consideration

As described in Note 14 to the consolidated financial statements, on September 1, 2020 the Company acquired ABchimie for a total purchase price of $22.2 million. The acquisition included a contingent consideration provision based on future annual earnings before interest and taxes exceeding certain thresholds in each of the four years subsequent to the acquisition, with a potential total consideration of $8.3 million. We identified the valuation of the acquisition-date fair value and subsequent reporting period-end revaluation of the contingent consideration as a critical audit matter.

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The principal considerations for our determination that the valuation of the fair value of the contingent consideration is a critical audit matter is that a high degree of subjective auditor judgment was required in evaluating certain inputs to the Monte Carlo simulation model used to determine the fair value of the contingent consideration. Specifically, the key inputs included forecasted earnings before interest and taxes and the volatility rate. There was limited observable market information, and the calculated fair value of the contingent consideration was sensitive to possible changes to these key inputs

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Our audit procedures related to the valuation of the contingent consideration included the following, among others:

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/s/ GRANT THORNTON LLP

We have served as the Company’s auditor since 2019

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Boston, Massachusetts November 15, 2021

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CHASE CORPORATION

CONSOLIDATED BALANCE SHEETS

In thousands, except share and per share amounts

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See accompanying notes to the Consolidated Financial Statements.

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CHASE CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

In thousands, except share and per share amounts