Note 6 — Segment Data and Foreign Operations

The Company is organized into ~~two~~3 reportable operating ~~segments, an~~segments: Adhesives, Sealants and Additives; Industrial ~~Materials segment~~Tapes; and ~~a Construction Materials segment.~~Corrosion Protection and Waterproofing. The segments are distinguished by the nature of the products manufactured and how they are delivered to their respective markets.

The ~~Industrial Materials~~Adhesives, Sealants and Additives segment ~~includes specified~~offers innovative and specialized product offerings consisting of both end-use products and intermediates that are used in, or integrated into, another company’s product. Demand for the segment’s product offerings is typically dependent upon general economic conditions. The Adhesives, Sealants and Additives segment leverages the core specialty chemical competencies of the Company and serves diverse markets and applications. The segment sells predominantly into the transportation, appliances, medical, general industrial and environmental market verticals. The segment’s products include moisture protective coatings and cleaners, customized sealant and adhesive systems for electronics, polymeric microspheres, polyurethane dispersions and superabsorbent polymers. Beginning September 1, 2020, the Adhesives, Sealants and Additives segment includes the acquired operations of ABchimie, within the electronic and industrial coatings product lineand beginning February 5, 2021, the acquired operations of ETi, within the functional additives product line.

The Industrial Tapes segment features wire and cable materials, specialty tapes and other laminated and coated products. The segment derives its competitive advantage through its proven chemistries, its diverse specialty offerings and the reliability its supply chain offers to end customers. These products are generally used in the assembly of other manufacturers’ products, with demand typically dependent upon general economic conditions. The Industrial ~~Materials products~~Tapes segment sells mostly to established markets, with some exposure to growth opportunities through further development of existing products. Markets served include wire and cable manufacturing, utilities and telecommunications, and electronics packaging. The segment’s offerings include insulating and conducting materials for wire and cable manufacturers, ~~moisture protective coatings for electronics,~~ 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, composite materials and elements, polymeric microspheres and polyurethane dispersions. Beginning September 30, 2016, the Industrial Materials segment includes the acquired operations of Resin Designs, LLC, which was obtained through acquisition and is included in the Company’s electronic and industrial coatings product line. Prior to the April 3, 2017 sale of the business, the segment’s products also included glass-based strength elements, designed to allow fiber optic cables to withstand mechanical and environmental strain and stress.tape-and-reel packaging.

The ~~Construction Materials~~Corrosion Protection and Waterproofing segment is principally composed of project-oriented product offerings that are primarily sold and used as “Chase” branded products. ~~Construction Materials~~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 and industrial structures. The segment’s products include protective coatings for pipeline applications, coating and lining systems for ~~use in~~waterproofing and liquid storage ~~and containment~~ applications, adhesives and sealants used in architectural and building envelope waterproofing applications, high-performance polymeric asphalt additives, and expansion ~~and control~~ joint systems for ~~use~~waterproofing applications in ~~the~~ transportation and architectural markets. With sales generally dependent on outdoor project work, the segment experiences highly seasonal sales patterns.

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The following tables summarize information about the Company’s reportable segments:


	Three Months Ended February 28,						Six Months Ended February 28,
	2022			2021			2022			2021
Revenue
Adhesives, Sealants and Additives	$	31,780		$	31,575		$	62,829		$	61,646
Industrial Tapes		33,330			28,345			66,091			54,836
Corrosion Protection and Waterproofing		8,843			8,527			20,043			19,141
Total	$	73,953		$	68,447		$	148,963		$	135,623

Income before income taxes
Adhesives, Sealants and Additives	$	7,802	(a)	$	10,137	(c)	$	15,399	(a)	$	20,116	(c)
Industrial Tapes		10,250			8,460			19,540			16,328
Corrosion Protection and Waterproofing		2,884			2,415			7,330			6,501
Total for reportable segments		20,936			21,012			42,269			42,945
Corporate and common costs		(8,569)	(b)		(8,147)	(c)		(16,785)	(b)		(16,103)	(c)
Total	$	12,367		$	12,865		$	25,484		$	26,842

Includes the following costs by segment:
Adhesives, Sealants and Additives
Interest	$	34		$	24		$	69		$	54
Depreciation		220			247			463			489
Amortization		2,658			2,643			5,398			5,216

Industrial Tapes
Interest	$	34		$	15		$	69		$	42
Depreciation		411			428			821			893
Amortization		383			387			767			773

Corrosion Protection and Waterproofing
Interest	$	18		$	28		$	35		$	40
Depreciation		129			136			247			275
Amortization		1			89			2			201

Three Months Ended November 30,

2017

2016

Revenue

Industrial Materials

$
49,985

$
49,024

Construction Materials

11,932

12,333

Total

$
61,917

$
61,357

Income before taxes

Industrial Materials

$
15,365

$
16,415
(a)

Construction Materials

4,246

5,150

Total for reportable segments

19,611

21,565

Corporate and common costs

(7,012)

(6,915)
(b)

Total

$
12,599

$
14,650

Includes the following costs by segment:

Industrial Materials

Interest

$
36

$
184

Depreciation

800

1,062

Amortization

1,987

1,862

Construction Materials

Interest

$
9

$
62

Depreciation

190

158

Amortization

327

314

(a)

Includes ~~$190~~a $200 gain in the second quarter and a $275 year-to-date loss on the adjustment of ~~expenses~~the performance-based earn-out contingent consideration associated with the September 2020 acquisition of ABchimie and $301 in operation optimization costs related to ~~inventory step-up in fair value attributable~~the move from Woburn, MA to O’Hara Township, PA and $147 of operations optimization costs related to the ~~September 2016 acquisition~~move from Newark, CA to Hickory, NC

(b)

Includes $141 of ~~certain assets of Resin Designs, LLC~~

~~(b)~~

~~Includes $584~~operations optimization costs in ~~acquisition-related expenses attributable to~~ the ~~September 2016 acquisition of certain assets of Resin Designs, LLC, facility exit~~second quarter and ~~demolition costs of $27~~$200 year-to-date related to the Company’s ~~Randolph,~~move to the new Corporate Headquarters within Westwood, MA ~~location,~~substantially completed in the second quarter of the fiscal year

(c)

Includes $733 in loss on the upward adjustment of the performance-based earn out contingent consideration associated with the September 2020 acquisition of ABchimie and ~~a $792 gain~~$98 operations optimization in exit costs related to the ~~November 2016 sale~~movement of the ~~Company’s Paterson, NJ~~sealants system business out of the Newark, CA location

and into the Hickory, NC location during the second quarter of fiscal 2021. Also includes $128 in acquisition-related expense attributable to the February 2021 acquisition of the operations of ETi

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Total assets for the Company’s reportable segments as of ~~November 30, 2017~~February 28, 2022 and August 31, ~~2017~~2021 were:


	November 30,		August 31,
	2017		2017

					February 28,		August 31,
					2022		2021
Total Assets
Industrial Materials	$	156,903	$	156,263
Construction Materials		34,274		38,162
Adhesives, Sealants and Additives					$	159,326	$	161,968
Industrial Tapes						76,773		72,301
Corrosion Protection and Waterproofing						30,775		31,067
Total for reportable segments		191,177		194,425		266,874		265,336
Corporate and common assets		68,077		60,313		139,887		138,823
Total	$	259,254	$	254,738	$	406,761	$	404,159

The Company’s products are sold worldwide. Revenue for the ~~three-month~~three- and six-month periods ended ~~November 30, 2017~~February 28, 2022 and ~~2016 are~~2021 was attributed to operations located in the following countries:


	Three Months Ended February 28,				Six Months Ended February 28,
	2022		2021		2022		2021
Revenue
United States	$	62,816	$	55,629	$	127,869	$	111,371
United Kingdom		5,927		6,997		10,521		13,024
All other foreign ⁽¹⁾		5,210		5,821		10,573		11,228
Total	$	73,953	$	68,447	$	148,963	$	135,623

Three Months Ended November 30,

2017

2016

Revenue

United States

$
52,477

$
51,808

United Kingdom

4,397

4,759

All other foreign (1)

5,043

4,790

Total

$
61,917

$
61,357

(1)

Comprises sales orders originated from ~~our Paris, France location,~~the Company’s French locations, royalty revenue attributable to ~~our~~its licensed manufacturer in Asia, and Chase foreign manufacturing operations.

As of ~~November 30, 2017~~February 28, 2022 and August 31, ~~2017,~~2021 the Company had long-lived assets (~~defined~~(defined as tangible assets providing the Company with a future economic benefit beyond the current year or operating period, including buildings, equipment and leasehold improvements) and goodwill and intangible assets, less accumulated amortization, in the following countries:


	November 30,		August 31,
	2017		2017
Long-lived Assets

					February 28,		August 31,
					2022		2021
Long-Lived Assets
United States
Property, plant and equipment, net	$	29,855	$	30,253	$	21,046	$	20,990
Goodwill and Intangible assets, less accumulated amortization		88,484		90,673		110,305		115,936


United Kingdom
Property, plant and equipment, net		3,253		3,184		2,023		2,174
Goodwill and Intangible assets, less accumulated amortization		5,770		5,685		3,807		3,905


All other foreign
Property, plant and equipment, net		1,322		1,323		1,068		1,103
Goodwill and Intangible assets, less accumulated amortization		1,264		1,272		23,324		24,979


Total
Property, plant and equipment, net	$	34,430	$	34,760	$	24,137	$	24,267
Goodwill and Intangible assets, less accumulated amortization	$	95,518	$	97,630	$	137,436	$	144,820

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Note 7 — Goodwill and Other Intangibles

The changes in the carrying value of goodwill ~~are~~were as follows:

Industrial
Materials

Construction Materials

Consolidated

Balance at August 31, 2017

$
40,091

$
10,693

$
50,784

Foreign currency translation adjustment

119

8

127

Balance at November 30, 2017

$
40,210

$
10,701

$
50,911


	Adhesives, Sealants and Additives		Industrial Tapes		Corrosion Protection and Waterproofing		Consolidated
Balance at August 31, 2021	$	65,945	$	21,215	$	10,706	$	97,866
Foreign currency translation adjustment		(729)		—		(6)		(735)
Balance at February 28, 2022	$	65,216	$	21,215	$	10,700	$	97,131

The Company’s goodwill is allocated to each reporting unit based on the nature of the products manufactured by the respective business combinations that originally created the goodwill. The Company has identified ~~eleven~~a total of 3 reporting units, ~~within~~corresponding to its ~~two~~3 operating segments, that are used to evaluate the possible impairment of goodwill. ~~Goodwill impairment exists when the carrying value of goodwill exceeds its fair value.~~ Assessments of possible impairment of goodwill are made when events or changes in circumstances indicate that the carrying value of the asset may not be recoverable through future operations. Additionally, testing for possible impairment of recorded goodwill and certain intangible asset balances is required annually. The amount and timing of any impairment charges based on these assessments require the estimation of future cash flows and the fair market value of the related assets based on management’s best estimates of certain key factors, including future selling prices and volumes; operating, raw material and energy costs; and various other projected operating and economic ~~factors.~~factors, including the anticipated future impact of thecoronavirus disease 2019 (COVID-19) pandemic. When testing, fair values of the reporting units ~~and the related implied fair values of their respective goodwill~~ are established using discounted cash flows. The Company evaluates the possible impairment of goodwill annually during the fourth quarter, and whenever events or circumstances indicate the carrying value of goodwill may not be recoverable.

The Company has adopted ASU No. 2017-04 “Intangibles - Goodwill and Other Topics (Topic 350): Simplifying the Test for Goodwill Impairment.” The Company assesses goodwill for impairment by comparing the fair value of the reporting unit to its carrying amount. If the fair value of a reporting unit is less than its carrying value, an impairment loss, limited to the amount of goodwill allocated to that reporting unit, is recorded.

Intangible assets subject to amortization ~~consist~~consisted of the following as of ~~November 30, 2017~~February 28, 2022 and August 31, ~~2017:~~2021:


	Weighted Average		Gross Carrying		Accumulated		Net Carrying
	Amortization Period		Value		Amortization		Value
February 28, 2022
Patents and agreements	14.6	years	$	1,760	$	1,720	$	40
Formulas and technology	7.8	years		10,930		10,000		930
Trade names	5.9	years		8,804		8,451		353
Customer lists and relationships	9.1	years		116,098		77,116		38,982
			$	137,592	$	97,287	$	40,305

August 31, 2021
Patents and agreements	14.6	years	$	1,760	$	1,715	$	45
Formulas and technology	7.9	years		10,987		9,769		1,218
Trade names	5.9	years		8,836		8,285		551
Customer lists and relationships	9.2	years		116,855		71,715		45,140
			$	138,438	$	91,484	$	46,954

Weighted Average

Gross Carrying

Accumulated

Net Carrying


Amortization Period

Value

Amortization

Value

November 30, 2017

Patents and agreements

14.4
years
$
1,851

$
1,673

$
178

Formulas and technology

7.8
years

9,353

5,721

3,632

Trade names

6.0
years

7,738

6,103

1,635

Customer lists and relationships

9.6
years

70,482

31,320

39,162

$
89,424

$
44,817

$
44,607

August 31, 2017

Patents and agreements

14.4
years
$
1,845

$
1,671

$
174

Formulas and technology

7.8
years

9,318

5,387

3,931

Trade names

6.0
years

7,709

5,813

1,896

Customer lists and relationships

9.6
years

70,180

29,335

40,845

$
89,052

$
42,206

$
46,846

Table of Contents

Aggregate amortization expense related to intangible assets for the ~~three~~six months ended ~~November 30, 2017~~February 28, 2022 and ~~2016~~2021 was ~~$2,314~~$6,167 and ~~$2,176,~~$6,190 respectively. Estimated amortization expense for the remainder of fiscal year ~~2018~~2022 and for the next five years is as follows:

Years ending August 31,

2018 (remaining 9 months)

$
6,818

2019

8,462

2020

7,594

2021

7,064

2022

6,171

2023

2,971


Years ending August 31,
2022 (remaining 6 months)	$	5,617
2023		8,660
2024		7,453
2025		5,853
2026		5,055
2027		2,508

~~Table of Contents~~

Note 8 — ~~Sale~~Leases

The Company accounts for leases in accordance to ASU 2016-02, “Leases (Topic 842).” At the inception of ~~Business~~

~~Sale ofFiber Optic Cable Components Product Line~~

~~On April 3, 2017, Chase executed~~ an ~~agreement with an unrelated party to sell all inventory, machinery~~arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and equipment and intangible assets of the Company’s fiber optic cable components product line for proceeds of $3,858, net of transaction costs and following certain working capital adjustments. Given its low-growth and low-margin prospects, and a customer, supplier and equipment base separate from our other businesses, the fiber optic cable components product line, which was formerly part of the Company’s Industrial Materials segment, was determined to not be part of Chase’s long-term strategy. The divestiture was accounted for under~~ASC Topic 360, “Disclosure - Impairment or Disposal of Long-Lived Assets.”In accordance with this accounting standard, the resulting pre-tax gain on sale of $2,013 was recognized~~circumstances present in the ~~third quarter~~arrangement. Leases with a term greater than one year are recognized on the balance sheet as right-of-use (ROU) assets and short-term and long-term lease liabilities, as applicable. The Company does not have any financing leases that are material in nature.

Operating lease liabilities and their corresponding right-of-use assets are initially recorded based on the present value of ~~fiscal 2017as gain on sale of businesses within~~lease payments over the ~~condensed consolidated statement of operations. Chase received $3,458, net of transaction costs,~~expected remaining lease term. The interest rate implicit in lease contracts is typically not readily determinable. As a result, the ~~third quarter of fiscal 2017, with~~Company utilizes its incremental borrowing rate to discount lease payments, which reflects the ~~remaining $400 placed in escrow;~~the portion of the sale price held in escrow was recorded as a non-current asset within other assets as of August 31, 2017 and as a current asset (Due from sale of business) as of November 30, 2017, and is available to resolve any submitted claims or adjustments up to 18 months from the closing date of the sale.

~~Subsequent to the sale, Chase will provide ongoing manufacturing and administrative support to the purchaser for~~fixed rate at which the Company ~~will receive additional consideration upon~~believes it could borrow on a collateralized basis the ~~performance~~amount of ~~services; this arrangement~~the lease payments in the same currency, for a similar term, in a similar economic environment.

The Company has elected not to recognize leases with an original term of one year or less on the balance sheet. The Company typically only includes an initial lease term in its assessment of a lease arrangement. Options to renew a lease are not included in the Company’s assessment unless there is ~~anticipated to last for multiple years. In the quarter ended November 30, 2017, Chase charged the purchaser $470 for manufacturing services, which~~reasonable certainty that the Company ~~recognized as revenue within~~will renew.

The following table presents the ~~Industrial Materials segment,~~right-of-use asset and ~~$60 for selling~~short-term and ~~administrative expenses, which the Company recognized as an offset to selling, general and administrative expenses. Further, the purchaser entered a multiyear~~long-term lease for a portion of the manufacturing space at the Company’s Granite Falls, NC facility. Chase received $33 in rental income during the first quarter of fiscal 2018 related to this lease, which the Company recognized within other income (expense)liabilities amounts recorded on the condensed consolidated ~~statement~~balance sheet as of ~~operations~~February 28, 2022 and August 31, 2021:


	February 28,		August 31,
	2022		2021
Assets
Operating lease right-of-use asset	$	9,554	$	9,312

Liabilities
Current (accrued expenses)	$	1,484	$	1,515
Operating lease long-term liabilities		7,493		7,202
Total lease liability	$	8,977	$	8,717

Table of Contents

Lease cost

The components of lease costs for the three and six months ended February 28, 2022 and 2021 are as follows:


	Three Months Ended February 28,				Six Months Ended February 28,
	2022		2021		2022		2021

Operating lease cost ^(a)	$	833	$	971	$	1,661	$	1,922

(a)

Includes short-term leases and variable lease costs (e.g. common area maintenance), which are immaterial.

Maturity of lease liability

The maturity of the Company's lease liabilities at February 28, 2022 was as follows:


	Future Operating
Year ending August 31,	Lease Payments
2022 (remaining 6 months)		868
2023		1,697
2024		1,622
2025		1,464
2026		1,189
2027 and thereafter		3,009
Less: Interest		(872)
Present value of lease liabilities	$	8,977

The weighted average remaining lease term and discount rates are as follows:


	February 28,			August 31,
	2022			2021
Lease Term and Discount Rate
Weighted average remaining lease term (years)
Operating leases		6.8			6.8
Weighted average discount rate (percentage)
Operating leases		2.8	%		3.1	%

Other Information

Supplemental cash flow information related to leases is as follows:


	Six Months Ended February 28,
	2022		2021

Operating cash outflows from operating leases	$	881	$	1,328
Total cash paid for amounts included in the measurement of lease liabilities	$	881	$	1,328

Table of Contents

Note 9 — ~~Sale~~Revenue from Contracts with Customers

The Company accounts for revenue in accordance with ASC 606, “Revenue from Contracts with Customers.” The Company’s revenue is generated from the manufacture of ~~Real Estate~~

~~Sale~~specialty chemical products including coatings, linings, adhesives, sealants, specialty tapes, polymers and laminates. Certain of ~~Paterson, NJ Location~~

~~In November 2016,~~these manufactured products can incorporate customer-owned materials. The Company also recognizes, to a lesser extent, revenue through royalties and commissions from licensed manufacturers and from providing custom manufacturing-related services. The Company’s revenue recognition policies require the Company ~~finalized~~to make significant judgments and estimates. In applying the ~~sale~~Company’s revenue recognition policy, determinations must be made as to when control of ~~its Paterson, NJ property~~products passes to the Company’s customers, which can be either at a point in time or over time based on contractual terms with customers. Revenue is generally recognized at a point in time when control passes upon either shipment to or receipt by the customer of the Company’s products, while revenue is generally recognized over time when control of the Company’s products transfers to customers during the manufacturing process.The Company analyzes several factors, including but not limited to the nature of the products being sold and contractual terms and conditions in contracts with customers, to help the Company make such judgments about revenue recognition.

Contract Balances

The Company’s contract assets primarily relate to unbilled revenue for ~~cash proceeds~~products currently in production at the ~~amount~~Company’s facilities and which incorporate customer-owned material. Revenue is recognized in advance of ~~$1,382. This transaction resulted~~billing to the customer in ~~a gain~~these specific circumstances, whereas billing is typically performed at the time of ~~$792, which was recorded~~shipment to or receipt by the customer.

Contract assets are included in prepaid expenses and other current assets on the Company’s condensed consolidated ~~statement~~balance sheet. The following table presents contract assets by reportable operating segment as of ~~operations as a gain on sale of real estate during the fiscal quarter ended November 30, 2016.~~ February 28, 2022 and August 31, 2021:


	February 28,		August 31,
	2022		2021
Contract Assets
Adhesives, Sealants and Additives	$	36	$	21
Industrial Tapes		25		82
Corrosion Protection and Waterproofing		27		25
Total	$	88	$	128

The Company ~~had previously reclassified~~did 0t have any contract liabilities as of February 28, 2022 and August 31, 2021.

Table of Contents

Disaggregated Revenue

The Company disaggregates revenue from customers by geographic region, as it believes this disclosure best depicts how the ~~related long-lived assets to assets held for sale after committing to a plan in the second quarter of fiscal 2016 to actively market the property.~~

~~Sale of Former Corporate Headquarters in Bridgewater, MA~~

~~In October 2016, Chase entered into an agreement to sell its former corporate headquarters~~nature, amount, timing and executive offices in Bridgewater, MA. In December 2016, during the second quarter of fiscal 2017, the sale was finalized for gross cash proceeds in the amount of $740, resulting in a gain on sale of $68.~~See Note 17 to the condensed consolidated financial statements for additional information on the sale~~uncertainty of the ~~Bridgewater, MA location.~~Company's revenue and cash flows are affected by economic factors. Disaggregated revenue by geographical region for the three and six months ended February 28, 2022 and 2021 was as follows:


	Three Months Ended February 28, 2022
	Adhesives, Sealants		Industrial		Corrosion Protection		Consolidated
	and Additives		Tapes		and Waterproofing		Revenue
Revenue
North America	$	18,882	$	29,643	$	7,827	$	56,352
Asia\Middle East		7,179		1,781		494		9,454
Europe		5,575		1,449		450		7,474
All other foreign		144		457		72		673
Total Revenue	$	31,780	$	33,330	$	8,843	$	73,953

	Six Months Ended February 28, 2022
	Adhesives, Sealants		Industrial		Corrosion Protection		Consolidated
	and Additives		Tapes		and Waterproofing		Revenue
Revenue
North America	$	38,977	$	59,277	$	17,204	$	115,458
Asia\Middle East		13,149		3,579		1,384		18,112
Europe		10,371		2,361		1,365		14,097
All other foreign		332		874		90		1,296
Total Revenue	$	62,829	$	66,091	$	20,043	$	148,963


	Three Months Ended February 28, 2021
	Adhesives, Sealants		Industrial		Corrosion Protection		Consolidated
	and Additives		Tapes		and Waterproofing		Revenue
Revenue
North America	$	17,724	$	24,504	$	6,946	$	49,174
Asia\Middle East		8,599		2,155		1,119		11,873
Europe		5,124		1,039		430		6,593
All other foreign		128		647		32		807
Total Revenue	$	31,575	$	28,345	$	8,527	$	68,447

	Six Months Ended February 28, 2021
	Adhesives, Sealants		Industrial		Corrosion Protection		Consolidated
	and Additives		Tapes		and Waterproofing		Revenue
Revenue
North America	$	36,109	$	47,809	$	15,431	$	99,349
Asia\Middle East		14,928		3,836		2,569		21,333
Europe		10,330		2,052		1,077		13,459
All other foreign		279		1,139		64		1,482
Total Revenue	$	61,646	$	54,836	$	19,141	$	135,623

Table of Contents

Note 10 — Commitments and Contingencies

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

~~Table of Contents~~

Note 11 — Pensions and Other Postretirement Benefits

The components of net periodic benefit cost for the three and six months ended ~~November 30, 2017~~February 28, 2022 and ~~2016 are~~2021 were as follows:


	Three Months Ended November 30,
	2017		2016

					Three Months Ended February 28,				Six Months Ended February 28,
					2022		2021		2022		2021
Components of net periodic benefit cost
Service cost	$	71	$	72	$	95	$	91	$	190	$	183
Interest cost		157		170		96		85		192		170
Expected return on plan assets		(116)		(132)		(103)		(98)		(206)		(196)
Amortization of prior service cost		1		1		1		1		2		2
Amortization of accumulated loss		121		224		148		164		296		328
Net periodic benefit cost	$	234	$	335	$	237	$	243	$	474	$	487

When funding is required, the Company’s policy is to contribute amounts that are deductible for federal income tax purposes. ~~As of November 30, 2017, the~~The Company has made contributions of ~~$389~~$782 in the ~~current fiscal year~~six months ended February 28, 2022 to fund its obligations under its pension plans, and plans to make the necessary contributions over the remainder of fiscal ~~2018~~2022 to ensure the qualified ~~plans continue~~plan continues to be adequately funded given the current market ~~conditions.~~conditions, including conditions related to the coronavirus disease 2019 (COVID-19) pandemic. The Company made contributions of ~~$21~~$783 in the ~~first three~~six months ended February 28, 2021.

Table of ~~the prior year.~~Contents

Note 12 — Fair Value Measurements

The Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability (exit price) in an orderly transaction between market participants at the measurement date. The Company uses a three-tier fair value hierarchy, which classifies the inputs used in measuring fair values. These tiers are: Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The Company utilizes the best available information in measuring fair value. Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The financial assets classified as Level 1 and Level 2 as of ~~November 30, 2017~~February 28, 2022 and August 31, ~~2017~~2021 represent investments that are restricted for use in a nonqualified retirement savings ~~plan~~plans for certain key employees and directors.

The following table sets forth the Company’s financial assets that were accounted for at fair value on a recurring basis as of ~~November 30, 2017~~February 28, 2022 and August 31, ~~2017:~~2021:


				Fair value measurement category
				Quoted prices		Significant other	Significant
	Fair value			in active markets		observable inputs	unobservable inputs
	measurement date	Total		(Level 1)		(Level 2)	(Level 3)

											Fair value measurement category
											Quoted prices		Significant other		Significant
								Fair value			in active markets		observable inputs		unobservable inputs
								measurement date	Total		(Level 1)		(Level 2)		(Level 3)
Assets:
Restricted investments	November 30, 2017	$	1,057	$	1,006	51	—	February 28, 2022	$	2,323	$	2,122	$	201	$	—


Restricted investments	August 31, 2017	$	964	$	926	38	—	August 31, 2021	$	2,260	$	2,016	$	244	$	—

~~Table of Contents~~

The following table presents the fair value of the Company’s liabilities that are accounted for at fair value on a recurring basis as of February 28, 2022 and August 31, 2021:


				Fair value measurement category
				Quoted prices		Significant other		Significant
	Fair value			in active markets		observable inputs		unobservable inputs
	measurement date	Total		(Level 1)		(Level 2)		(Level 3)
Liabilities:
Long-term debt	February 28, 2022	$	—	$	—	$	—	$	—
Contingent consideration	February 28, 2022	$	2,692	$	—	$	—	$	2,692

Long-term debt	August 31, 2021	$	—	$	—	$	—	$	—
Contingent consideration	August 31, 2021	$	2,537	$	—	$	—	$	2,537

The long-term debt (including ~~the~~any current portion of long-term debt) had 0 outstanding balance as of ~~November 30, 2017~~February 28, 2022 and August 31, ~~2017, which is recorded at its carrying value:~~

~~Fair value measurement category~~

~~Quoted prices~~

~~Significant other~~

~~Significant~~

~~Fair value~~

~~in active markets~~

~~observable inputs~~

~~unobservable inputs~~

~~measurement date~~

~~Total~~

~~(Level 1)~~

~~(Level 2)~~

~~(Level 3)~~

~~Liabilities:~~

~~Long-term debt~~

~~November 30, 2017~~

—

~~Long-term debt~~

~~August 31, 2017~~

—

2021. The ~~long-term debt had no outstanding balance at either November 30, 2017 or August 31, 2017. Generally, the~~ carrying value of the long-term debt approximates its fair value, as the interest rate is set based on the movement of the underlying market rates. ~~In December 2016, Chase refinanced its term debt with a new revolving credit agreement.~~ See Note 1816 to the condensed consolidated financial statements for additional information on long-term debt.

In connection with accounting for the ABchimie acquisition on September 1, 2020, the Company recorded a contingent consideration liability included within Other liabilities on the condensed consolidated balance sheet of €780 (approximately $928) on the acquisition date, representing the fair value of contingent consideration payable upon the achievement of a performance-based target. The contingent consideration liability was valued using a Monte Carlo simulation model in an option pricing framework based on key inputs that are not all observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The Company assesses the fair value of the contingent consideration liability at each reporting period. Any subsequent changes in the estimated fair value of the liability are reflected in Loss (gain) on contingent consideration on the condensed consolidated statement of operations until the liability is settled. As of February 28, 2022, the liability increased to $2,692 predominantly due to changes in non-market data assumptions as well as a shorter period to the payment date.See Note 17 to the condensed consolidated financial statements for additional information on the ~~refinancing.~~acquisition of ABchimie.

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Note 13 — Accumulated Other Comprehensive Income

The changes in accumulated other comprehensive income (loss), net of tax, were as follows:


			Change in Funded		Foreign Currency
	Restricted		Status of		Translation
	Investments		Pension Plans		Adjustment		Total
Balance at August 31, 2020	$	269	$	(8,317)	$	(5,044)	$	(13,092)

Other comprehensive gains (losses) before reclassifications (1)		154		—		1,887		2,041
Reclassifications to net income of previously deferred (gains) losses (2)		(36)		247		—		211
Other comprehensive income (loss)		118		247		1,887		2,252

Balance at February 28, 2021	$	387	$	(8,070)	$	(3,157)	$	(10,840)


Balance at August 31, 2021	$	518	$	(7,979)	$	(3,749)	$	(11,210)

Other comprehensive gains (losses) before reclassifications (3)		(106)		—		(2,058)		(2,164)
Reclassifications to net income of previously deferred (gains) losses (4)		(59)		224		—		165
Other comprehensive income (loss)		(165)		224		(2,058)		(1,999)

Balance at February 28, 2022	$	353	$	(7,755)	$	(5,807)	$	(13,209)

Change in Funded

Foreign Currency

Restricted

Status of

Translation


Investments

Pension Plan

Adjustment

Total

Balance at August 31, 2016

$
54

$
(7,336)

$
(8,197)

$
(15,479)

Other comprehensive gains (losses) before reclassifications (1)

14

—

(2,098)

(2,084)

Reclassifications to net income of previously deferred (gains) losses (2)

(1)

147

—

146

Other comprehensive income (loss)

13

147

(2,098)

(1,938)

Balance at November 30, 2016

$
67

$
(7,189)

$
(10,295)

$
(17,417)

Balance at August 31, 2017

$
121

$
(6,181)

$
(7,409)

$
(13,469)

Other comprehensive gains (losses) before reclassifications (3)

31

—

1,570

1,601

Reclassifications to net income of previously deferred (gains) losses (4)

—

80

—

80

Other comprehensive income (loss)

31

80

1,570

1,681

Balance at November 30, 2017

$
152

$
(6,101)

$
(5,839)

$
(11,788)

(1)

Net of tax benefit of $52, $0 and $0, respectively.

(2)

Net of tax expense of ~~$8, $0~~$13, tax benefit of $83 and $0, respectively.

~~(2)~~

(3)

Net of tax expense of ~~$1, tax benefit of $78 and $0, respectively.~~

~~(3)~~

~~Net of tax benefit of $16,~~$36, $0 and $0, respectively.

(4)

Net of tax expense of ~~$1,~~$21, tax benefit of ~~$41~~$74 and $0, ~~respectively~~.

respectively.

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The following table summarizes the reclassifications from accumulated other comprehensive income (loss) to the unaudited condensed consolidated statements of income:


	Amount of Gain (Loss) Reclassified from
	Accumulated Other Comprehensive Income
	(Loss) into Income
	Three Months Ended November 30,				Location of Gain (Loss) Reclassified from Accumulated
	2017		2016		Other Comprehensive Income (Loss) into Income


						Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive
						Income (Loss) into Income
						Three Months Ended February 28,				Six Months Ended February 28,				Location of Gain (Loss) Reclassified from Accumulated
						2022		2021		2022		2021		Other Comprehensive Income (Loss) into Income
Gains on Restricted Investments:
Realized gain on sale of restricted investments	$	(1)	$	(2)	Selling, general and administrative expenses
Realized loss (gain) on sale of restricted investments						$	(73)	$	(44)	$	(80)	$	(49)	Selling, general and administrative expenses
Tax expense (benefit)		1		1			19		12		21		13
Gain net of tax	$	—	$	(1)		$	(54)	$	(32)	$	(59)	$	(36)


Loss on Funded Pension Plan adjustments:
Amortization of prior pension service costs and unrecognized losses	$	28	$	26	Cost of products and services sold
Amortization of prior pension service costs and unrecognized losses	$	94	$	199	Selling, general and administrative expenses		149		165		298		330	Other income (expense)
Tax expense (benefit)		(42)		(78)			(37)		(40)		(74)		(83)
Loss net of tax	$	80	$	147		$	112	$	125	$	224	$	247


Total net loss reclassified for the period	$	80	$	146		$	58	$	93	$	165	$	211

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Note 14 — ~~Acquisitions~~Income Taxes

~~Acquisition~~For the three and six months ended February 28, 2022, the Company’s recognized effective tax rate was 26.2% and 26.0%, respectively. For the three and six months ended February 28, 2021, the Company’s recognized and effective tax rate was 28.7% and 25.5%, respectively.

The Company has applied the U.S. statutory Federal rate of 21%, enacted as part of the Tax Cuts and Jobs Act (the “Tax Act”) in December 2017, for both the second quarter and year-to-date fiscal periods ended February 28, 2022 and 2021.

In addition, the Company also recognizes an additional component of total Federal tax expense, the tax on Global Intangible Low-Taxed Income (“GILTI”) provision of the Tax Act, which became applicable to the Company in fiscal 2019. The Company elected to account for GILTI as a period cost, and therefore included GILTI expense in the effective tax rate calculation. This provision did not have a material effect on the effective tax rate for the second quarter and year-to-date fiscal periods ended February 28, 2022 and 2021. Additionally, the Company concluded that the Base Erosion and Anti Abuse Tax (“BEAT”) provision of the Tax Act, which also became applicable to the Company in fiscal 2019, had no effect on its effective tax rate for the second quarter and year-to-date fiscal periods ended February 28, 2022 and 2021.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, included a technical correction to the Tax Act which will allow accelerated deductions for qualified improvement property. The Company has evaluated the impact of the CARES Act, and at present does not expect that the qualified improvement property correction or other provisions of the CARES Act will result in a material tax benefit in future periods. The CARES Act had no material effect on the effective tax rate for the second quarter and year-to-date fiscal periods ended February 28, 2022 and 2021.

In July 2020, the United States Internal Revenue Service (“IRS”) released final regulations (TD 9901) that ease documentation standards and provide greater flexibility for taxpayers claiming the deduction for Foreign-Derived Intangible Income (“FDII”). During the second quarter and year-to-date fiscal periods ended February 28, 2022, FDII had a favorable impact on the Company’s effective tax rate.

0Note 15 — Operations Optimization Costs

Relocation of Chase Corporate Headquarters

The Company substantially completed the relocation of its Corporate Headquarters to another location within Westwood, MA during the second quarter of the fiscal year. The move, part of the Company’s ongoing consolidation and optimization initiative, capitalizes on the hybrid work model utilized by many of Chase’s corporate and administrative employees and is expected to provide future operational cost savings. The new facility also consolidates and houses research and development operations previously conducted at the previous Westwood, MA and Woburn, MA locations. Operations optimization expenses related to the Westwood move of $141 and $200 were expensed in the second quarter and first half of the fiscal year, respectively. The Company does not anticipate any significant additional operations optimization costs related to the new Corporate Headquarters during the remaining second half of the fiscal year.

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

During the third quarter of fiscal 2021, Chase announced to the employees at its Woburn, MA location that its adhesives systems operations, part of the Adhesives, Sealants and Additives segment’s electronic and industrial coatings product line, would be consolidating into the Company’s existing O'Hara Township, PA location. This rationalization and consolidation initiative aligns with the second quarter of fiscal 2021 announcement of the Company’s plan to move its sealant systems production from Newark, CA to Hickory, NC, described in more detail below. Chase Corporation obtained both the adhesive and sealants systems as part of its fiscal 2017 acquisition of the operations of Resin Designs. The Company expensed $301 related to the consolidation of the Woburn, MA location during the second quarter of the fiscal year and expects to recognize additional expense during the second half of the fiscal year.

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Relocation of Sealants Systems Manufacturing to Hickory, NC

During the second quarter of fiscal 2021, Chase began moving the sealant systems operations, part of the Adhesives, Sealants and Additives segment’s electronic and industrial coatings product line, from its Newark, CA location to its Hickory, NC facility. This is in line with the Company’s ongoing initiative to consolidate its manufacturing plants and streamline its existing processes. The sealant systems operations and Newark, CA location came to Chase Corporation as part of the fiscal 2017 acquisition of the operations of Resin Designs, ~~LLC~~and the Company’s lease there terminated in fiscal 2021. The Company recognized $977 of expense related to the move during the entire prior fiscal year ended August 31, 2021 and $147 of expense in the second quarter and first half of fiscal 2022. This project is now substantially completed and any future costs related to this move are not anticipated to be significant to the condensed consolidated financial statements.

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Note 16 — Long-Term Debt

On ~~September 30, 2016,~~July 27, 2021 (the fourth quarter of fiscal 2021), the Company entered into the Second Amended and Restated Credit Agreement (the “New Credit Agreement”) by and among the Company and NEPTCO Incorporated (“NEPTCO”), each as borrowers, the guarantor subsidiaries party thereto, the financial institutions party thereto as Lenders, and Bank of America, N.A., as administrative agent, with participation from Wells Fargo Bank, N.A., PNC Bank, N.A. and JPMorgan Chase Bank, N.A. The New Credit Agreement was entered into to amend, restate and extend the Company’s preexisting Amended and Restated Credit Agreement (the “Prior Credit Agreement”), which previously had a maturity date of December 15, 2021 and is discussed in more detail below, and to provide for additional liquidity to finance acquisitions, working capital and capital expenditures, and for other general corporate purposes. Under the New Credit Agreement, Chase obtained an increased revolving credit loan (the “New Revolving Facility”), with borrowing capabilities not to exceed $200,000 at any time, with the ability to request an increase in this amount by an additional $100,000 at the individual or collective option of any of the Lenders. The applicable interest rate for the New Revolving Facility and New Term Loan (defined below) is based on the effective London Interbank Offered Rate (LIBOR) plus a range of 1.00% to 1.75%, depending on the consolidated net leverage ratio of Chase and its subsidiaries. At February 28, 2022, there was 0 outstanding principal balance, and as such, 0 applicable interest rate.

The New Credit Agreement has a five-year term with interest payments due at the end of the applicable LIBOR period (but in no event less frequently than the three-month anniversary of the commencement of such LIBOR period) and principal payment due at the expiration of the agreement, July 27, 2026. The New Credit Agreement contains provisions that may replace LIBOR as the benchmark index under certain circumstances. In addition, the Company may elect a base rate option for all or a portion of the New Revolving Facility, in which case interest payments shall be due with respect to such portion of the New Revolving Facility on the last business day of each quarter. Subject to certain conditions set forth in the New Credit Agreement, the Company may elect to convert all or a portion of the outstanding New Revolving Facility into a new term loan twice during the term of the New Revolving Facility (each, a “New Term Loan”, and collectively with the New Revolving Facility, the “New Credit Facility”), which New Term Loan shall be payable quarterly in equal installments sufficient to amortize the original principal amount of such Term Loan on a ten year amortization schedule.

The outstanding balance on the New Credit Facility is guaranteed by all of Chase’s direct and indirect domestic subsidiaries, which collectively had a carrying value of approximately $291,810 at February 28, 2022. The New Credit Facility is subject to restrictive covenants under the New Credit Agreement, and financial covenants that require Chase and its subsidiaries to maintain certain financial ratios on a consolidated basis, including a consolidated net leverage ratio of 3.25 to 1.00 and a consolidated interest coverage ratio of 3.50 to 1.00 (both defined in the New Credit Agreement). Chase Corporation was in compliance with the debt covenants as of February 28, 2022. The New Credit Agreement also places certain Lender-approval requirements as to the size of permitted acquisitions which may be entered into by the Company and its subsidiaries, and allows for a temporary step-up in the allowed consolidated leverage ratio for the four fiscal quarters ending after certain designated acquisitions. Prepayment is allowed by the New Credit Agreement at any time during the term of the agreement, subject to customary notice requirements and the payment of customary LIBOR breakage fees.

The Prior Credit Agreement was an all-revolving credit facility with a borrowing capacity of $150,000, which could be increased by an additional $50,000 at the request of the Company and the individual or collective option of any of the lenders, and with an interest rate based on the effective LIBOR plus an additional amount in the range of 1.00% to 1.75%, depending on our consolidated net leverage ratio or, at the Company’s option, at the bank’s base lending rate. It was substantially available at July 27, 2021, the time of its amendment and restatement.

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Note 17 – Acquisitions

Acquisition of Emerging Technologies, Inc.

On February 5, 2021, the Company acquired certain assets of ~~Resin Designs, LLC~~Emerging Technologies, Inc. (“~~Resin Designs”~~ETi”), ~~an advanced adhesives and sealants manufacturer, with locations~~a superabsorbent polymers solutions provider, located in ~~Woburn, MA and Newark, CA. This~~Greensboro, NC. The business was acquired for a purchase price of ~~$30,270,~~$9,997, comprising $8,997 paid on February 5, 2021 and an accrual of $1,000 to be paid out up to eighteen months after the purchase, subsequent to final working capital adjustments, and excluding acquisition-related costs. As part of this transaction, Chase acquired substantially all working capital and fixed assets of the business and entered ~~into multiyear leases~~a multi-year lease at ~~both locations. Resin Designs~~ETi’s existing location. The Company expensed $128 of acquisition-related costs during the three-month period ended February 28, 2021 associated with this acquisition. The purchase was funded with available cash on hand. ETi is a solutions provider and formulator of ~~customized adhesive~~absorbent polymers for use in the packaging, recreational, consumer, and ~~sealant systems used in high-reliability electronic applications.~~sanitation markets. The acquisition broadens the Company’s ~~adhesives~~superabsorbent polymers product offerings and ~~sealants product offering and manufacturing~~formulation capabilities ~~and expands~~while expanding its market reach. The Company finalized purchase ~~was funded entirely~~accounting during the first quarter of fiscal 2022, with ~~available cash on hand.~~

no significant change to amounts initially recorded. Since the effective date ~~for this~~of the acquisition, ~~September 30, 2016,~~ the financial results of ~~the~~ETi’s acquired ~~business~~operations have been included in the Company’s financial statements within the ~~Industrial Materials operating segment,~~functional additives product line, contained within the ~~electronic~~Adhesives, Sealants and ~~industrial coatings product line.~~Additives operating segment. The ETi acquisition ~~was accounted for as~~does not represent a significant business combination under ASC Topic 805, “Business Combinations.” In accordance with this accounting standard, the Company expensed $584 of acquisition-related costs during the first fiscal quarter of 2017 to acquisition-related costs.so pro forma financial information is not provided.

~~Table of Contents~~

~~The purchase price has been allocated to the acquired tangible and identifiable intangible assets assumed, based on their fair values as of the date of the acquisition:~~

Assets & Liabilities

Amount

Accounts receivable

$
1,877

Inventory

1,300

Prepaid expenses and other current assets

63

Property, plant & equipment

623

Goodwill

7,592

Intangible assets

19,450

Accounts payable and accrued liabilities

(635)

Total purchase price

$
30,270

The excess of the purchase price over the net tangible and intangible assets acquired resulted in goodwill of ~~$7,592~~$2,451 that is largely attributable to the synergies and economies of scale from combining the operations, technologies and research and development capabilities of ~~Resin Designs~~ETi and Chase, particularly as ~~it pertains~~they pertain to the expansion of the Company's product and service offerings, the established workforce and marketing efforts. This goodwill is deductible for income tax purposes.

~~All assets, including goodwill, acquired as part~~Acquisition of ~~the Resin Designs acquisition are included in the Industrial Materials operating segment. Identifiable intangible assets purchased with this transaction are as follows:~~ABchimie

Intangible Asset

Amount

Useful life
Customer relationships

$
17,500

10
years
Technology

1,200

4
years
Trade names

750

7
years
Total intangible assets

$
19,450

~~Supplemental Pro Forma Data~~

~~The following table presents the pro forma results of the Company for the three-month period ended November 30, 2016 as though the Resin Designs acquisition described above occurred on~~On September 1, ~~2015 (the first~~2020 (first day of fiscal ~~2016)~~2021), the Company acquired all the capital stock of ABchimie for €18,654 (approximately $22,241 at the time of the transaction) net of cash acquired, subject to final working capital adjustments, excluding acquisition-related costs totaling $274 recognized in fiscal 2020 and with a performance-based earn out (measured over four years post-acquisition) potentially worth an additional €7,000 (approximately $8,330 at the time of the transaction). The ~~actual revenue and expenses for~~Company had $2,692 accrued at February 28, 2022 within Other liabilities on the ~~acquired business are included~~condensed consolidated balance sheet related to its estimate of the current fair value of the earn out. Following its initial recording at the acquisition date, changes in the ~~Company’s consolidated results beginning~~performance-based earn out accrual have been recorded within (Gain) loss on ~~September 30, 2016. For the three months ended November 30, 2017, revenue and net income for the Resin Designs operations included~~contingent consideration in the condensed consolidated statement of operations (including a $200 gain in the second quarter and $275 year-to-date net loss adjustment in fiscal 2022).

ABchimie is a Corbelin, France headquartered solutions provider for the cleaning and protection of electronic assemblies, with ‎further formulation, production, and research and development capabilities‎. The transaction was funded with available cash on hand. The financial results of the business are included in the Company's financial statements within the Adhesives, Sealants and Additives operating segment in the electronic and industrial coatings product line. The Company finalized purchase accounting during the fourth quarter of fiscal 2021, with no significant change to amounts initially recorded.

The excess of the purchase price over the net tangible and intangible assets acquired resulted in goodwill of $13,055 that is largely attributable to the synergies and economies of scale from combining the operations, technologies and research and development capabilities of ABchimie and Chase, particularly as they pertain to the expansion of the Company's product and service offerings, the established workforce and marketing efforts. A portion of this goodwill is deductible in the U.S. for calculation of GILTI period costs but is nondeductible for French income tax purposes.

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Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion provides an analysis of the Company’s financial condition and results of operations. It should be read in conjunction with the Condensed Consolidated Financial Statements. Notes thereto are included in Item 1 of Part I of this Quarterly Report on Form 10-Q and with the Company’s Annual Report on Form 10-K filed for the fiscal year ended August 31, 2021.

Overview

General

The Company’s revenue grew in the second fiscal quarter and six months ended February 28, 2022, with all three of its reportable operating segments surpassing sales achieved in the prior year quarter and year-to-date period. In spite of the second quarter’s traditional unfavorable seasonal impact on sales of the Company’s high margin Corrosion Protection and Waterproofing segment products and the continuation of the challenging operating environment detailed below, the Company was able to maintain a 37% gross margin for both the second quarter of fiscal 2022 and the first half of the fiscal year.

Despite healthy sales growth in both the second quarter and fiscal year-to-date period, the Company had a less favorable relative gross margin and higher operating expenses, as compared to the prior year periods, resulting in lower company-wide operating income. Chase’s relative gross margin in the quarter and first half of the fiscal year were ~~$3,738~~negatively impacted by both: a.) increased input costs caused by continued global raw material inflationary pressures, increased logistics costs and ~~$348,~~a more competitive labor market; and b.) a less favorable sales mix, with sales increases in its lower margin Industrial Tapes segment outpacing revenue gains seen in its higher margin Adhesive, Sealants and Additives and Corrosion Protection and Waterproofing segments. Further, the Adhesives, Sealants and Additives segment also experienced a less favorable sales mix within the segment itself—with historically less favorable margin products constituting a comparatively larger part of total segment sales in the quarter-to-date and year-to-date periods.

The Company has implemented and continues to implement customer price adjustments and continues to work with our customers and suppliers in an effort to counteract margin compression. However, given the delay experienced due to notification period requirements with certain customers and the continuation of upward inflationary pressures on input costs, the current period and year-to-date results reflect a lag in the realization of the full benefits of these efforts.

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Revenue by Segment

Chase Corporation has three reportable operating segments as summarized below:


Segment	Product Lines	Manufacturing Focus and Products
Adhesives, Sealants and Additives	Electronic and Industrial Coatings Functional Additives	Protective coatings, including moisture protective coatings and cleaning chemistries, and customized sealant and adhesive systems for electronics; polyurethane dispersions, polymeric microspheres and superabsorbent polymers.
Industrial Tapes	Cable Materials Specialty Products Pulling and Detection Electronic Materials	Protective tape and coating products and services, including insulating and conducting materials for wire and cable manufacturers; laminated durable papers, packaging and industrial laminate products and custom manufacturing services; pulling and detection tapes used in the installation, measurement and location of fiber optic cables and water and natural gas lines; cover tapes essential to delivering semiconductor components via tape-and-reel packaging.
Corrosion Protection and Waterproofing	Coating and Lining Systems Pipeline Coatings Building Envelope Bridge and Highway	Protective coatings and tape products, including coating and lining systems for use in liquid storage and containment applications; protective coatings for pipeline and general construction applications; adhesives and sealants used in architectural and building envelope waterproofing applications; high-performance polymeric asphalt additives and expansion and control joint systems for use in the transportation and architectural markets.

Revenue for our Adhesives, Sealants and Additives segment increased for the second quarter and year-to-date period against the comparable prior year periods with increased demand for our North American-focused functional additives product line, including inorganic growth from our Emerging Technologies, Inc. (“ETi”) business acquired in the last month of the second quarter of fiscal 2021. Partially offsetting this increase in revenue was a quarter-to-quarter and year-to-date reduction in sales volume from our worldwide-focused electronic and industrial coatings product line due to reduced demand most acutely seen with sales within the automotive industry for the second quarter and first half of the fiscal year.

Revenue for our Industrial Tapes segment surpassed the COVID-19 impacted second quarter and year-to-date prior year sales with continued increased demand for our North American-focused cable materials, pulling and detection and specialty products product lines. Tempering this overall increase in revenue were quarter-to-quarter and year-to-date reductions in sales volume from our Asia-focused electronic materials product line.

Revenue for our Corrosion Protection and Waterproofing segment surpassed the prior year quarter and year-to-date period with increased demand for our coating and lining systems and building envelope product lines. Partially offsetting these increases in revenue were second quarter and year-to-date reductions in net sales volume from our pipeline coatings and highly seasonal bridge and highway product lines.

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Balance Sheet and Cash Flow

Chase Corporation’s balance sheet remained strong as of February 28, 2022, with cash on hand of $116,044,000, and a current ratio of 8.3. The Company’s cash position remained healthy, as did cash flow from operations. Chase continued its strategic inventory build during the second quarter, undertaken to help ensure its ability to satisfy our customers’ demands and to address its elevated backlog caused in part by supply chain challenges. In addition, during the second fiscal quarter Chase Corporation paid out its largest ever annual cash dividend of $9,460,000 on December 9, 2021.

The Company held no outstanding balance on its $200,000,000 revolving credit facility as of February 28, 2022. The revolving credit facility, which was amended and restated in July 2021 (fourth quarter of fiscal 2021) to increase its capacity from $150,000,000 to $200,000,000, allows for the Company to pay down debt with excess cash, while retaining access to immediate liquidity to fund future accretive activities, including mergers and acquisitions, as they are identified. The new facility also gives Chase the ability to request an increase in this amount by an additional $100,000,000 ($300,000,000 in total borrowing capacity) at the individual or collective option of any of the lenders. The facility matures in July 2026.

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Results of Operations

Revenue and Income before Income Taxes by Segment were as follows (dollars in thousands):


				% of					% of					% of					% of
	Three Months Ended			Total		Three Months Ended			Total		Six Months Ended			Total		Six Months Ended			Total
	February 28, 2022			Revenue		February 28, 2021			Revenue		February 28, 2022			Revenue		February 28, 2021			Revenue

Revenue
Adhesives, Sealants and Additives	$	31,780		43	%	$	31,575		46	%	$	62,829		42	%	$	61,646		45	%
Industrial Tapes		33,330		45	%		28,345		41	%		66,091		44	%		54,836		40	%
Corrosion Protection and Waterproofing		8,843		12	%		8,527		12	%		20,043		13	%		19,141		14	%
Total	$	73,953				$	68,447				$	148,963				$	135,623

				% of					% of					% of					% of
	Three Months Ended			Segment		Three Months Ended			Segment		Six Months Ended			Segment		Six Months Ended			Segment
	February 28, 2022			Revenue		February 28, 2021			Revenue		February 28, 2022			Revenue		February 28, 2021			Revenue
Income before income taxes
Adhesives, Sealants and Additives	$	7,802	(a)	25	%	$	10,137	(c)	32	%	$	15,399	(a)	25	%	$	20,116	(c)	33	%
Industrial Tapes		10,250		31	%		8,460		30	%		19,540		30	%		16,328		30	%
Corrosion Protection and Waterproofing		2,884		33	%		2,415		28	%		7,330		37	%		6,501		34	%
Total for reportable segments		20,936		28	%		21,012		31	%		42,269		28	%		42,945		32	%
Corporate and Common Costs		(8,569)	(b)				(8,147)	(c)				(16,785)	(b)				(16,103)	(c)
Total	$	12,367		17	%	$	12,865		19	%	$	25,484		17	%	$	26,842		20	%

Note: Some percentage of total revenue amounts may not sum to 100% due to rounding.

(a)

Includes a $200 gain in the second quarter and a $275 year-to-date loss on the adjustment of the performance-based earn-out contingent consideration associated with the September 2020 acquisition of ABchimie and $301 in operation optimization costs related to the move from Woburn, MA to O’Hara Township, PA and $147 of operations optimization costs related to the move from Newark, CA to Hickory, NC

(b)

Includes $141 of operations optimization costs in the second quarter and $200 year-to-date related to the Company’s move to the new Corporate Headquarters to another location in Westwood, MA substantially completed in the second quarter of the fiscal year

(c)

Includes $733 in loss on the upward adjustment of the performance-based earn out contingent consideration associated with the September 2020 acquisition of ABchimie and $98 operations optimization in exit costs related to the movement of the sealants system business out of the Newark, CA location and into the Hickory, NC location during the second quarter of fiscal 2021. Also includes $128 in acquisition-related expense attributable to the February 2021 acquisition of the operations of ETi

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Total Revenue

Total revenue increased $5,506,000 or 8% to $73,953,000 for the quarter ended February 28, 2022, compared to $68,447,000 in the same quarter of the prior year. Total revenue increased $13,340,000 or 10% to $148,963,000 in the fiscal year-to-date period compared to $135,623,000 in the same period in fiscal 2021.

Revenue in the Company’s Adhesives, Sealants and Additives segment increased $205,000 or 1% and $1,183,000 or 2% in the current quarter and year-to-date period, respectively. Positively impacting sales for both the current quarter and year-to-date period were demand-driven sales increases of $2,145,000 and $4,388,000, respectively, by our North American-focused functional additives product line, which includes the inorganic growth attributable to ETi in the current quarter and year-to-date period. Negatively impacting the segment’s sales was a decrease in revenue in the current quarter and year-to-date period from our worldwide-focused electronic and industrial coatings line totaling $1,940,000 and $3,205,000, respectively, with logistics and raw material supply constraints affecting demand in automotive verticals.

Compared to the prior year quarter and year-to-date period, revenue in the Company’s Industrial Tapes segment increased $4,985,000 or 18% and $11,255,000 or 21%, respectively. Positively impacting sales for both the current quarter and year-to-date period were volume and price-driven sales increases of $5,443,000 and $11,283,000, respectively, due to its wire and cable, pulling and detection, and specialty products product lines over the COVID-19 impacted prior year periods. Negatively impacting the segment’s sales was a decrease in revenue from our electronic materials product line totaling $458,000 and $28,000 for the second quarter and year-to-date period, respectively, due to decreased demand in the Asian end-market.

Revenue in the Company’s Corrosion Protection and Waterproofing segment increased $316,000 or 4% and $902,000 or 5% in the current quarter and year-to-date period, respectively. Positively impacting sales for the segment were its coatings and lining systems and building envelope product lines’ combined $684,000 and $1,372,000 current quarter and year-to-date period increases, respectively. Negatively impacting the segment’s sales was a decrease in revenue from its pipeline coatings and bridge and highway product lines, totaling a combined $368,000 and $470,000 for the current quarter and year-to-date period, respectively. The ~~pro forma results include adjustments~~pipeline coatings product line saw a net decrease for the ~~estimated amortization~~current quarter and year-to-date period, with COVID-19 overhang delays in products sold into Middle East and Asian markets outpacing North American sales gains in oil and gas pipeline repair and construction markets. Because its sales are heavily dependent on infrastructure-related project and maintenance work in North America, the Company’s Corrosion Protection and Waterproofing segment customarily experiences a seasonal downturn in the winter months, our second fiscal quarter (with this trend repeating itself for fiscal 2022).

Table of ~~intangibles, acquisition-related~~Contents

Cost of Products and Services Sold

Cost of products and services sold increased $5,996,000 or 15% to $46,911,000 for the quarter ended February 28, 2022, compared to $40,915,000 in the prior year quarter. Cost of products and services sold increased $13,672,000 or 17% to $94,192,000 in the first six months of fiscal 2022, compared to $80,520,000 in the comparative year-to-date period.

The following table summarizes the cost of products and services sold as a percentage of revenue for each of Chase Corporation’s reportable operating segments:


	Three Months Ended February 28,				Six Months Ended February 28,
Cost of products and services sold	2022		2021		2022		2021
Adhesives, Sealants and Additives	62	%	54	%	62	%	55	%
Industrial Tapes	65		66		67		65
Corrosion Protection and Waterproofing	60		61		57		58
Total Company	63	%	60	%	63	%	59	%

Cost of products and services sold in the Adhesives, Sealants, and Additives segment was $19,838,000 and $38,755,000 in the current quarter and year-to-date period compared to $16,998,000 and $33,611,000 in the comparable periods in the prior year. Cost of products and services sold in the Industrial Tapes segment was $21,790,000 and $44,009,000 in the current quarter and year-to-date period compared to $18,693,000 and $35,810,000 in the comparable periods in the prior year. Cost of products sold in the Corrosion Protection and Waterproofing segment was $5,283,000 and $11,428,000 in the current quarter and year-to-date period compared to $5,224,000 and $11,099,000 in the comparable periods in the prior year.

As a percentage of revenue, cost of products and services sold increased for the Adhesives, Sealants and Additives segment in the current quarter and year-to-date period. As a percentage of revenue, cost of products and services sold decreased for the Industrial Tapes segment for the current quarter and increased in the year-to-date period. As a percentage of revenue, cost of products and services sold decreased for the Corrosion Protection and Waterproofing segment in the current quarter and year-to-date period. The decrease in the relative gross margin for the Adhesives, Sealants and Additives and Industrial Tapes segments in the year-to-date period (and for the second quarter period for Adhesives, Sealants and Additives) was due tocontinued global raw material inflationary pressures, increased logistics and freight costs ~~sale~~and a more competitive labor market. Additionally, the Company’s overall relative margin was affected by a less favorable sales mix with sales increases in our lower margin Industrial Tapes segment outpacing revenue gains seen in our Adhesive, Sealants and Additives and Corrosion Protection and Waterproofing segments. The Adhesives, Sealants and Additives segment also experienced a less favorable sales mix within the segment itself, with historically less favorable margin products constituting a comparatively larger part of ~~inventory step-up cost~~total segment sales. The Company has implemented and continues to implement customer price adjustments and continues to work with our customers and suppliers in an effort to counteract margin compression but with a lag reflected in current quarter and year-to-date period results.

With the composition of the Company’s finished goods and the ~~income tax impact~~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 the ~~pro forma adjustments~~raw materials and market demand for its product offerings. In an effort to preserve margins, the Company diligently monitors raw materials and commodities pricing across all its product lines.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $794,000 or 6% to $13,125,000 for the quarter ended February 28, 2022 compared to $12,331,000 in the prior year quarter. Selling, general and administrative expenses increased $1,909,000 or 8% to $26,500,000 in the fiscal year-to-date period compared to $24,591,000 in the same period in fiscal 2021. Selling, general and administrative expenses increased in the second quarter and year-to-date fiscal 2022 period. The increase was attributed to selling and sales activity costs as compared to the COVID-19 impacted comparable prior

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year quarter and year-to-date period. As a percentage of revenue, selling, general and administrative expenses represented 18% for both the current quarter and fiscal year-to-date period for both fiscal 2022 and 2021.

Research and Product Development Costs

Research and product development costs increased $69,000 or 7% percent to $1,095,000 during the second quarter of fiscal 2022, compared to $1,026,000 in fiscal 2021. Research and product development costs increased $11,000 or less than one percent to $2,088,000 during the first six months of fiscal 2022, compared to $2,077,000 in the same period of fiscal 2021. Research and development stayed relatively consistent from fiscal 2021 to 2022 as the Company continued focused development work on strategic product lines.

Operations Optimization Costs

The Company substantially completed the relocation of its Corporate Headquarters to another location within Westwood, MA during the second quarter of the fiscal year. The move, part of the Company’s ongoing consolidation and optimization initiative, capitalizes on the hybrid work model utilized by many of Chase’s corporate and administrative employees and is expected to provide future operational cost savings. The facility will consolidate and house research and development operations previously conducted at the ~~statutory rate~~previous Westwood, MA and Woburn, MA locations. Operations optimization costs related to the Westwood move of ~~35%. The following pro forma information is not necessarily indicative~~$141,000 and $200,000 were expensed in the second quarter and first half of the ~~results~~fiscal year, respectively. The Company does not anticipate any significant additional operations optimization costs related to the new Corporate Headquarters during the second half of the fiscal year.

During the third quarter of fiscal 2021, Chase announced to the employees at its Woburn, MA location that its adhesives systems operations, part of the Adhesives, Sealants and Additives segment’s electronic and industrial coatings product line, would ~~have been achieved if~~be consolidating into the Company’s existing O'Hara Township, PA location. This rationalization and consolidation initiative aligns with the second quarter of fiscal 2021 announcement of the Company’s plan to move its sealant systems production from Newark, CA to Hickory, NC, described in more detail below. Chase Corporation obtained both the adhesive and sealants systems as part of its fiscal 2017 acquisition ~~had been effective on September 1, 2015.~~of the operations of Resin Designs. The Company expensed $301,000, related to the consolidation of the Woburn, MA location during the second quarter of the fiscal year and expects to recognize additional expense during the second half of fiscal year.

Three Months Ended November 30,

2016
Revenue
$
62,942
Net income

11,034

Net income available to common shareholders, per common and common equivalent share

Basic earnings per share
$
1.18
Diluted earnings per share
$
1.17

~~Table~~During the second quarter of ~~Contents~~

~~Note 15 — Exit Costs Related~~fiscal 2021, Chase began moving the sealant systems operations, part of the Adhesives, Sealants and Additives segment’s electronic and industrial coatings product line, from its Newark, CA location to ~~Idle Facility~~

Inits Hickory, NC facility. This is in line with the ~~three-month period ended November 30, 2016,~~Company’s ongoing initiative to consolidate its manufacturing plants and streamline its existing processes. The sealant systems operations and Newark, CA location came to Chase Corporation as part of the fiscal 2017 acquisition of the operations of Resin Designs, and the Company’s lease there terminated in fiscal 2021. The Company recognized ~~$27~~$977,000 in ~~expenses~~expense related to ~~raze and exit its Randolph, MA facility,~~the move during the entire prior fiscal year ended August 31, 2021, of which ~~had been idle regarding production for several years; no expense~~$98,000 was recognized in the first half of the year. The Company recognized $147,000 in expense during both the second quarter and first half of fiscal 2022. This project is now substantially completed and any future costs related to this move are not anticipated to be significant to the Condensed Consolidated Financial Statements.

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(Gain) loss on Contingent Consideration

As a component of the September 1, 2020 acquisition of ABchimie, the Company incurred a performance-based earn out liability potentially worth an additional €7,000,000 (approximately $8,330,000 at the time of the transaction) in consideration. Following its initial recording of an accrual for $928,000 at the acquisition date, $1,664,000 in expense related to adjustments to the performance-based earn out accrual was recorded during fiscal year ended August 31, 2021 (with $733,000 of expense recognized in the second quarter and first half of fiscal 2021). The Company recognized a loss of $475,000 and a gain of $200,000 (net $275,000 year-to date) in the first and second quarters of fiscal 2022, respectively, related to the performance-based contingent consideration.

Interest Expense

Interest expense increased $19,000 or 28% to $86,000 for the quarter ended ~~November 30, 2017. The~~February 28, 2022, compared to $67,000 in the prior year comparable period. Interest expense increased $37,000 or 27% for the first six months of fiscal 2022, compared to $136,000 in the prior comparable period. As the Company ~~began marketing~~had no outstanding balance on its revolving debt facility for both periods, interest expense has remained relatively low.

Other Income (Expense)

Other income (expense) was income of $20,000 in the ~~site for sale and reclassified~~quarter ended February 28, 2022, compared to an expense of $284,000 in the ~~net book value~~same period in the prior year, a difference of $304,000. Other income (expense) was income of $397,000 in the first six months of the ~~facility~~fiscal year compared to ~~assets held~~an expense of $498,000 in the comparable period, a difference of $895,000. Other income (expense) primarily includes foreign exchange gains (losses) caused by changes in exchange rates on transactions or balances denominated in currencies other than the functional currency of our subsidiaries, non-service cost components of periodic pension expense (including pension-related settlement costs due to the timing of lump-sum distributions), interest income, rental income and other non-trade/non-royalty/non-commission receipts. The change in total other income (expense) in fiscal 2022 compared to fiscal 2021 for ~~sale~~both the quarter-to-date and year-to-date periods was largely due to the recognition of net foreign exchange gains in fiscal 2022 as compared to a net losses in fiscal 2021.

Income Taxes

For the three and six months ended February 28, 2022, the Company’s recognized effective tax rate was 26.2% and 26.0%, respectively. For the three and six months ended February 28, 2021, the Company’s recognized and effective tax rate was 28.7% and 25.5%, respectively.

For fiscal 2022 and 2021, 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 14 — “Income Taxes” to the Condensed Consolidated Financial Statements for further discussion of the effects of the Tax Act.

Net Income

Net income decreased $45,000 or less than 1% to $9,126,000 in the quarter ended February 28, 2022 compared to $9,171,000 in the comparable prior year second quarter. Net income decreased $1,155,000 or 6% to $18,853,000 in the six month year-to-date period ended February 28, 2022 compared to $20,008,000 in the comparable six month year-to-date prior period. The decrease in net income in the second quarter and year-to-date period was primarily due to a.) increased input costs caused by continued global raw material inflationary pressures, increased logistics costs and a more competitive labor market; and b.) a less favorable sales mix, with sales increases in its lower margin Industrial Tapes segment outpacing revenue gains seen in its higher margin Adhesive, Sealants and Additives and Corrosion Protection and Waterproofing segments.

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Liquidity and Sources of Capital

The Company’s overall cash and cash equivalents balance decreased $3,385,000 to $116,044,000 at February 28, 2022, from $119,429,000 at August 31, 2021. The decreased cash balance is primarily attributable to the payment of the $9,460,000 annual dividend in the second quarter of fiscal ~~2016,~~2022 and ~~recognized~~the strategic inventory build that was going over the first half of fiscal 2022. The net decrease in cash was offset by cash flow from operations. Of the above-noted amounts, $28,509,000 and $26,309,000 were held outside the United States by Chase Corporation and its foreign subsidiaries as of February 28, 2022 and August 31, 2021, 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 (as evidenced by the fiscal 2021 acquisition of ABchimie), prior to the second quarter of fiscal 2018 the Company did not have a ~~total~~history of ~~$70 and $935 in expenses associated with~~repatriating a significant portion of its foreign cash. With the ~~project during fiscal 2017 and 2016, respectively. These actions were taken as part~~passage of the ~~Company’s on-going facility consolidation~~Tax Cuts and ~~rationalization initiative. The Company substantially completed the demolition of the structure~~Jobs Act (the “Tax Act”) in the ~~fourth~~second fiscal quarter of ~~2016, and completed other environmental aspects~~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 project during fiscal 2017. The sale of the property is anticipated to follow in a subsequent period, and any future expenses related to the project are anticipated to not be material. See Note 16 to the condensed consolidated financial statements for additional information on assets held for sale.

~~Note 16 — Assets Held for Sale~~

~~The Company periodically reviews long-lived assets against its plans to retain or ultimately dispose of these assets. If~~Tax Act, the Company ~~decides to dispose of an asset~~repatriated $10,499,000 in U.K. foreign earnings in fiscal 2018 and ~~commits to a plan to actively market and sell the asset, it will be moved to assets held for sale. The Company analyzes market conditions each reporting period, and, if applicable, records~~$17,230,000 in fiscal 2019. No additional ~~impairments due to declines~~amounts were repatriated in market values of like assets. The fair value of the asset is determined by observable inputs such as appraisals and prices of comparable assets in active markets for assets like the Company's. Gains are not recognized until the assets are sold.

~~Assets held for sale as of November 30, 2017 and August 31, 2017 were:~~

November 30, 2017

August 31, 2017

Randolph, MA - Property (1)
$
14

$
14

Total
$
14

$
14

~~(1)~~

~~See Note 15 to the condensed consolidated financial statements for additional information on Randolph, MA location assets held for sale as of November 30, 2017 and August 31, 2017.~~

~~Note 17 — Related Party Agreements~~

~~Reimbursements Related to Life Insurance Policies~~

~~During the fourth quarter of~~ fiscal ~~2016~~year 2020, 2021 and the first ~~quarter~~half of fiscal ~~2017,~~2022. Please see Note 14 — “Income Taxes” to the ~~Edward L. Chase Trust (the “Trust”), owners~~Condensed Consolidated Financial Statements for further discussion of ~~two insurance policies~~the effects of the Tax Act.

Cash flow provided by operations was $8,757,000 in the first six months of fiscal year 2022 compared to $26,386,000 in the same period of the comparable year. Cash provided by operations during the current period was primarily related to operating income. Negatively impacting the cash flow from operations in the current period was our continued strategic inventory build, undertaken to help ensure our ability to satisfy our customers’ demands and to address our elevated backlog caused in part by macroeconomic supply chain challenges.

The ratio of current assets to current liabilities was 8.3 as of February 28, 2022 compared to 6.5 as of August 31, 2021, primarily due to decreases in accounts payable and accrued payroll and other compensation balances.

Cash flow used in investing activities of $1,974,000 was largely due to the cash spent on capital purchases of machinery and equipment in the ~~life~~first six months of ~~Claire E. Chase, reimbursed the Company for premiums~~fiscal 2022.

Cash flows used in financing activities of $9,460,000 was due to a cash dividend of $1.00 per share. The dividend was paid on ~~the policies in exchange for the Company’s release~~December 9, 2021 to shareholders of ~~any claims~~record on ~~the policies. In August 2016~~November 30, 2021.

On July 27, 2021 (the fourth quarter of fiscal ~~2016)~~2021), the Company ~~received $1,238 related to~~entered into the John Hancock (formerly Manufacturers’ Life Insurance Company) policy, the full value of premiums paid to date by the Company. In September 2016 (the first quarter of fiscal 2017), the Company received $1,504 related to the Metropolitan Life Insurance policy, its then cash surrender value, plus an additional prepaid premium related to the policy. Claire E. Chase is the spouse of a former executive of the Company, Edward L. Chase (deceased), and who in each case are the parents of Peter R. Chase (the Executive Chairman of the Company) and Mary Claire Chase (Director) and the grandparents of Adam P. Chase (the President and CEO of the Company). The Trust is the beneficial owner of more than 5% of the Company’s common stock. Terms and conditions of these transactions were reviewed and approved by the independent members of the Company's Board of Directors in advance.

~~Sale of Former Corporate Headquarters in Bridgewater, MA~~

In October 2016, Chase entered an agreement to sell its former corporate headquarters and executive offices in Bridgewater, MA. In December 2016, the sale was finalized for gross proceeds of $740, resulting in a gain on sale of $68, which was recognized in the second quarter of fiscal 2017. The buyer, Bridgewater State University Foundation, Inc., was deemed a related party because of previously existing professional connections between it and two members of

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the Company’s Board of Directors, including Peter R. Chase (the Executive Chairman of the Company) and Dana Mohler-Faria (Director). The terms and conditions of the proposed transaction were reviewed and approved by all members of the Company's Board of Directors who were not parties related to the potential buyer, prior to entering the October 2016 agreement. They concluded that the sale price was appropriate, after considering a recent market appraisal of the land and building performed by an independent third-party valuation firm.

~~Note 18 — Long-Term Debt~~

~~On December 15, 2016, the Company entered an~~Second Amended and Restated Credit Agreement (the “New Credit Agreement”) ~~with~~by and among the Company and NEPTCO Incorporated (“NEPTCO”), each of the borrowers, the subsidiary guarantors party thereto, the financial institutions party thereto as Lenders, and Bank of America, ~~acting~~N.A., as administrative agent, ~~and~~ with participation from ~~Citizens~~Wells Fargo Bank, N.A., PNC Bank, N.A. and JPMorgan Chase Bank, ~~(collectively with Bank of America, the “Lenders”).~~N.A. The New Credit Agreement ~~is initially an all-revolving~~was entered into to amend, restate and extend the Company’s preexisting credit facility, which had a maturity date of December 15, 2021, and to provide for additional liquidity to finance acquisitions, working capital and capital expenditures, and for other general corporate purposes. Under the New Credit Agreement, Chase obtained an increased revolving credit loan (the “New Revolving Facility”), with a borrowing ~~capacity of $150,000, which can be increased~~capabilities not to exceed $200,000,000 at any time, with the ability to request an increase in this amount by an additional ~~$50,000~~$100,000,000 at ~~the request of the Company and~~ the individual or collective option of any of the Lenders. The New Credit Agreement contains customary affirmative and negative covenants that, among other things, restrict our ability to incur additional indebtedness and require certain lender approval for acquisitions by the Company and its subsidiaries over a certain size. It also requires us to maintain certain financial ratios on a consolidated basis, including a consolidated net leverage ratio (as defined in the facility) of no more than 3.25 to 1.00, and a consolidated fixed charge coverage ratio (as defined in the facility) of at least 1.25 to 1.00. We were in compliance with our debt covenants as of November 30, 2017. The New Credit Agreement is guaranteed by all of Chase’s direct and indirect domestic subsidiaries, including NEPTCO, which had a carrying value of $162,794 at November 30, 2017. The New Credit Agreement was entered both to refinance our previously existing term loan and revolving line of credit, and to provide for additional liquidity to finance potential acquisitions, working capital, capital expenditures, and for other general corporate purposes.

~~The~~ applicable interest rate for the ~~revolver portion of the~~ New ~~Credit Agreement (the “New~~ Revolving ~~Facility”)~~Facility and ~~any~~ New Term Loan (defined below) is based on the effective London Interbank Offered Rate (LIBOR) plus ~~an additional amount in the~~a range of 1.00% to 1.75%, depending on the consolidated net leverage ratio of Chase and its subsidiaries. At ~~November 30, 2017,~~February 28, 2022, there was no outstanding principal balance, and as such, no applicable interest rate. The New Credit Agreement has a five-year term with interest payments due at the end of the applicable LIBOR period (but in no event less frequently than the three-month anniversary of the commencement of such LIBOR period) and principal payment due at the expiration of the agreement, ~~December 15, 2021.~~July 27, 2026. The New Credit Agreement contains provisions that may replace LIBOR as the benchmark index under certain circumstances. In addition, the Company may elect a base rate option for all or a portion of the New Revolving Facility, in which case interest payments shall be due with respect to such portion of the New Revolving Facility on the last business day of each quarter.

Subject to certain conditions set forth in the New Credit Agreement, the Company may elect to convert all or a portion of the outstanding New Revolving Facility into a new term loan twice during the term of the New Revolving Facility (each, a “New Term Loan”, and collectively with the New Revolving Facility, the “New Credit Facility”), which New Term Loan shall be payable

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quarterly in equal installments sufficient to amortize the original principal amount of such ~~New~~ Term Loan on a ~~seven~~ten year amortization ~~schedule; provided, however,~~schedule. The outstanding balance on the New Credit Facility is guaranteed by all of Chase’s direct and indirect domestic subsidiaries. The New Credit Facility is subject to restrictive covenants under the New Credit Agreement, and financial covenants that require Chase and its subsidiaries to maintain certain financial ratios on a consolidated basis, including a consolidated net leverage ratio of 3.25 to 1.00 and a consolidated interest coverage ratio of 3.50 to 1.00 (both defined in the ~~final principal repayment installment shall be repaid on December 15, 2021 and~~New Credit Agreement). Chase Corporation was in ~~any event shall be in an amount equal~~compliance with the debt covenants as of February 28, 2022. The New Credit Agreement also places certain Lender-approval requirements as to the ~~aggregate principal amount~~size of ~~all Term Loans outstanding on such date.~~permitted acquisitions which may be entered into by the Company and its subsidiaries, and allows for a temporary step-up in the allowed consolidated leverage ratio for the four fiscal quarters ending after certain designated acquisitions. Prepayment is allowed by the New Credit Agreement at any time during the term of the agreement, subject to customary notice ~~requirements.~~

In connection with entry into the New Credit Agreement, Chase applied proceeds to refinance in full the outstanding principal balance of its preexisting term debt, simultaneously terminating both our previously existing term loan agreementrequirements and the ~~previously existing revolving line~~payment of ~~credit, which was fully available as of December 15, 2016.~~customary LIBOR breakage fees.

In December 2017, the Company utilized $65,000 of the New Credit Agreement to finance a portion of the acquisition cost of Stewart Superabsorbents, LLC. See Note 19 to the condensed consolidated financial statements for additional information on this acquisition completed during the second fiscal quarter.

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~~Note 19 — Subsequent Events~~

~~Acquisition of Zappa Stewart~~

On December 29, 2017, Chase entered an agreement to acquire Stewart Superabsorbents, LLC (“SSA, LLC”), an advanced superabsorbent polymer (SAP) formulator and solutions provider, with operations located in Hickory and McLeansville, NC. The transaction closed on December 31, 2017. In the most recently completed fiscal year, SSA, LLC, and its recently acquired ZappaTec business (collectively “Zappa Stewart”), had combined revenue in excess of $24,000. Chase expects this acquisition to be immediately accretive to its earnings. The business was acquired for a purchase price of $71,382, net of cash acquired, pending any working capital adjustments and excluding acquisition-related costs. Chase acquired all equity of the business, and entered multiyear leases at both locations. The purchase was funded from a combination of Chase’s existing revolving credit facility and available cash on hand. Zappa Stewart’s protective materials technology is complementary to Chase’s current specialty chemical offerings. This acquisition is in line with our core strategies and extends our reach into growing medical and consumer applications.

~~Tax Cuts and Jobs Act of 2017~~

On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act (H.R. 1) (the "Act"). The Act includes a number of changes in existing U.S. tax law impacting the Company's income taxes including, among other things, permanent reduction in the U.S. corporate income tax rate from 35% to 21%, repeal of Section 199 domestic manufacturing deduction, and deemed repatriation on U.S. shareholders’ pro rata share of certain non-U.S. subsidiaries’ earnings not previously taxed by the United States of America.

The Company is currently reviewing the components of the Act and evaluating its impact, which could be material on the Company’s fiscal year 2018 consolidated financial statements and related disclosures, including a one-time, non-cash expense related to a decrease in the value of the Company’s net deferred tax assets. At this time, the Company’s revaluation of its deferred tax assets has not been estimated, and the Company is unable to make a final determination of the effect on quarterly and annual earnings for the period ending August 31, 2018. The Company does not assert permanent reinvestment of its undistributed non-U.S. subsidiaries' earnings and has previously recognized a deferred tax liability for the estimated future tax effects attributable to temporary differences due to these undistributed earnings.

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~~Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

The following discussion provides an analysis of the Company’s financial condition and results of operations and should be read in conjunction with the Condensed Consolidated Financial Statements and notes thereto included in Item 1 of Part I of this Quarterly Report on Form 10-Q and with the Company’s Annual Report on Form 10-K filed for the fiscal year ended August 31, 2017.

~~Overview~~

In the three-month period ended November 30, 2017, the Company had favorable comparative results to the prior year in revenue, however a less favorable sales mix and certain other unfavorable items (explained below) resulted in lower operating income and net income. Our Industrial Materials segment obtained higher sales volume for the quarter, while our Construction Materials segment’s sales decreased from the comparable period. The current quarter saw reduced margins and earnings, driven by sales mix and increasing raw material prices and a comparatively higher income tax rate. Additionally, we experienced a swing in the effects of foreign currency transactions, moving from a gain in the prior year, to a loss in the first quarter of fiscal 2018.

First quarter revenue from our Industrial Materials segment surpassed the prior year with high demand for our electronic and industrial coatings, pulling and detection, structural composites, specialty products and specialty chemical intermediates product lines. Offsetting these increases in revenue were quarter-over-quarter reductions in sales volume from our fiber optic cable components and cable materials product lines. Our fiber optic cable components product line, which was divested in the third quarter of the prior year, did not record any revenue in the current year.

Revenue for our Construction Materials segment decreased for the first quarter as compared to the same period in the prior year. Our pipeline coatings products experienced the largest net sales volume decrease. Middle East water infrastructure projects continued, but at significantly reduced comparative levels, resulting in reduced demand for our Rye, U.K. facility-produced pipeline coatings products. Our domestically-produced pipeline coatings products, which sell into North American oil and gas markets, and are primarily for repairs and maintenance, fared better, seeing a quarter-over-quarter increase from the prior year. Our building envelope and coating and lining systems product lines both saw quarter-over-quarter decreases in sales volume. Partially offsetting these losses, bridge and highway products finished ahead of the prior year for the first quarter.

During the remainder of the fiscal year, the Company plans to successfully address both foreseen and unforeseen challenges through disciplined operational and financial management. The upcoming second fiscal quarter has historically generated lower quarterly revenue for many of our product lines, especially within the Construction Materials segment due to the effects of winter weather across much of North America. We plan to integrate the operations of Zappa Stewart, which was acquired in the second fiscal quarter of 2018, onto our worldwide ERP computer system. Through employing both market and product development efforts and pursuing opportunities realizable through mergers, acquisitions and divestitures, we will continue the strategic management of our portfolio of product offerings.

Our balance sheet remains strong, with cash on hand of $54,262,000 and a current ratio of 4.2 at November 30, 2017. At the end of our first fiscal quarter, there was no outstanding principal balance under our credit facility. Subsequent to the first quarter, the Company utilized $65,000,000 of the credit facility to finance a portion of the acquisition of Zappa Stewart.

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~~We have two reportable segments as summarized below:~~


~~Segment~~	~~Product Lines~~	~~Manufacturing Focus and Products~~
~~Industrial Materials~~	~~Cable Materials~~ ~~Electronic and Industrial Coatings~~ ~~Specialty Products~~ ~~Pulling and Detection~~ ~~Electronic Materials~~ ~~Structural Composites~~ ~~Fiber Optic Cable Components (1)~~ ~~Specialty Chemical Intermediates~~	Protective coatings and tape products, including insulating and conducting materials for wire and cable manufacturers; moisture protective coatings and customized sealant and adhesive systems for electronics; laminated durable papers, packaging and industrial laminate products and custom manufacturing services; pulling and detection tapes used in the installation, measurement and location of fiber optic cables and water and natural gas lines; cover tapes essential to delivering semiconductor components via tape and reel packaging; composite materials elements; glass-based strength elements designed to allow fiber optic cables to withstand mechanical and environmental strain and stress; polyurethane dispersions and polymeric microspheres.
~~Construction Materials~~	~~Coating and Lining Systems~~ ~~Pipeline Coatings~~ ~~Building Envelope~~ ~~Bridge and Highway~~	Protective coatings and tape products, including coating and lining systems for use in liquid storage and containment applications; protective coatings for pipeline and general construction applications; adhesives and sealants used in architectural and building envelope waterproofing applications; high-performance polymeric asphalt additives and expansion and control joint systems for use in the transportation and architectural markets.

~~(1)~~

~~Results of product line included for period prior to its April 3, 2017 sale by the Company.~~

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~~Results of Operations~~

~~Revenue and Operating Profit by Segment are as follows (dollars in thousands):~~

% of


% of


Three Months Ended

Total

Three Months Ended

Total


November 30, 2017

Revenue

November 30, 2016

Revenue


Revenue

Industrial Materials

$
49,985

81
%
$
49,024

80
%

Construction Materials

11,932

19
%

12,333

20
%

Total

$
61,917

$
61,357

% of

% of

Three Months Ended

Segment

Three Months Ended

Segment

November 30, 2017

Revenue

November 30, 2016

Revenue

Income before income taxes

Industrial Materials

$
15,365

31
%
$
16,415
(a)
33
%

Construction Materials

4,246

36
%

5,150

42
%

Total for reportable segments

19,611

32
%

21,565

35
%

Corporate and Common Costs

(7,012)

(6,915)
(b)

Total

$
12,599

20
%
$
14,650

24
%

~~(a)~~

~~Includes $190 of expenses related to inventory step-up in fair value attributable to the September 2016 acquisition of certain assets of Resin Designs, LLC~~

~~(b)~~

Includes $584 in acquisition-related expenses attributable to the September 2016 acquisition of certain assets of Resin Designs, LLC, facility exit and demolition costs of $27 related to the Company’s Randolph, MA location, and a $792 gain related to the November 2016 sale of the Company’s Paterson, NJ location

~~Total Revenue~~

~~Total revenue increased $560,000 or 1% to $61,917,000 for the quarter ended November 30, 2017, compared to $61,357,000 in the same quarter of the prior year.~~

Revenue in our Industrial Materials segment increased $961,000 or 2% in the current quarter. The increase in this segment as compared to the prior year period was primarily due to: (a) our electronic and industrial coatings product line, which included three full months of the acquired Resin Designs operations, and had a total increase of $2,458,000, reflecting increased sales volume from the automotive and appliance manufacturing industries, along with an increased royalty revenue received from our licensed manufacturer in Asia; (b) sales volume increase of $1,294,000 from our pulling and detection products, on increased demand from customers in the utility and telecommunication industries following a severe hurricane season which affected Texas and the U.S. southeast; (c) increased sales into the wind energy market of $791,000 from our structural composite products; (d) revenue increase of $604,000 for our specialty products, which, subsequent to the sale of our fiber optic cable components business on April 3, 2017, includes revenue from the manufacturing services provided by the Company to the purchaser of thefiber optic cable components product line; and (e) our specialty chemicals intermediates product line, which had a sales volume increase of $20,000. These net increases were partially offset in the current quarter by: (a) a $2,291,000 reduction in sales volume for our cable materials products, with the largest decreases in communication cable components as the industry experiences consolidation and product design changes; and (b) a sales volume decrease of $1,915,000 from the prior year in our fiber optic cable components product line, which was divested in fiscal 2017, and had no revenue recorded in the current year. Our electronic materials products sales stayed constant with the prior year.

Compared to the prior year first quarter, revenue from our Construction Materials segment decreased $401,000 or 3%. The largest decrease in our Construction Materials segment compared to the prior year period was due to a net decrease in sales of our pipeline coatings products of $645,000. While project work in the Middle East has continued, delays and sluggishness in the region have continued to reduce demand for water and wastewater pipeline coatings products produced at our Rye, U.K. facility. Conversely, sales for our domestically produced pipeline products increased compared to the first quarter of the prior year, but not enough to offset the international decline.~~Further decreases in this segment as compared to the prior year period were primarily due to the following for the current quarter: (a) our building~~

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envelope product line had sales volume decrease by $565,000, as it experienced commercial roofing project delays and consolidation within the industry; and (b) sales volume from our coating and lining systems decreased $86,000. Positively impacting the change in segment revenue for the quarter were sales of our bridge and highway products, which increased by $895,000 and are being utilized in multiple projects domestically, especially in the New York metropolitan area, as well as expanding internationally.

~~Cost of Products and Services Sold~~

~~Cost of products and services sold increased $1,606,000 or 5% to $36,895,000 for the quarter ended November 30, 2017, compared to $35,289,000 in the prior year quarter.~~

~~The following table summarizes our cost of products and services sold as a percentage of revenue for each of our reporting segments:~~

Three Months Ended November 30,

Cost of products and services sold


2017

2016


Industrial Materials

61
%
58
%

Construction Materials

54
%
55
%

Total

60
%
58
%

Cost of products and services sold in our Industrial Materials segment was $30,465,000 in the current quarter compared to $28,492,000 in the comparable period in the prior year. Cost of products and services sold in our Construction Materials segment was $6,430,000 for the quarter ended November 30, 2017, compared to $6,797,000 in the same period of the prior year. As a percentage of revenue, cost of products and services sold increased for our Industrial Materials segment and decreased for our Construction Materials segment. The increase for our Industrial Materials segment was primarily due to product mix, as our lower margin products within our product lines constituted a comparatively higher portion of total sales, as well as raw material costs on increasing commodity prices. For the Construction Materials segment in the first quarter of 2018, the decrease was primarily due to product mix, as our lower margin products constituted a comparatively lower portion of total sales. Chase’s products are manufactured largely with commodity items (including petroleum-based solvents, films, yarns, and nonwovens, aluminum and copper foils, specialty papers, and various resins, adhesives and inks). Price changes in these commodities can both directly and indirectly affect the purchase price of our raw materials and market demand for our product offerings. The Company diligently monitors raw material and commodities pricing across all its product lines in effort to preserve margins.

~~Selling, General and Administrative Expenses~~

Selling, general and administrative expenses increased $307,000 or 3% to $12,059,000 for the quarter ended November 30, 2017 compared to $11,752,000 in the prior year quarter. As a percentage of revenue, selling, general and administrative expenses stayed consistent at 19% in both periods. The nominal increase for the current fiscal quarter compared to the prior year period, was largely attributable to: (a) increased selling and sales commission expense of $209,000 because of Resin Designs operating for an additional month in the current year and targeted spending increases in certain other product lines; and (b) increased amortization expense of $138,000 primarily related to intangible assets acquired in our September 30, 2016 acquisition of certain assets of Resin Designs.

~~Exit Costs Related to Idle Facility~~

In the three-month period ended November 30, 2016, the Company recognized $27,000 in expenses to raze and exit its Randolph, MA facility, which had been idle regarding production for several years; no expense was recognized in the quarter ended November 30, 2017. The Company began marketing the site for sale and reclassified the net book value of the facility to assets held for sale in the second quarter of fiscal 2016, and recognized a total of $70,000 and $935,000 in expenses associated with the project during fiscal 2017 and 2016, respectively. The decision to raze the site and market the property comes as part of the Company’s facility consolidation and rationalization initiative, and was done in part to make the property more attractive to a potential buyer. Production previously housed in Randolph, MA had been relocated to the Company’s Oxford, MA and Blawnox, PA locations prior to the commencement of demolition work.

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The Company has ~~updated its initial estimate and currently anticipates any future expenses associated with completing the project will not be material, with the sale of the property to follow.~~

~~Acquisition-Related Costs~~

In the first quarter of fiscal 2017, the Company incurred $584,000 of costs related to our acquisition of certain assets of Resin Designs, LLC. This acquisition was accounted for as a business combination in accordance with applicable accounting standards, and all related professional service fees (including banking, legal, accounting and actuarial fees) were expensed as incurred within the first fiscal quarter of 2017.

~~Interest Expense~~

Interest expense decreased $201,000 or 82% to $45,000 for the quarter ended November 30, 2017 compared to $246,000 in the prior year first quarter. The decrease in interest expense from the prior period is a result of a reduction in our overall average debt balance through principal payments prior to the Company’s refinancing in December 2016, and following the refinancing, elective payments made with cash generated from operations. Interest expense in the first fiscal quarter of 2018 related primarily to commitment fees.

~~Gain on Sale of Real Estate~~

In November 2016, the Company finalized the sale of its Paterson, NJ property for proceeds of $1,382,000. This transaction resulted in a gain of $792,000 which was recorded in the Company’s condensed consolidated statement of operations as a gain on sale of real estate during the first fiscal quarter of 2017. The Company had previously reclassified the related long-lived assets to assets held for sale after committing to a plan in February 2016 to actively market the property.

~~Other Income (Expense)~~

Other income (expense) was an expense of $319,000 in the quarter ended November 30, 2017 compared to an income of $399,000 in the same period in the prior year, a difference of $718,000. Other income (expense) primarily includes interest income, rental income, 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 and other non-trade/non-royalty- and non-commission receipts. Other income (expense) in the current quarter was largely net foreign exchange losses resulting from sales made from our U.K.-based operations and denominated in U.S. dollars.

~~Income Taxes~~

Our effective tax rates were 34.0% for the first quarter of fiscal 2018 and 29.3% for the prior year’s first quarter. Both the current year and prior year effective tax rates were calculated following the Company’s adoption of ASU No. 2016-09, “Compensation – Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting”, during the first quarter of fiscal 2017. During the quarter ended November 30, 2016, the Company recognized an excess tax benefit from stock-based compensation of $794,000, within income tax expense on the condensed consolidated statements of operations (adopted prospectively); but given the nature of equity activity in the current quarter, no benefit was recognized in the quarter ended November 30, 2017. The Company anticipates the potential for increased periodic volatility in future effective tax rates based on the continued application of ASU No. 2016-09.

The passage of the Tax Cuts and Jobs Act of 2017 during our second fiscal quarter is expected to affect the Company’s future results and financial position in multiple ways. For fiscal 2018, the Company anticipates incorporating a blended U.S. effective tax rate, which will likely cause our overall effective tax rate to be lower than the 34.0% recognized in the first quarter. The new corporate tax rate in the Internal Revenue Code (the “Code”) will also require us to revalue our U.S. net deferred tax asset positions also at a presumably lower rate, which will result in a charge taken to earnings in the period in which this impact occurs. We will continue to evaluate and quantify further the effects that the revised Code will have on our operations, including the phasing out of the domestic production deduction and the new rules and rates related to the repatriation of foreign cash.

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~~Net Income~~

Net income decreased $2,048,000 or 20% to $8,315,000 in the quarter ended November 30, 2017 compared to $10,363,000 in the prior year first quarter. The decrease in net income in the first fiscal quarter was primarily due to decreased gross margins, the foreign transaction losses and no recognition of excess tax benefit from stock-based compensation.

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~~Other Important Performance Measures~~

We believe that EBITDA, Adjusted EBITDA and Free Cash Flow are useful performance measures. They are used by our executive management team to measure operating performance, to allocate resources, to evaluate the effectiveness of our business strategies and to communicate with our Board of Directors and investors concerning our financial performance. The Company believes EBITDA, Adjusted EBITDA and Free Cash Flow are commonly used by financial analysts and others in the industries in which the Company operates and thus provide useful information to investors. EBITDA, Adjusted EBITDA and Free Cash Flow are non-GAAP financial measures.

We define EBITDA as net income before interest expense from borrowings, income tax expense, depreciation expense from fixed assets, and amortization expense from intangible assets. We define Adjusted EBITDA as EBITDA excluding costs and (gains) losses related to our acquisitions and divestitures, costs of products sold related to inventory step-up to fair value, settlement (gains) losses resulting from lump sum distributions to participants from our defined benefit plans, and other significant items. We define Free Cash Flow as net cash provided by operating activities less purchases of property, plant and equipment.

The use of EBITDA, Adjusted EBITDA and Free Cash Flow has limitations and these performance measures should not be considered in isolation from, or as an alternative to, U.S. GAAP measures such as net income and net cash provided by operating activities. None of these measures should be interpreted as representing the residual cash flow of the Company available for discretionary expenditures or to invest in the growth of our business, since we have certain non-discretionary expenditures that are not deducted from these measures, including scheduled principal and (in the case of Free Cash Flow) interest payments on outstanding debt. Our measurement of EBITDA, Adjusted EBITDA and Free Cash Flow may not be comparable to similarly-titled measures used by other companies.

The following table provides a reconciliation of net income, the most directly comparable financial measure presented in accordance with U.S. GAAP, to EBITDA and Adjusted EBITDA for the periods presented (dollars in thousands):

Three Months Ended November 30,



2017

2016


Net income

$
8,315

$
10,363

Interest expense

45

246

Income taxes

4,284

4,287

Depreciation expense

1,254

1,335

Amortization expense

2,314

2,176

EBITDA

$
16,212

$
18,407

Exit costs related to idle facility (a)

—

27

Gain on sale of real estate (b)

—

(792)

Cost of sale of inventory step-up (c)

—

190

Acquisition-related costs (d)

—

584

Adjusted EBITDA

$
16,212

$
18,416

~~(a)~~

~~Represents Randolph, MA facility exit and demolition costs incurred~~

~~(b)~~

~~Represents gain on November 2016 sale of the Company’s Paterson, NJ location~~

~~(c)~~

~~Represents expenses related to inventory step-up in fair value related to the September 2016 acquisition of certain assets of Resin Designs, LLC~~

~~(d)~~

~~Represents costs related to the September 2016 acquisition of certain assets of Resin Designs, LLC~~

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The following table provides a reconciliation of net cash provided by operating activities, the most directly comparable financial measure presented in accordance with U.S. GAAP, to Free Cash Flow for the periods presented (dollars in thousands):

Three Months Ended November 30,



2017

2016


Net cash provided by operating activities

$
6,554

$
8,337

Purchases of property, plant and equipment

(851)

(652)

Free Cash Flow

$
5,703

$
7,685

~~Liquidity and Sources of Capital~~

Our overall cash and cash equivalents balance increased $6,908,000 to $54,262,000 at November 30, 2017, from $47,354,000 at August 31, 2017. The increased cash balance is primarily attributable to the $6,554,000 in cash from operations, partially offset by cash paid for the purchases of machinery and equipment. Of the above-noted amounts, $34,220,000 and $31,756,000 were held outside the United States by Chase Corporation and our foreign subsidiaries as of November 30, 2017 and August 31, 2017 respectively. Given our cash position and borrowing capability in the United States and the potential for increased investment and acquisitions in foreign jurisdictions, we do not have a history of repatriating a significant portion of our foreign cash. However, we do not currently take the position that undistributed foreign subsidiaries’ earnings are considered permanently reinvested. Accordingly, we recognize a deferred tax liability for the estimated future tax effects attributable to temporary differences due to these unremitted earnings. Should circumstances change in the future and we decide to repatriate these foreign amounts to fund U.S. operations, we would pay the applicable U.S. taxes on these repatriated foreign amounts, less any tax credit offsets, to satisfy all previously recorded tax liabilities.

Cash flow provided by operations was $6,554,000 in the first three months of fiscal year 2018 compared to $8,337,000 in the same period in the prior year. Cash provided by operations during the current period was primarily related to operating income and a decrease in accounts receivable that was driven primarily by lower sales in the first quarter of fiscal 2018 as compared to the fourth quarter of fiscal 2017. Negatively impacting our cash flow from operations were both a reversal from accrued to prepaid income taxes based on timing of payments, and a decrease in accrued compensation and other expenses related primarily to the payment of the annual employee incentive plan in November 2017.

The ratio of current assets to current liabilities was consistent at 4.2 at both November 30, 2017 and August 31, 2017. The ratio stayed consistent based primarily on the offsetting effects of (a) cash and cash equivalents and dividends payable increasing, (b) accounts receivable and accrued payroll and other compensation decreasing, and (c) accrued taxes payable reversing to a prepaid position.

~~Cash flow used in investing activities of $898,000 was primarily due to our purchases of machinery and equipment at our manufacturing locations during fiscal 2018.~~

~~Cash flow provided by financing activities of $143,000 was due to proceeds from exercise of common stock options.~~

On October 30, 2017, we announced a cash dividend of $0.80 per share (totaling $7,497,000). The dividend was paid on December 6, 2017 (subsequent to the first quarter of 2018) to shareholders of record on November 9, 2017.

In June 2012, in connection with our acquisition of NEPTCO, we borrowed $70,000,000 under a five-year term debt financing arrangement led and arranged by Bank of America, with participation from RBS Citizens (the “2012 CreditFacility”). The applicable interest rate was based on the effective LIBOR plus an additional amount in the range of 1.75% to 2.25%, depending on our consolidated leverage ratio. The 2012 Credit Facility required repayment of the principal amount of the term loan in quarterly installments. Installment payments of $1,400,000 began in September 2012 and continued through June 2014, increased to $1,750,000 per quarter thereafter through June 2015, and increased

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to $2,100,000 per quarter thereafter, and were scheduled to continue at this amount through March 2017. The 2012 Credit Facility had a scheduled maturity date of June 27, 2017, prior to the refinancing described below.

Under the 2012 Credit Facility, Chase also had a revolving line of credit with Bank of America (the “2012 Revolver”) totaling $15,000,000, which bore interest at LIBOR plus an additional amount in the range of 1.75% to 2.25%, depending on our consolidated leverage ratio, or, at our option, at the bank’s base lending rate. As of December 15, 2016 (the date on which the New Credit Agreement described below was entered into), the entire amount of $15,000,000 was available for use. The 2012 Revolver had a scheduled maturity date of June 27, 2017, prior to its refinancing.

The 2012 Credit Facility with Bank of America contained customary affirmative and negative covenants that, among other things, restricted our ability to incur additional indebtedness. It also required us to maintain a ratio of consolidated indebtedness to consolidated EBITDA (each as defined in the facility) of no more than 3.00 to 1.00, and to maintain a consolidated fixed charge coverage ratio (as calculated in the facility) of at least 1.25 to 1.00. We were in compliance with our debt covenants of the 2012 Credit Facility as of November 30, 2016 (the last measurement date for the 2012 Credit Facility).

On December 15, 2016, we entered an Amended and Restated Credit Agreement (the “New Credit Agreement”) with Bank of America, acting as administrative agent, and with participation from Citizens Bank and JPMorgan Chase Bank (collectively with Bank of America, the “Lenders”). The New Credit Agreement is initially an all-revolving credit facility with a borrowing capacity of $150,000,000, which can be increased by an additional $50,000,000 at the request of the Company and the individual or collective option of any of the Lenders. The New Credit Agreement contains customary affirmative and negative covenants that, among other things, restrict our ability to incur additional indebtedness and require certain lender approval for acquisitions by us and our subsidiaries over a certain size. It also requires us to maintain certain financial ratios on a consolidated basis, including a consolidated net leverage ratio (as defined in the facility) of no more than 3.25 to 1.00, and a consolidated fixed charge coverage ratio (as defined in the facility) of at least 1.25 to 1.00. We were in compliance with our debt covenants as of November 30, 2017. The applicable interest rate for the New Credit Agreement is based on the effective LIBOR plus an additional amount in the range of 1.00% to 1.75%, depending on our consolidated net leverage ratioor, at our option, at the bank’s base lending rate. At November 30, 2017, there was no outstanding principal balance, and as such no applicable interest rate. The New Credit Agreement was used to refinance our previously existing term loan and revolving line of credit. It also provides for additional liquidity to finance potential acquisitions, working capital, capital expenditures, and other general corporate purposes.

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

We may acquire companies or other assets in future periods which are complementary to our business. ~~We believe~~The acquisition of ABchimie included a potential earnout based on performance of up to an additional €7,000,000 (approximately $8,330,000 at the time of the transaction), which the Company expects to pay with cash on hand if the applicable conditions are met. The acquisition of ETi includes a $1,000,000 withholding, which is payable by the Company within eighteen months of the acquisition. The Company believes that ~~our~~its existing resources, including cash on hand and the New Amended and Restated Credit Agreement, together with cash generated from operations and additional bank borrowings, will be sufficient to fund ~~our~~its cash flow requirements through at least the next twelve months. However, there can be no assurance that additional financing, if needed, will be available on favorable terms, if at all.

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

We have no ~~significant~~material off-balance sheet arrangements.

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Contractual Obligations

Please refer to Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in ~~our~~the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, ~~2017~~2021 for a complete discussion of ~~our~~its contractual obligations.

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Recent Accounting Standards

Please see Note 2— “Recent Accounting Standards” to the Condensed Consolidated Financial Statements for a discussion of the effects of recently issued and recently adopted accounting pronouncements.

Critical Accounting Policies

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States. To apply these principles, we must make estimates and judgments that affect our reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. In many instances, we reasonably could have used different accounting estimates and, in other instances, changes in the accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ significantly from our estimates. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations will be affected. We base our estimates and judgments on historical experience and other assumptions that we believe to be reasonable at the time and under the circumstances, and we evaluate these estimates and judgments on an ongoing basis. We refer to accounting estimates and judgments of this type as critical accounting policies, judgments, and estimates. Management believes there have been no material changes during the ~~three~~six months ended ~~November 30, 2017~~February 28, 2022 to the critical accounting policies reported in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended August 31, ~~2017.~~2021.

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Item 3 — Quantitative and Qualitative Disclosures about Market ~~Risk~~Risk

~~We limit~~Chase Corporation limits the amount of credit exposure to any one issuer. At ~~November 30, 2017,~~February 28, 2022, other than ~~our~~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 ~~our~~its funds were either in demand deposit accounts or investment instruments that meet high credit quality standards, such as money market funds, government securities, or commercial paper.

~~Our domestic~~Chase Corporation’s U.S. operations have limited currency exposure since substantially all transactions are denominated in U.S. dollars. However, ~~our~~the Company’s European and Asian operations are subject to currency exchange fluctuations. ~~We continue~~The Company continues to review ~~our~~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~~pound and the U.S. dollar would not have a material direct effect on the Company’s overall liquidity. As of ~~November 30, 2017,~~February 28, 2022, the Company had cash balances in the following foreign currencies (with USD ~~equivalents)~~equivalents, dollars in thousands):



Currency Code	Currency Name	USD Equivalent at November 30, 2017		Currency Name	USD Equivalent at February 28, 2022
GBP	British Pound	$	22,884,000	British Pound	$	15,887
EUR	Euro	$	3,733,000	Euro	$	6,259
CAD				Canadian Dollar	$	2,363
CNY	Chinese Yuan	$	334,000	Chinese Yuan	$	483
INR	Indian Rupee	$	124,000	Indian Rupee	$	213
CAD	Canadian Dollar	$	99,000

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

WeThe Company recognized a foreign currency translation ~~gain~~loss for the ~~three~~six months ended ~~November 30, 2017~~February 28, 2022 in the amount of ~~$1,570,000~~$2,058,000 related to ~~our~~Chase Corporation’s European and Indian operations, which is recorded in other comprehensive income (loss) within ~~our~~its Statement of Equity and Statement of Comprehensive Income. ~~We do~~The Company does not have or utilize any derivative financial instruments.

~~We pay~~The Company pays interest on ~~our~~its outstanding long-term debt at interest rates that fluctuate based upon changes in various base interest rates. ~~The carrying value~~There was no outstanding balance of ~~our~~ long-term debt ~~was $0 at November 30, 2017.~~on February 28, 2022. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Sources of Capital,” together with Note 12 — “Fair Value Measurements” and Note 1816 — “Long-Term Debt” to the Condensed Consolidated Financial Statements for additional information regarding ~~our~~the Company’s outstanding long-term debt. AnThe effect of an immediate hypothetical 10% change in variable interest rates would not have a material effect on our ~~Condensed~~ Consolidated Financial Statements.

3642

Table of Contents

Item 4 — Controls and ~~Procedures~~Procedures

Evaluation of disclosure controls and procedures

~~We maintain~~The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in ~~our~~Chase Corporation’s reports under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to ~~our~~its management, including ~~our~~its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

~~We carry~~The Company carries out a variety of ongoing procedures under the supervision and with the participation of ~~our~~its management, including ~~our~~its Chief Executive Officer and Chief Financial Officer, to evaluate the effectiveness of the design and operation of ~~our~~its disclosure controls and procedures. Based on the foregoing, ~~our~~the Company’s Chief Executive Officer and Chief Financial Officer concluded that ~~our~~its disclosure controls and procedures were effective at a reasonable assurance level as of the end of the period covered by this report.

Changes in internal control over financial reporting

~~There~~During the quarter ended February 28, 2022, the Company continued the process of refining financial reporting controls on the operations associated with Emerging Technologies, Inc. (ETi), acquired in February 2021.

Other than the foregoing, there have not been any changes in the Company’s internal control over financial reporting during the ~~first~~ quarter ~~of fiscal 2018~~ended February 28, 2022 that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

Table of Contents

Part II — OTHER ~~INFORMATION~~INFORMATION

Item 1 — Legal ~~Proceedings~~Proceedings

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

Item 1A — Risk ~~Factors~~Factors

Please refer to Item 1A in our Annual Report on Form 10-K for the fiscal year ended August 31, ~~2017~~2021 for a complete discussion of the risk factors which could materially affect our business, financial condition or future results.

~~Table of Contents~~

Item 6 — ~~Exhibits~~Exhibits


Exhibit Number		Description
Exhibit Number		~~Description~~
31.1		Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification of principal executive officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
32.2		Certification of principal financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
~~101.INS~~101		~~XBRL Instance Document~~The following materials from this Quarterly Report on Form 10-Q, formatted in Inline Extensible Business Reporting Language (iXBRL): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Statement of Stockholders’ Equity, (v) Condensed Consolidated Statements of Cash Flows, and (vi) Notes to Unaudited Condensed Consolidated Financial Statements.
~~101.SCH~~104		Cover Page Interactive Data File (formatted as Inline XBRL ~~Taxonomy Extension Schema Document~~
~~101.CAL~~		~~XBRL Taxonomy Extension Calculation Linkbase Document~~
~~101.LAB~~		~~XBRL Taxonomy Extension Label Linkbase Document~~
~~101.PRE~~		~~XBRL Taxonomy Extension Presentation Linkbase Document~~
~~101.DEF~~		~~XBRL Taxonomy Extension Definition Linkbase Document~~and contained in Exhibit 101)

*Furnished, not filed

**Identifies management plan or compensatory plan or arrangement.

3844

Table of Contents

~~SIGNATURES~~

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			Chase Corporation
	~~Chase Corporation~~


Dated: ~~January 9, 2018~~April 7, 2022	By:	/s/ Adam P. Chase
		Adam P. Chase
		President and Chief Executive Officer


Dated: ~~January 9, 2018~~April 7, 2022	By:	/s/ ~~Kenneth~~Michael J. ~~Feroldi~~Bourque
		~~Kenneth~~Michael J. ~~Feroldi~~Bourque
		Treasurer and Chief Financial Officer

3945


Massachusetts		11-1797126
(State or other jurisdiction of incorporation of organization)		(I.R.S. Employer Identification No.)


Large accelerated filer ☐◻	Accelerated filer ☒⌧
Non-accelerated filer ~~☐ (Do not check if a smaller reporting company)~~◻	Smaller reporting company ☐
Emerging growth company ☐

Ca
Cautionary Note Concerning Forward-Looking Statements		3
		3

Part I - FINANCIAL INFORMATION

Item 1 – Unaudited Condensed Consolidated Financial Statements

Condensed Consolidated Balance Sheets as of ~~November 30, 2017~~February 28, 2022 (unaudited) and August 31, ~~2017~~2021		4

Condensed Consolidated Statements of Operations for the three and six months ended ~~November 30, 2017~~February 28, 2022 and ~~2016~~2021 (unaudited)		5

Condensed Consolidated Statements of Comprehensive Income for the three and six months ended ~~November 30, 2017~~February 28, 2022 and ~~2016~~2021 (unaudited)		6

Condensed Consolidated ~~Statement~~Statements of Equity for the three and six months ended ~~November 30, 2017~~February 28, 2022 and 2021 (unaudited)		7

Condensed Consolidated Statements of Cash Flows for the ~~three~~six months ended ~~November 30, 2017~~February 28, 2022 and ~~2016~~2021 (unaudited)		8 9

Notes to Unaudited Condensed Consolidated Financial Statements		9 10

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations		26 31

Item 3 – Quantitative and Qualitative Disclosures About Market Risk		36 42

Item 4 – Controls and Procedures		37 43

Part II – OTHER INFORMATION

Item 1 – Legal Proceedings		37 44

Item 1A – Risk Factors		37 44

Item 6 – Exhibits		38 44

SIGNATURES		39 45


	November 30,		August 31,
	2017		2017
ASSETS
Current Assets
Cash and cash equivalents	$	54,262	$	47,354
Accounts receivable, less allowance for doubtful accounts of $333 and $456		34,976		38,051
Inventory		27,331		25,618
Prepaid expenses and other current assets		3,847		3,098
Due from sale of business		400		—
Assets held for sale		14		14
Prepaid income taxes		641		—
Total current assets		121,471		114,135

Property, plant and equipment, less accumulated depreciation of $45,614 and $44,277		34,430		34,760

Other Assets
Goodwill		50,911		50,784
Intangible assets, less accumulated amortization of $44,817 and $42,206		44,607		46,846
Cash surrender value of life insurance, less current portion		4,530		4,530
Restricted investments		1,057		964
Funded pension plan		549		566
Deferred income taxes		1,570		1,614
Other assets		129		539
Total assets	$	259,254	$	254,738

LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	13,114	$	14,455
Accrued payroll and other compensation		4,404		6,500
Accrued expenses		3,826		4,052
Dividend payable		7,498		—
Accrued income taxes		—		2,333
Total current liabilities		28,842		27,340

Deferred compensation		1,071		979
Accumulated pension obligation		12,368		12,666
Other liabilities		1,612		1,567
Accrued income taxes		1,257		1,257

Commitments and Contingencies (Note 10)

Equity
First Serial Preferred Stock, $1.00 par value: Authorized 100,000 shares; none issued		—		—
Common stock, $.10 par value: Authorized 20,000,000 shares; 9,374,840 shares at November 30, 2017 and 9,354,136 shares at August 31, 2017 issued and outstanding		937		935
Additional paid-in capital		14,734		14,060
Accumulated other comprehensive loss		(11,788)		(13,469)
Retained earnings		210,221		209,403
Total equity		214,104		210,929
Total liabilities and equity	$	259,254	$	254,738


	February 28,		August 31,
	2022		2021
ASSETS
Current Assets
Cash and cash equivalents	$	116,044	$	119,429
Accounts receivable, less allowances of $529 and $451		46,081		46,212
Inventory		52,996		41,217
Prepaid expenses and other current assets		4,629		2,851
Prepaid income taxes and refunds due		3,280		3,255
Total current assets		223,030		212,964

Property, plant and equipment, less accumulated depreciation of $51,796 and $50,666		24,137		24,267

Other Assets
Goodwill		97,131		97,866
Intangible assets, less accumulated amortization of $97,287 and $91,484		40,305		46,954
Cash surrender value of life insurance		4,450		4,450
Restricted investments		2,323		2,260
Deferred income taxes		4,879		5,265
Operating lease right-of-use asset		9,554		9,312
Other assets		952		821
Total assets	$	406,761	$	404,159

LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	17,331	$	19,575
Accrued payroll and other compensation		4,212		7,179
Income taxes payable		—		761
Accrued expenses		5,250		5,407
Total current liabilities		26,793		32,922

Operating lease long-term liabilities		7,493		7,202
Deferred compensation		2,329		2,267
Accumulated pension obligation		8,811		9,416
Other liabilities		2,692		2,537
Deferred income taxes		3,162		3,301
Accrued income taxes		2,207		2,190

Commitments and contingencies (Note 10)

Equity
First Serial Preferred Stock, $1.00 par value: Authorized 100,000 shares; NaN issued		—		—
Common stock, $.10 par value: Authorized 20,000,000 shares; 9,468,888 shares at February 28, 2022 and 9,447,905 shares at August 31, 2021 issued and outstanding		948		946
Additional paid-in capital		20,513		18,959
Accumulated other comprehensive loss		(13,209)		(11,210)
Retained earnings		345,022		335,629
Total equity		353,274		344,324
Total liabilities and equity	$	406,761	$	404,159


				Additional		Accumulated Other				Total
	Common Stock			Paid-In		Comprehensive		Retained		Stockholders'
	Shares	Amount		Capital		Income (Loss)		Earnings		Equity
Balance at August 31, 2017	9,354,136	$	935	$	14,060	$	(13,469)	$	209,403	$	210,929
Restricted stock grants, net of forfeitures	13,121		1		(1)						—
Amortization of restricted stock grants					421						421
Amortization of stock option grants					112						112
Exercise of stock options	10,859		1		448						449
Common stock received for payment of stock option exercises	(3,276)				(306)						(306)
Cash dividend accrued, $0.80 per share									(7,497)		(7,497)
Change in funded status of pension plan, net of tax $41							80				80
Foreign currency translation adjustment							1,570				1,570
Net unrealized gain on restricted investments, net of tax $15							31				31
Net income									8,315		8,315
Balance at November 30, 2017	9,374,840	$	937	$	14,734	$	(11,788)	$	210,221	$	214,104


				Additional		Accumulated Other				Total
	Common Stock			Paid-In		Comprehensive		Retained		Stockholders'
	Shares	Amount		Capital		Income (Loss)		Earnings		Equity
Balance at November 30, 2020	9,446,281	$	945	$	17,264	$	(12,809)	$	301,546	$	306,946
Restricted stock grants, net of forfeitures	3,314		1		(1)						—
Amortization of restricted stock grants					620						620
Amortization of stock option grants					(23)						(23)
Common stock retained to pay statutory minimum withholding taxes on common stock	(1,224)		—		(139)						(139)
Change in funded status of pension plans, net of tax $40							125				125
Foreign currency translation adjustment							1,796				1,796
Net unrealized gain (loss) on restricted investments, net of tax $15							48				48
Net income									9,171		9,171
Balance at February 28, 2021	9,448,371	$	946	$	17,721	$	(10,840)	$	310,717	$	318,544

Balance at November 30, 2021	9,459,685	$	947	$	19,733	$	(13,301)	$	335,896	$	343,275
Restricted stock grants, net of forfeitures	9,203		1		(1)						—
Amortization of restricted stock grants					552						552
Amortization of stock option grants					229						229
Change in funded status of pension plans, net of tax $37							112				112
Foreign currency translation adjustment							115				115
Net unrealized gain (loss) on restricted investments, net of tax ($46)							(135)				(135)
Net income									9,126		9,126
Balance at February 28, 2022	9,468,888	$	948	$	20,513	$	(13,209)	$	345,022	$	353,274


	Industrial Materials		Construction Materials		Consolidated
Balance at August 31, 2017	$	40,091	$	10,693	$	50,784
Foreign currency translation adjustment		119		8		127
Balance at November 30, 2017	$	40,210	$	10,701	$	50,911


	Weighted Average		Gross Carrying		Accumulated		Net Carrying
	Amortization Period		Value		Amortization		Value
November 30, 2017
Patents and agreements	14.4	years	$	1,851	$	1,673	$	178
Formulas and technology	7.8	years		9,353		5,721		3,632
Trade names	6.0	years		7,738		6,103		1,635
Customer lists and relationships	9.6	years		70,482		31,320		39,162
			$	89,424	$	44,817	$	44,607

August 31, 2017
Patents and agreements	14.4	years	$	1,845	$	1,671	$	174
Formulas and technology	7.8	years		9,318		5,387		3,931
Trade names	6.0	years		7,709		5,813		1,896
Customer lists and relationships	9.6	years		70,180		29,335		40,845
			$	89,052	$	42,206	$	46,846


Years ending August 31,
2018 (remaining 9 months)	$	6,818
2019		8,462
2020		7,594
2021		7,064
2022		6,171
2023		2,971


			Change in Funded		Foreign Currency
	Restricted		Status of		Translation
	Investments		Pension Plan		Adjustment		Total
Balance at August 31, 2016	$	54	$	(7,336)	$	(8,197)	$	(15,479)

Other comprehensive gains (losses) before reclassifications (1)		14		—		(2,098)		(2,084)
Reclassifications to net income of previously deferred (gains) losses (2)		(1)		147		—		146
Other comprehensive income (loss)		13		147		(2,098)		(1,938)

Balance at November 30, 2016	$	67	$	(7,189)	$	(10,295)	$	(17,417)


Balance at August 31, 2017	$	121	$	(6,181)	$	(7,409)	$	(13,469)
Other comprehensive gains (losses) before reclassifications (3)		31		—		1,570		1,601
Reclassifications to net income of previously deferred (gains) losses (4)		—		80		—		80
Other comprehensive income (loss)		31		80		1,570		1,681

Balance at November 30, 2017	$	152	$	(6,101)	$	(5,839)	$	(11,788)


Assets & Liabilities	Amount
Accounts receivable	$	1,877
Inventory		1,300
Prepaid expenses and other current assets		63
Property, plant & equipment		623
Goodwill		7,592
Intangible assets		19,450
Accounts payable and accrued liabilities		(635)
Total purchase price	$	30,270


Intangible Asset	Amount		Useful life
Customer relationships	$	17,500	10	years
Technology		1,200	4	years
Trade names		750	7	years
Total intangible assets	$	19,450


	Three Months Ended November 30,
	2016
Revenue	$	62,942
Net income		11,034

Net income available to common shareholders, per common and common equivalent share
Basic earnings per share	$	1.18
Diluted earnings per share	$	1.17


			% of					% of
	Three Months Ended		Total		Three Months Ended			Total
	November 30, 2017		Revenue		November 30, 2016			Revenue

Revenue
Industrial Materials	$	49,985	81	%	$	49,024		80	%
Construction Materials		11,932	19	%		12,333		20	%
Total	$	61,917			$	61,357

			% of					% of
	Three Months Ended		Segment		Three Months Ended			Segment
	November 30, 2017		Revenue		November 30, 2016			Revenue
Income before income taxes
Industrial Materials	$	15,365	31	%	$	16,415	(a)	33	%
Construction Materials		4,246	36	%		5,150		42	%
Total for reportable segments		19,611	32	%		21,565		35	%
Corporate and Common Costs		(7,012)				(6,915)	(b)
Total	$	12,599	20	%	$	14,650		24	%

November 30, 2017

August 31, 2017

Randolph, MA - Property (1)