CHASE CORP - Annual Report: 2023 (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, 2023

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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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375 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 check mark 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.

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether an of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

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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, 2023, was approximately $542,820,000.

As of October 31, 2023, the Company had outstanding 9,522,749 shares of common stock, $0.10 par value, which is its only class of common stock.

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CHASE CORPORATION

INDEX TO ANNUAL REPORT ON FORM 10-K

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For the Year Ended August 31, 2023

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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; our pending merger, 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 public health issues, including epidemics or pandemics such as the coronavirus disease 2019 (COVID-19) pandemic on the Company's businesses and the impact of inflation and other market forces. 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.

Use of Non-GAAP Financial Measures

The Company has used non-GAAP financial measures in Part III in this Form 10-K. EBITDA, Adjusted EBITDA and Adjusted EBITDAX are non-GAAP financial measures. The Company believes that EBITDA, Adjusted EBITDA and Adjusted EBITDAX are useful performance measures as they are used by its executive management team to measure operating performance, to allocate resources to enhance the financial performance of its business, to evaluate the effectiveness of its business strategies and to communicate with its board of directors and investors concerning its financial performance. The Company believes EBITDA, Adjusted EBITDA and Adjusted EBITDAX are commonly used by financial analysts and others in the industries in which the Company operates, and thus provide useful information to investors. However, Chase’s calculation of EBITDA, Adjusted EBITDA and Adjusted EBITDAX may not be comparable to similarly-titled measures published by others. Non-GAAP financial measures should be considered in addition to, and not as an alternative to, the Company’s reported results prepared in accordance with GAAP.

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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, personal care, general industrial and environmental market verticals. The segment’s products include moisture protective coatings and cleaners, and customized sealant and adhesive systems for electronics, polymeric microspheres, polyurethane dispersions, specialty polymers and superabsorbent polymers. Beginning September 1, 2022 (first day of fiscal 2023), the Adhesives, Sealants and Additives segment includes the acquired operations of NuCera Solutions (“NuCera”), within the functional additives product line.

The Industrial Tapes segment features wire and cable materials, specialty tapes and other laminated and coated products. The segment derives its competitive advantage through its proven chemistries, its diverse specialty offerings and the reliability its supply chain offers to end customers. These products are generally used in the assembly of other manufacturers’ products, with demand typically dependent upon general economic conditions. The Industrial Tapes segment sells mostly to established markets, with some exposure to growth opportunities through further development of existing products. Markets served include cable manufacturing, utilities and telecommunications, and electronics packaging. The segment’s offerings include insulating and conducting materials for wire and cable manufacturers, laminated durable papers, laminates for the packaging and industrial laminate markets, custom manufacturing services, pulling and detection tapes used in the installation, measurement and location of fiber optic cables and water and natural gas lines and cover tapes essential to delivering semiconductor components via tape-and-reel packaging.

The Corrosion Protection and Waterproofing segment is principally composed of project-oriented product offerings that are primarily sold and used as “Chase” branded products. End markets include new and existing infrastructure projects on oil, gas, water and wastewater pipelines, highways and bridge decks, water and wastewater containment systems, and commercial buildings. The segment’s products include protective coatings for pipeline applications, coating and lining systems for waterproofing and liquid storage applications, adhesives and sealants used in architectural and building envelope waterproofing applications, high-performance polymeric asphalt additives, and expansion joint systems for waterproofing applications in transportation and architectural markets. With sales generally dependent on outdoor project work, the segment experiences highly seasonal sales patterns.

Our manufacturing facilities are distinct to their respective segments apart from our O’Hara Township, PA, Blawnox, PA and Hickory, NC facilities, which manufacture products related to a combination of operating segments.

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A summary of our operating structure as of August 31, 2023 is as follows:

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Other Business Developments

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Merger Agreement

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On July 21, 2023, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among the Company, Formulations Parent Corporation, a Delaware corporation (“Parent”), Formulations Merger Sub Corporation, a Delaware corporation and a direct, wholly owned subsidiary of Parent (“Merger Sub”), pursuant to which Merger Sub will merge with and into the Company, with the Company surviving as a wholly owned subsidiary of Parent (the “Merger”). Parent is an affiliate of investment funds managed by KKR, a leading global investment firm.

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Subject to the terms and conditions of the Merger Agreement, at the effective time of the Merger, each share of Company common stock, par value $0.10 per share (other than shares held by the Company as treasury stock or owned by Parent immediately prior to the effective time, shares held by any subsidiary of the Company or Parent immediately prior to the effective time, or shares held by any holder who is entitled to appraisal rights and has properly exercised such rights under Massachusetts law) will be converted into the right to receive $127.50 in cash, without interest.

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If the Merger is consummated, the Company’s securities will be delisted from the NYSE American and deregistered under the Securities Exchange Act of 1934 as promptly as practicable after the effective time.

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The consummation of the Merger (the “Closing”) is subject to certain customary mutual conditions, including (i) the approval of the Company’s shareholders holding at least two thirds of the outstanding shares of Company Common Stock entitled to vote on the adoption of the Merger Agreement, (ii) the expiration or termination of any waiting period (and any extension thereof) applicable to the consummation of the Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and the approvals, clearances or expiration of applicable waiting periods of the Merger, as applicable, under the antitrust and foreign investment laws of certain other jurisdictions, and (iii) the absence of any order, injunction, decree or law issued or enforced by any governmental authority of competent jurisdiction that prohibits, renders illegal or enjoins the consummation of the Merger.

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The 30-day waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), in connection with the Merger expired at 11:59 p.m. on September 5, 2023. The expiration of the HSR Act waiting period satisfies one of the conditions to the closing of the Merger.

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On October 6, 2023, the Company convened a special meeting of shareholders to consider and vote upon certain proposals related to the Merger Agreement. Each proposal was approved by shareholders at the special meeting. Shareholder approval satisfies one of the conditions to the closing of the Merger.

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The Company incurred $4,270,000 of acquisition-related costs (in the fourth fiscal quarter) of fiscal 2023, related to the Merger.

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NuCera Solutions

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On September 1, 2022 (the first day of fiscal 2023), the Company completed its acquisition of NuCera Solutions, a recognized global leader in the production and development of highly differentiated specialty polymers and polymerization technologies serving demanding applications, offering products critical to enabling end-product functionality, performance and reliability. The Company acquired all of the capital stock of NuCera for a purchase price of $250,000,000, net of debt, accrued income taxes and cash at closing, and pending any working capital adjustments. See Note 14 – “Acquisitions” to the consolidated financial statements for additional information.

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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.

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As of August 31, 2023, we employed approximately 859 people (including union employees). Of these, 82% were U.S. based and 18% international. 31% of our employees worked in administrative, selling and research and development functions, while 69% worked in the manufacture of our products at our facilities. Given macrotrends faced worldwide, Chase currently operates in an increasingly competitive landscape in hiring and retaining a manufacturing labor force. We consider our employee relations to be good. In the U.S., we offer our employees a wide array of company-paid benefits, which we believe are competitive relative to others in our industry. In our operations outside the U.S., we offer benefits that may vary from those offered to our U.S. employees due to customary local practices and statutory requirements.

We have policies in place designed to provide a safe and healthy workplace and comply with applicable safety and health regulations and our own internal requirements. We work to provide and maintain a safe, healthy and productive workplace, in consultation with our employees, by addressing and remediating identified risks of accidents, injury and health impacts.

We strive to maintain workplace environments that are free from discrimination or harassment on the basis of race, sex, color, national or social origin, ethnicity, religion, age, disability, sexual orientation, gender identification or expression, political opinion, or any other status protected by applicable law. The qualities and characteristics we seek for recruitment, hiring, placement, development, training, compensation, and advancement at the Company are job qualifications, performance, skills, and experience.

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

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Backlog, Customers and Competition

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As of August 31, 2023, the backlog of customer orders believed to be firm was approximately $42,920,000.  This compared with a backlog of approximately $40,600,000 as of August 31, 2022. The increase in backlog from the prior year amount was primarily due to NuCera Solutions increasing the balance for the current year. We continue to work with our customers, vendors and supply chain partners to prioritize the flow of goods. During fiscal 2023 and 2022, no customer accounted for more than 10% of sales. No material portion of our business is subject to renegotiation or termination of profits or contracts at the election of the United States Federal Government.

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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, 2023, we owned the following trademarks that we believe were of material importance to our business: Chase Corporation^®, C-Spray (Logo), a trademark used in conjunction with most of the Company’s business segment and product line marketing material and communications; HumiSeal^®, a trademark for moisture protective coatings sold to the electronics industry; Chase & Sons^®, a trademark for barrier and insulating tapes sold to the wire and cable industry; Chase BLH2OCK^®, a trademark for a water-blocking compound sold to the wire and cable industry; Rosphalt50^®, a trademark for an asphalt additive used predominantly on bridge decks for waterproofing protection; PaperTyger^®, a trademark for laminated durable papers sold to the envelope converting and commercial printing industries; DuraDocument^®, a trademark for durable, laminated papers sold to the digital print industry; Defender^® a trademarked RFID protective material sold to the personal accessories and paper industries; Tapecoat^®, a trademark for corrosion preventive surface coatings and primers; Maflowrap^®, a trademark for anti-corrosive tapes incorporating self-adhesive mastic or rubber-backed strips, made of plastic materials; Royston^®, a trademark for a corrosion-inhibiting coating composition for use on pipes; Ceva^®, a trademark for epoxy pastes/gels/mortars and elastomeric concrete used in the construction industry; CIM^® trademarks for fluid-applied coating and lining systems used in the water and wastewater industry; ServiWrap^® trademarks for pipeline protection tapes, coatings and accessories; NEPTCO^®, a trademark used in conjunction with most of NEPTCO’s products marketing material and communications; NEPTAPE^®, a trademark for coated shielding and insulation materials used in the wire and cable industry; Muletape^®, a trademark for pulling and installation tapes sold to the telecommunications industry; Trace-Safe^®, a trademark for detection tapes sold to the telecommunications and water and gas utilities industries; Dualite^®, a trademark for polymeric microspheres utilized for density and weight reduction and sound dampening by various industries; 4EvaSeal^®, a trademark for adhesive-backed tape utilized in various industries; Resin Designs^®, a trademark for adhesives and sealants sold into the microelectronics and semiconductor industries; SlickTape^®, a trademark for a lubricated shielding tape sold to the wire and cable industry; HighDraw^®, a trademark for a highly extensible shielding tape sold to the wire and cable industry; ZapZorb^®, a trademark for environmental solidification products that are designed to meet the specific challenges posed by a wide range of liquid-bearing waste streams; ZapLoc^®, a trademark for medical waste solidifier products packaged in bottles or larger packages; ZapPak^®, a trademark for medical waste solidifier products packaged in dissolvable film; and ABchimie^®, a trademark used in conjunction with most of ABchimie’s products marketing material and communications.

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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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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 375 University Avenue, Westwood, Massachusetts 02090. Our internet website and the information contained on it or connected to it are not part of nor incorporated by reference into this Form 10-K. Our filings with the SEC are also available on the SEC’s website at http://www.sec.gov.

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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. 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 and in the fiscal 2022 period), which could impair our ability to procure necessary materials, or increase the cost of manufacturing our products. If the prices of raw materials increase, and we are unable to pass these increases on to our customers, we could experience reduced profit margins.

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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 and may continue to be adversely affected by public health issues, including epidemics or pandemics such as the coronavirus disease 2019 (COVID-19) pandemic.

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We face various risks related to public health issues, including epidemics, pandemics, and other outbreaks, including the global outbreak of the coronavirus disease 2019 (COVID-19). The global spread of the COVID-19 pandemic had created significant volatility, uncertainty and economic disruption. The Company experienced lower sales as a result of the economic disruption (most acutely in the first half of fiscal 2021), and initiated cost-saving measures, including a targeted workforce reduction in 2020, in response to the uncertainties associated with the scope and duration of the pandemic. The extent to which public health issues, including epidemics or pandemics such as the COVID-19 pandemic, impact the Company’s business, operations and financial results in future periods will depend on numerous evolving factors that it may not be able to accurately predict, including: the duration and scope of the pandemic; future domestic and international waves and variants seen in public health issues, like COVID-19 and current vaccines’ effectiveness

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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 public health issues like a pandemic may also increase the Company’s cost of capital or make additional capital more difficult or available only on terms less favorable to it. A sustained downturn may also result in the carrying value of the Company’s goodwill or other intangible assets exceeding their fair value, which may require it to recognize an impairment to those assets. A sustained downturn in the financial markets and asset values may have the effect of increasing the Company’s pension funding obligations in order to ensure that its qualified pension plan continues to be adequately funded, which may divert cash flow from other uses.

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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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We face risks associated with the Merger.

On July 21, 2023, we entered into the Merger Agreement with Formulations Parent Corporation, an affiliate of investment funds managed by KKR, and Merger Sub. The consummation of the Merger is conditioned on the receipt of the approval of our shareholders, which we received on October 6, 2023, as well as the satisfaction of other customary closing conditions, including domestic and foreign regulatory approvals and performance in all material respects by each party of its obligations under the Merger Agreement. The 30-day waiting period under the HSR Act expired on September 5, 2023. Consummation of the Merger is not subject to a financing condition. Although we are not aware of any conditions that would cause the Merger not to be consummated, there is no assurance that the conditions to the Merger will be satisfied in a timely manner or at all. Additionally, if the Merger is not completed, we may suffer a number of consequences that could adversely affect our business, results of operations, and stock price. There are numerous risks related to the Merger, including the following:

•Various conditions of the Merger may not be waived or satisfied;

•Required regulatory approvals from governmental entities may delay the Merger;

•Our ability to attract, recruit, retain and motivate current and prospective employees may be adversely affected;

•The attention of our employees and management may be diverted due to activities related to the Merger;

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In addition, we have incurred, and will continue to incur, substantial costs, expenses and fees for professional services and other transaction costs in connection with the Merger, and those fees and costs are payable by us regardless of whether the Merger is consummated.

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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 2023 for NuCera and fiscal 2021 for both ABchimie and the operations of Emerging Technologies, Inc. (“ETI”)), the integration of an acquired business into our operations involves numerous risks, including potential difficulties in integrating an acquired company’s product line with ours; the diversion of our resources and management’s attention from other business concerns; the potential loss of key employees; limitations imposed by antitrust or merger control laws in the United States or other jurisdictions; risks associated with entering a new geographical or product market; and the day-to-day management of a larger and more diverse combined company.

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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.

​

General economic factors, domestically and internationally, may also adversely affect our financial performance through increased raw material costs or other expenses and by making access to capital more difficult.

​

The cumulative effect of higher interest rates, energy costs, inflation, levels of unemployment, healthcare costs, unsettled financial markets, and other economic factors (including changes in foreign currency exchange rates and changes to federal, state, local and international tax laws or the application or enforcement practices of such laws) could adversely affect our financial condition by increasing our manufacturing costs and other expenses at the same time that our customers may be scaling back demand for our products. Prices of certain commodity products, including oil and petroleum-based products, are historically volatile and are subject to fluctuations arising from changes in domestic and international supply and demand, labor costs, competition, weather events and climate change, regional and global public health crises, market speculation, government regulations and periodic delays in delivery. Rapid and significant changes in commodity prices may affect our sales and profit margins. These factors can increase our cost of products and services sold and/or selling, general and administrative expenses, and otherwise adversely affect our operating results. Disruptions in the credit markets may limit our ability to access debt capital for use in acquisitions or other purposes on advantageous terms or at all. If we are unable to manage our expenses in response to general economic conditions and margin pressures, or if we are unable to obtain capital for strategic acquisitions or other needs, then our results of operations would be negatively affected.

​

Other Risks

​

We are dependent on key personnel.

​

We depend significantly on our executive officers including our President and Chief Executive Officer, Adam P. Chase, and on other key employees. The loss of the services of any of these key employees could have a material impact on our business and results of operations. In addition, our acquisition strategy will require that we attract, motivate and retain additional skilled and experienced personnel. We have experienced in the past, and may continue to experience, an

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increasingly competitive landscape relating to obtaining and retaining a manufacturing labor force. The inability to satisfy such requirements could have a negative impact on our ability to remain competitive in the future.

​

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

​

Significant and sustained declines in the financial markets may have a material adverse effect on the fair market value of the assets of our qualified pension plan. While these pension plan assets are considered non-financial assets since they are not carried on our balance sheet (i.e. the balance sheet reflects only the net of plan assets and obligations), the fair market valuation of these assets could impact our funding requirements, funded status or net periodic pension cost. Any significant and sustained declines in the fair market value of these pension assets could require us to increase our funding requirements, which would have an impact on our cash flow, and could also lead to additional pension expense.

​

If we fail to maintain effective internal control over financial reporting, this may adversely affect investor confidence in our company and, as a result, the value of our common stock.

​

We are required under Section 404 of the Sarbanes-Oxley Act to furnish a report by management on the effectiveness of our internal control over financial reporting and to include a report by our independent auditors attesting to such effectiveness. Any failure by us to maintain effective internal control over financial reporting could adversely affect our ability to report accurately our financial condition or results of operations.

​

If we are unable to maintain effective internal control over financial reporting, or if our independent auditors determine that we have a material weakness in our internal control over financial reporting, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of our common stock could decline, and we could be subject to sanctions or investigations by the SEC or other regulatory authorities. Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, also could restrict our future access to the capital markets.

​

Failure or compromise of security with respect to an operating or information system or portable electronic device could adversely affect our results of operations and financial condition or the effectiveness of our internal controls over operations and financial reporting.

​

We are highly dependent on automated systems to record and process our daily transactions and certain other components of our financial statements.  Notwithstanding efforts to ensure the integrity of our automated systems, we could experience a failure of one or more of these systems, or a compromise of our security due to technical system flaws, data input or recordkeeping errors, or tampering or manipulation of our systems by employees or unauthorized third parties.  Information security risks also exist with respect to the use of portable electronic devices, such as laptops and smartphones, which are particularly vulnerable to loss and theft.

​

We could be subject to disruptions of any of these systems arising from events that are wholly or partially beyond our control (for example, natural disasters, acts of terrorism, epidemics, pandemics, computer viruses, cyber-attacks, malware, ransomware, and electrical/telecommunications outages). All of these risks are also applicable wherever we rely on outside vendors to provide services.  Operating system failures, disruptions, or the compromise of security with respect to operating systems or portable electronic devices (with information technology security threats increasing in frequency and sophistication) could subject us to liability claims, harm our reputation, interrupt our operations, or adversely affect our business, results from operations, financial condition, cash flow or internal control over financial reporting.

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Item 1B – Unresolved Staff Comments

​

Not applicable.

​

Item 2 – Properties

​

The principal properties of the Company as of August 31, 2023 are situated at the following locations and have the following characteristics:

​

​

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.

​

​

PART II

​

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

Our common stock is traded on the NYSE American under the symbol CCF.  As of October 31, 2023, there were 244 shareholders of record of our Common Stock and we believe there were approximately 7,799 beneficial owners who held shares through brokers or other nominees. On that date, the closing price of our common stock was $127.06 per share as reported by the NYSE American.

Single annual cash dividend payments were declared and scheduled to be paid subsequent to each year ended August 31, 2022 and 2021 in the amounts of $1.00 and $1.00 per common share, respectively. Our revolving credit facility contains financial covenants which may have the effect of limiting the amount of dividends that we can pay.

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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 our Peer Group Index are Henkel AG & Co KGaA, H.B. Fuller Company, CSW Industrials, Inc., Element Solutions, Inc., Quaker Chemical Corporation, and RPM International, Inc. Cumulative total returns are calculated assuming that $100 was invested on August 31, 2018 in each of the Common Stock, the S&P 500 Index and the Peer Group Index, and that all dividends were reinvested.

​

​

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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Not required.

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​

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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.

​

The discussion of the comparison of our fiscal 2022 and fiscal 2021 results was previously presented in the Management’s Discussion & Analysis in Part II, Item 7 of the Company’s Annual Report on Form 10-K filed with the SEC on November 10, 2022 and has been omitted from this section pursuant to Instruction 1 to Item 303(a) of Regulation S-K.

​

Selected Relationships within the Consolidated Statements of Operations

​

* denotes less than one percent

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

​

Executive Overview

​

Results of Operations

​

The Company’s revenue grew in fiscal 2023, with the Adhesives, Sealants and Additives and Industrial Tapes operating segments surpassing revenue achieved in fiscal 2022. The increase in revenue for fiscal 2023 was primarily attributed to inorganic growth from our NuCera Solutions (“NuCera”) business acquired in the first month of fiscal 2023 and our electronic and industrial coatings product line (included within our Adhesives, Sealants and Additives operating segment) coupled with revenue generated by our cable materials, specialty products and pulling and detection product lines (included within our Industrial Tapes operating segment). Tempering the overall increase in fiscal 2023 revenue was decreased demand seen in our Corrosion Protection and Waterproofing operating segment.

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The Company’s gross margin as a percentage of revenue was 36.0% in fiscal 2023 compared to 37.8% in fiscal 2022. Despite the Company’s sales growth in fiscal 2023, the Company continues to have less favorable gross margin compared to the comparable prior fiscal period. The decrease in gross margin percentage in the fiscal period is primarily attributed to lower gross margin from our NuCera business. Additionally, the Company’s gross margin was negatively impacted by customer destocking caused by customer inventory reduction initiatives seen in the first half of fiscal 2023.

After being negatively impacted by inflationary pressures in fiscal 2022, the gross margin for our organic business has stabilized due to measures implemented in fiscal 2022, including sales price increases fully realized in fiscal 2023 and the Company’s supply chain strategy to actively explore secondary sourcing initiatives to locate alternative suppliers for our critical raw materials. Inflationary pressures did not have a significant impact on our profitability in the fiscal year.

​

The Company’s operating expenses increased in the year-to-date period over the comparable prior period. The increase in operating expenses is attributable to the inclusion of expenses from our NuCera business including purchase accounting adjustments such as additional amortization expected to recur in future periods and backlog intangible that was fully amortized during the first fiscal quarter, acquisition-related costs related to the merger agreement dated July 21, 2023, and lease impairment and write-off of long-term assets, all of which negatively impacted operating income over the fiscal 2023 period.

​

Balance Sheet and Cash Flow

​

Chase Corporation’s balance sheet remained healthy as of August 31, 2023, with cash on hand of $49,019,000, and a current ratio of 4.4. The Company’s cash position remained steady including cash flow from operations and debt paydown. The Company’s disciplined inventory reduction approach in the fiscal period has continued to allow the Company to make subsequent payments on our long-term debt and improve cash flow. Furthermore, during the second fiscal quarter Chase Corporation paid out an annual cash dividend of $9,500,000 on December 9, 2022.

​

The Company had $105,000,000 outstanding balance on its $200,000,000 revolving credit facility as of August 31, 2023, related to the funding of the NuCera acquisition as noted above. The Company made $75,000,000 in principal payments related to the outstanding balance over the course of fiscal 2023.

Pending Merger

On July 21, 2023, the Company entered into the Merger Agreement with Parent and Merger Sub. See “Business—Other Business Developments—Merger Agreement” in Item 1 of Part I of this Annual Report on Form 10-K for more information.

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Results of Operations

​

Revenue

​

Total revenue increased $78,355,000, or 24.1% to $404,015,000 for the year ended August 31, 2023, compared to $325,660,000 in fiscal 2022. Out of the $78,355,000 increase in fiscal 2023 revenue, 89% relates to inorganic revenue from our NuCera business and the remaining increase in revenue is primarily attributable to sales price increases fully realized in fiscal 2023.

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Revenue by Segment

​

The Company has three reportable operating segments summarized below:

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Results of Operations

​

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

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Total Revenue

​

Revenue for our Adhesives, Sealants and Additives segment increased in fiscal 2023 over the comparable prior year period. The segment revenue increased $72,130,000, or 53% to $207,900,000 for the year ended August 31, 2023 compared to $135,770,000 in fiscal 2022. The year-to-date increase in revenue was predominately due to the inorganic growth from our NuCera business acquired on the first day of fiscal 2023, totaling $69,669,000. The remaining increase in revenue for the fiscal period was primarily attributed to sales price increases realized over the comparable fiscal year and increased demand for our world-wide focused electronic and industrial coatings product line, totaling $10,808,000. Partially offsetting this increase in revenue in the fiscal year-to-date period was a reduction in revenue in our organic functional product line due to decreased customer demand in North America over the comparable prior fiscal year, totaling $8,347,000.

​

Revenue for our Industrial Tapes segment increased in fiscal 2023 over the comparable prior year period. The segment revenue increased $9,706,000, or 6.7% to $153,660,000 for the year ended August 31, 2023 compared to $143,954,000 in fiscal 2022. Sales price increases realized over the prior year and increased demand for our North American-focused specialty products, pulling and detection, and cable materials product lines increased fiscal 2023 revenue by $11,710,000. Partially offsetting this increase in revenue in the fiscal year was a year-to-date reduction in sales volume from our Asia-focused electronic materials product line, totaling $2,004,000.

​

Revenue in the Company’s Corrosion Protection and Waterproofing segment decreased $3,481,000, or 7.6% to $42,455,000 for the year ended August 31, 2023 compared to $45,936,000 in fiscal 2022. Negatively impacting sales for the segment in the fiscal year was a reduction in sales volume for our building envelope product line related to customer destocking due to prior year demand attributed to customer inventory increase initiatives in reaction to supply chain shortages, totaling $4,147,000. Also negatively impacting sales for the segment for the fiscal year was our pipeline coatings product line predominately due to delayed projects in the Middle East market over the prior comparable period coupled with customer destocking initiatives in North American oil and gas markets, totaling $927,000. Partially offsetting the decrease in revenue was our coating and lining systems product line, with a revenue increase of $1,283,000, attributed to sales price increases realized over the prior year and increased demand seen in the last quarter of the fiscal year due to the commencement of delayed projects affected by the extended rainy season seen in the west coast of North America. Also, partially offsetting the decrease in revenue was our bridge and highway product line, with a revenue increase of $310,000, predominately due to sales price increases realized over the prior year coupled with increased demand seen in the fourth quarter of the fiscal year due to the commencement of bridge and highway projects in North America.

​

Royalties and commissions in the Adhesive, Sealants and Additives segment totaled $3,133,000 and $3,198,000 for the year ended August 31, 2023 and 2022, respectively. The decrease in royalties and commissions in fiscal 2023 compared to fiscal 2022 was primarily due to decreased demand seen in our electronic and industrial coatings products by our licensed manufacturer in Asia.

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Cost of Products and Services Sold

​

Cost of products and services sold increased $55,866,000 or 27.6% to $258,574,000 for the fiscal year ended August 31, 2023 compared to $202,708,000 in fiscal 2022.

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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 the Adhesives, Sealants and Additives segment was $133,484,000 for the fiscal year ended August 31, 2023 compared to $80,619,000 in fiscal 2022. Cost of products and services sold in the Industrial Tapes segment was $100,264,000 for the fiscal year ended August 31, 2023 compared to $96,132,000 in fiscal 2022. Costs of products and services sold in the Corrosion Protection and Waterproofing segment was $24,826,000 for the fiscal year ended August 31, 2023 compared to $25,957,000 in fiscal 2022.

​

As a percentage of revenue, cost of products and services sold increased in fiscal 2023 for both the Adhesives, Sealants and Additives and Corrosion Protection and Waterproofing segment as compared to the prior comparable period. The decrease in relative gross margin for our Adhesives, Sealants and Additives segment was impacted by lower historical gross margin from our NuCera business. The decrease in relative gross margin for the Corrosion Protection and Waterproofing segment in fiscal 2023 was primarily due to decreased production affecting overhead variances. As a percentage of revenue, costs of products and services sold decreased for the Industrial Tapes segment in fiscal 2023 due to sales price increases realized in the current fiscal period coupled with increased demand.

​

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

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Selling, General and Administrative Expenses

​

Selling, general and administrative expenses increased $22,679,000 or 41.7% to $77,117,000 during fiscal 2023 compared to $54,438,000 in fiscal 2022. The year over year increase in activity is attributed to the inclusion of expenses from our NuCera business (including additional amortization expected to recur in future periods and backlog intangible that was fully amortized during the first fiscal quarter), which was acquired on the first day of fiscal 2023. As a percentage of revenue, selling, general and administrative expenses represented 19% and 17% of total revenue in fiscal 2023 and 2022, respectively.

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Research and Product Development Costs

​

Research and product development costs increased $1,620,000 or 36.7% to $6,035,000 during fiscal 2023 compared to $4,415,000 in fiscal 2022. The year over year increase in research and product development costs is primarily related to our NuCera business, which was acquired in the first month of fiscal 2023.

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Operations Optimization Costs

ERP System Upgrade

The Company recognized $1,476,000 in operations optimization costs during fiscal 2023 and $0 in fiscal 2022, related to the ERP system upgrade. Please see note 19 – “Operations Optimization” to the Consolidated Financial Statements for further discussion on Operations Optimization Costs.

Relocation of Adhesives Systems Manufacturing to O’Hara Township, PA

The Company recognized $516,000 in operations optimization costs during fiscal 2023 and 463,000 in fiscal 2022, related in operations optimization expense related to the consolidation of the Woburn, MA location. Please see note 19 – “Operations Optimization” to the Consolidated Financial Statements for further discussion on Operations Optimization Costs.

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Relocation of Sealants Systems Manufacturing to Hickory, NC

The Company recognized $0 and $147,000 in operations optimization costs during fiscal 2023 and 2022, respectively, related to the relocation of the Sealants Systems Manufacturing from Newark, CA to Hickory, NC location. Please see note 19 – “Operations Optimization” to the Consolidated Financial Statements for further discussion on Operations Optimization Costs.

Relocation of Chase Corporate Headquarters

The Company recognized $0 and $232,000 in operations optimization costs during fiscal 2023 and 2022, respectively, related to the relocation of the Company’s headquarters to another location within Westwood, MA. Please see note 19 – “Operations Optimization” to the Consolidated Financial Statements for further discussion on Operations Optimization Costs.

Acquisition-Related Costs

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Merger Agreement

​

The Company incurred $4,270,000 in the fourth quarter of fiscal 2023, related to the Agreement and Plan of Merger dated as of July 21, 2023. Please see note 14 – “Acquisitions” to the Consolidated Financial Statements for further discussion.

​

NuCera Solutions

The Company incurred $29,000 (in the first fiscal quarter) and $4,000,000 (in the fourth fiscal quarter) of acquisition-related costs in fiscal 2023 and 2022, respectively, related to our acquisition of NuCera Solutions (“NuCera”) on September 1, 2022 (first day of fiscal 2023). Please see note 14 – “Acquisitions” to the Consolidated Financial Statements for further discussion on the acquisition of NuCera Solutions.

​

Loss on Impairment/write-off of long-term assets

​

Woburn, MA Facility

​

The Company expensed $548,000 in the first quarter of fiscal 2023 as a lease impairment related to the Woburn, MA facility relocation. The Woburn, MA facility closure is related to the relocation of the Company’s Adhesives, Sealants and Additives segment’s electronic and industrial coatings product line to the Company’s existing O’Hara Township, PA location.

​

On the last day of the second quarter of fiscal 2023, the Company signed a termination agreement with the landlord for the Woburn, MA facility and wrote off the right-of-use asset and liability of the Woburn, MA lease, expensing $314,000.

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Woodlands, TX Facility

​

On the third quarter of fiscal 2023, the Company moved out of the Woodlands, TX facility (previously NuCera Corporate and R&D headquarters) to a smaller R&D facility in Houston, TX. On the last day of the third fiscal quarter, the Company signed a sublease agreement for the Woodlands office and expensed $211,000 as a lease impairment related to this facility in the third quarter of the fiscal period. The project is now complete and no future costs related to the facility relocation are anticipated.

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Additionally, the Company wrote off $120,000 of fixed assets primarily related to the R&D relocation of the Houston, TX facility in the third quarter and year-to-date period of fiscal 2023.

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NuCera-related fixed asset disposals

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In the fourth quarter of fiscal 2023, the Company wrote off $492,000 and $3,000, related to a discontinued engineering design study and fixed asset disposal from our Barnsdall, OK facility, respectively.

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Loss on Contingent Consideration

​

As part of the September 1, 2020 (fiscal 2021) acquisition of ABchimie, the Company incurred a performance-based earn out liability potentially worth an additional €7,000,000 (approximately $8,330,000 at the time of the transaction) in consideration. Following its initial recording of an accrual for $928,000 at the acquisition date, the Company recorded charges of $702,000, $432,000 and $1,664,000 in expenses related to adjustments to the performance-based earn out accrual were recorded during the fiscal years ended August 31, 2023, 2022 and 2021, respectively.

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Interest Expense

​

Interest expense of $8,981,000 was recognized in fiscal 2023 compared to $425,000 in fiscal 2022. The year over year increase in interest expense relates to our outstanding long-term debt which was used to fund our NuCera business acquisition at the beginning of fiscal 2023.

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Other Income (Expense)

​

Other (expense) income was an expense of ($1,435,000) in fiscal 2023 compared to income of $198,000 in the comparable period, a difference of $1,633,000. Other (expense) income primarily includes foreign exchange gains (losses) caused by changes in exchange rates on transactions or balances denominated in currencies other than the functional currency of our subsidiaries, non-service cost components of periodic pension expense (including pension-related settlement costs due to the timing of lump-sum distributions), interest income, rental income and other non-trade/non-royalty/non-commission receipts. The year over year change in total other (expense) income was largely due to the recognition of a foreign exchange loss in fiscal 2023 as compared to a foreign exchange gain in fiscal 2022.

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Income Taxes

​

The Company’s recognized effective tax rate was 23.2% and 23.8% in fiscal 2023 and 2022, respectively.

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For fiscal 2023 and 2022, the Company is utilizing the 21% Federal tax rate enacted by the Tax Cuts and Jobs Act (the “Tax Act”) passed in December 2017. Please see Note 7 — “Income Taxes” to the Consolidated Financial Statements for further discussion of the effects of the Tax Act.

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Net Income

​

Net income decreased $11,489,000 or 25.7% to $33,182,000 in fiscal 2023 compared to $44,671,000 in fiscal 2022. The decrease in net income is predominately caused by an increase in operating expenses and interest expense in fiscal 2023. The increase in operating expenses includes incremental depreciation and amortization related to our NuCera business, lease impairment/write-off of right of use asset, and first quarter purchase accounting adjustments related to the NuCera acquisition, which include backlog fully amortized during the first fiscal quarter – all of which negatively impacted net income over the comparable prior year.

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Liquidity and Sources of Capital

The Company’s overall cash and cash equivalents balance decreased $266,476,000 to $49,019,000 at August 31, 2023 compared to $315,495,000 at August 31, 2022. The lower year over year cash balance was primarily attributed to the $180,000,000 of cash drawn from the revolving credit facility prior to the end of fiscal 2022, the proceeds of which were used, together with $70,000,000 in cash on hand, to fund the acquisition of NuCera which closed on September 1, 2022 (the first day of fiscal 2023). In addition, the Company made $75,000,000 of principal debt payments. The decrease in cash balance at August 31, 2023 is offset by cash provided by operations of $74,336,000.

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Of the above-noted balances, $28,350,000 and $28,951,000 were held outside the United States by Chase Corporation and its foreign subsidiaries as of August 31, 2023 and August 31, 2022, respectively. Given the Company’s cash position and borrowing capability in the United States and the potential for increased investment and acquisitions in foreign jurisdictions, prior to the second quarter of fiscal 2018 the Company did not have a history of repatriating a significant portion of its foreign cash. With the passage of the Tax Cuts and Jobs Act (the “Tax Act”) in the second quarter of fiscal 2018, significant changes in the Internal Revenue Code were enacted, changing the U.S. taxable nature of previously unrepatriated foreign earnings. Following the passage of the Tax Act, the Company repatriated $10,499,000 in U.K. foreign earnings in fiscal 2018 and $17,230,000 in fiscal 2019. No additional amounts were repatriated in fiscal year 2020, 2021, or 2022. The Company repatriated $11,458,000 in U.K. foreign earnings in fiscal 2023. Please see Note 7 — “Income Taxes” to the Consolidated Financial Statements for further discussion of the effects of the Tax Act.

Cash flow provided by operations was $74,336,000 in fiscal year 2023 compared to $34,859,000 in fiscal 2022. The increase in cash provided by operations year over year was primarily related to increase in revenue, mainly driven by our NuCera business and reduction on inventory spend.

The ratio of current assets to current liabilities was 4.4 as of August 31, 2023 compared to 12.4 (or 7.3 excluding the $180,000,000 cash drawn from our revolving credit facility to fund the NuCera acquisition) as of August 31, 2022. The decrease in the ratio of current assets to current liabilities is primarily due to the cash outflow of $250,000,000 to fund the acquisition of NuCera mentioned above.

Cash flow used in investing activities of $257,231,000 was primarily due to the purchase of NuCera, which occurred on the first day of fiscal 2023.

Cash flows used in financing activities of $85,418,000 was due to principal payments (totaling $75,000,000) on our long-term debt related to the funding of the NuCera acquisition mentioned above. Please see note 6 – “Long-Term Debt” to the Consolidated Financial Statements for further discussion on the Company’s credit facility. Additionally, the cash flows used in financing activities was due to a cash dividend of $1.00 per share (totaling $9,500,000) to shareholders of record on November 30, 2022 and paid on December 9, 2022, the second quarter of fiscal 2023.

The Company’s Second Amended and Restated Credit Agreement (the “Credit Agreement”) with Bank of America, N.A. as administrative agent and the other lenders party thereto, which is used to provide for additional liquidity to finance acquisitions, working capital and capital expenditures, and for other general corporate purposes. The Credit Agreement includes a revolving credit loan (the “Revolving Facility”), with borrowing capabilities not to exceed $200,000,000 at any time, with the ability to request an increase in this amount by an additional $100,000,000 at the individual or collective option of any of the Lenders. As of August 31, 2023, the Company had $105,000,000 in long-term debt related to the acquisition of NuCera Solutions that closed on September 1, 2022. The long-term debt has a weighted average interest rate of 6.43% as of August 31, 2023. See Note 6 – “Long Term Debt” to the Consolidated Financial Statements for more information about the Credit Facility. We expect the Credit Facility to be paid off in connection with the Merger.

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

We may acquire companies or other assets in future periods which are complementary to our business. The Company believes that its existing resources, including cash on hand and the Credit Agreement, together with cash generated from operations and additional bank borrowings, will be sufficient to fund its cash flow requirements through at least the next twelve months. However, there can be no assurance that additional financing, if needed, will be available on favorable terms, if at all.

To the extent that interest rates increase in future periods, we will assess the impact of these higher interest rates on the financial and cash flow projections of our potential acquisitions.

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We have no material off-balance sheet arrangements.

Contractual Cash Obligations

​

The following table summarizes our contractual cash obligations at August 31, 2023 under operating leases and the effect such obligations are expected to have on our liquidity and cash flow in future periods (dollars in thousands):

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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. The Company’s unrecognized tax benefits was $1,895,000 as of August 31, 2023. See Note 7 — “Income Taxes” to the Consolidated Financial Statements for further information.

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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, 2023, we had recognized an accrued benefit plan liability of $5,679,000 representing the unfunded obligations of the pension benefit plans. See Note 9 — “Benefits and Pension Plans” to the Consolidated Financial Statements for further information, including expected pension benefit payments for the next 10 years.

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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

​

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

Business Combinations are recorded using the acquisition method. We assign the value of the consideration transferred to acquire a business to the tangible assets, identifiable intangible assets acquired, and liabilities assumed on the basis of their fair values at the date of acquisition. Any excess purchase price over the fair value of the net tangible and intangible assets acquired is allocated to goodwill. Any excess of the purchase price is largely attributable to the synergies and economies of scale from combining operations, technologies and research and development capabilities.

The Company assesses the fair value of assets, including intangible assets, using a variety of methods, and each asset is measured at fair value from the perspective of a market participant. The method used to estimate the fair values of intangible assets incorporates significant assumptions regarding the estimates a market participant would make in order to evaluate an asset, including a market participant’s use of the asset. Some of the most significant assumptions used include the discount rate, forward-looking financial information, and estimated customer attrition rates. A change in one of these assumptions could have material changes on the value of the intangible assets and goodwill which will impact the amortization expense in future periods and the goodwill impairment evaluation. During the year 2023, a 10% increase or decrease in the value of the intangible assets related to the NuCera acquisition would have decreased or increased the goodwill amount by $14,802,000 and it would have increased or decreased the year-to-date amortization expense by $1,504,000.

Transaction costs and restructuring costs associated with a transaction to acquire a business are expensed as incurred.

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Item 7a – Quantitative and Qualitative Disclosures about Market Risk

Chase limits the amount of credit exposure to any one issuer. At August 31, 2023, other than the Company’s restricted investments (which are restricted for use in non-qualified retirement savings plans for certain key employees and members of the Board of Directors), all of the Company’s funds were either in demand deposit accounts or investment instruments that meet high credit quality standards, such as money market funds, government securities, or commercial paper.

Chase’s U.S. operations have limited currency exposure since substantially all transactions are denominated in U.S. dollars. However, the Company’s European and Asian operations are subject to currency exchange fluctuations. The Company continues to review its policies and procedures to control this exposure while maintaining the benefit from these operations and sales not denominated in U.S. dollars. The effect of an immediate hypothetical 10% change in the exchange rate between the British pound and the U.S. dollar and the Euro and the U.S. dollar would not have a material direct effect on the Company’s overall liquidity.

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As of August 31, 2023, 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 in light of current tax guidelines, including the impact of the Tax Act to the U.S. Internal Revenue Code, working capital requirements, infrastructure improvements and potential acquisitions.

The Company recognized a foreign currency translation gain for the year ended August 31, 2023 in the amount of $5,385,000 related to its European, Asian and Indian operations, which is recorded in other comprehensive income (loss) within its Statement of Equity and Statement of Comprehensive Income. The Company does not have or utilize any derivative financial instruments.

The Company pays interest on its outstanding long-term debt at interest rates that fluctuate based upon changes in various base interest rates. There was an outstanding balance of long-term debt of $105,000,000 for the year ended August 31, 2023.

See “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Sources of Capital,” Note 6 — “Long-Term Debt” and Note 16 — “Fair Value Measurements” to the Consolidated Financial Statements for additional information regarding our outstanding long-term debt.  The effect of an immediate hypothetical 10% change in variable interest rates would not have a material effect on our Consolidated Financial Statements.

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Item 8 – Financial Statements and Supplementary Data

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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, 2023 and 2022, the related consolidated statements of operations, comprehensive income, equity, and cash flows for each of the three years in the period ended August 31, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of August 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended August 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of August 31, 2023, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated November 9, 2023 expressed an unqualified opinion.

Basis for opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical audit matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of the acquisition-date fair value of customer relationships

As described in Note 14 to the consolidated financial statements, on September 1, 2023 the Company acquired NuCera Solutions for a total purchase price of $250 million. As part of the transaction, the Company recorded a customer relationships intangible asset of $119 million related to NuCera US customer relationships. We identified the valuation of the acquisition-date fair value of the NuCera US customer relationships as a critical audit matter.

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The principal considerations for our determination that the valuation of the NuCera US customer relationships is a critical audit matter were (i) the significant judgments applied by management in developing forecasted financial information and selecting a customer attrition rate for use in the fair value measurement of acquired customer relationship (ii) the high degree of auditor judgment and subjectivity required in performing procedures and evaluating management’s significant assumptions relating to the projected forecasted information including revenue growth rate, weighted average cost of capital (WACC), and customer attrition rate.

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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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/s/ GRANT THORNTON LLP

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We have served as the Company’s auditor since 2019.

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Boston, Massachusetts

November 9, 2023

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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