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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended November 30, 2021

Commission File Number: 1-9852

CHASE CORPORATION

(Exact name of registrant as specified in its charter)

Massachusetts

11-1797126

(State or other jurisdiction of incorporation
of organization)

(I.R.S. Employer Identification No.)

295 University Avenue, Westwood, Massachusetts 02090

(Address of Principal Executive Offices) (Zip Code)

(781) 332-0700

(Registrant’s Telephone Number, Including Area Code)

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

 

Title of each class

Common stock, $.10 par value

Trading Symbol(s)

CCF

Name of each exchange on which registered

NYSE American

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  YES   NO 

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

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

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

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

The number of shares of Common Stock outstanding as of December 31, 2021 was 9,459,685.

CHASE CORPORATION

INDEX TO FORM 10-Q

For the Quarter Ended November 30, 2021

Ca

Cautionary Note Concerning Forward-Looking Statements

3

Part I - FINANCIAL INFORMATION

Item 1 – Unaudited Condensed Consolidated Financial Statements

Condensed Consolidated Balance Sheets as of November 30, 2021 (unaudited) and August 31, 2021

4

Condensed Consolidated Statements of Operations for the three months ended November 30, 2021 and 2020 (unaudited)

5

Condensed Consolidated Statements of Comprehensive Income for the three months ended November 30, 2021 and 2020 (unaudited)

6

Condensed Consolidated Statements of Equity for the three months ended November 30, 2021 and 2020 (unaudited)

7

Condensed Consolidated Statements of Cash Flows for the three months ended November 30, 2021 and 2020 (unaudited)

8

Notes to Unaudited Condensed Consolidated Financial Statements

9

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

30

Item 3 – Quantitative and Qualitative Disclosures About Market Risk

41

Item 4 – Controls and Procedures

42

Part II – OTHER INFORMATION

Item 1 – Legal Proceedings

43

Item 1A – Risk Factors

43

Item 6 – Exhibits

43

SIGNATURES

44

2

Cautionary Note Concerning Forward-Looking Statements

This Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements, including without limitation forward-looking statements made under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” involve risks and uncertainties. Any statements contained in this Quarterly Report that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking statements include, without limitation, statements as to future operating results; seasonality expectations; plans for the development, utilization or disposal of manufacturing facilities; future economic conditions; our expectations as to legal proceedings; the effect of our market and product development efforts; and expectations or plans relating to the implementation or realization of our strategic goals and future growth, including through potential future acquisitions. Forward-looking statements may also include, among other things, statements relating to future sales, earnings, cash flow, results of operations, use of cash and other measures of financial performance, statements relating to future dividend payments, as well as the expected impact of the coronavirus disease 2019 (COVID-19) pandemic on the Company's businesses. Forward-looking statements may be identified through the use of words such as “believes,” “anticipates,” “may,” “should,” “will,” “plans,” “projects,” “expects,” “expectations,” “estimates,” “predicts,” “targets,” “forecasts,” “strategy,” and other words of similar meaning in connection with the discussion of future operating or financial performance. These statements are based on current expectations, estimates and projections about the industries in which we operate, and the beliefs and assumptions made by management. Because forward-looking statements relate to the future, they are subject to inherent risks, uncertainties and changes in circumstances that are difficult to predict. Accordingly, the Company’s actual results may differ materially from those contemplated by the forward-looking statements. Investors, therefore, are cautioned against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. Readers should refer to the discussions under “Risk Factors” contained in our Annual Report on Form 10-K for the fiscal year ended August 31, 2021 concerning certain factors that could cause our actual results to differ materially from the results anticipated in such forward-looking statements. These Risk Factors are hereby incorporated by reference into this Quarterly Report.

3

Item 1 — Unaudited Condensed Consolidated Financial Statements

CHASE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

In thousands, except share and per share amounts

November 30, 

August 31, 

 

2021

    

2021

 

ASSETS

Current Assets

Cash and cash equivalents

$

124,234

$

119,429

Accounts receivable, less allowances of $410 and $451

43,726

46,212

Inventory

47,075

41,217

Prepaid expenses and other current assets

3,808

2,851

Prepaid income taxes and refunds due

2,450

3,255

Total current assets

221,293

212,964

Property, plant and equipment, less accumulated depreciation of $51,227 and $50,666

23,752

24,267

Other Assets

Goodwill

97,124

97,866

Intangible assets, less accumulated amortization of $94,179 and $91,484

43,359

46,954

Cash surrender value of life insurance

4,450

4,450

Restricted investments

2,348

2,260

Deferred income taxes

5,110

5,265

Operating lease right-of-use asset (Note 8)

9,949

9,312

Other assets

1,145

821

Total assets

$

408,530

$

404,159

LIABILITIES AND EQUITY

Current Liabilities

Accounts payable

$

17,427

$

19,575

Accrued payroll and other compensation

5,263

7,179

Income taxes payable

348

761

Accrued expenses

5,121

5,407

Dividend payable

9,460

Total current liabilities

37,619

32,922

Operating lease long-term liabilities (Note 8)

7,841

7,202

Deferred compensation

2,355

2,267

Accumulated pension obligation

9,114

9,416

Other liabilities

2,888

2,537

Deferred income taxes

3,325

3,301

Accrued income taxes

2,113

2,190

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; 9,459,685 shares at November 30, 2021 and 9,447,905 shares at August 31, 2021 issued and outstanding

947

946

Additional paid-in capital

19,733

18,959

Accumulated other comprehensive loss

(13,301)

(11,210)

Retained earnings

335,896

335,629

Total equity

343,275

344,324

Total liabilities and equity

$

408,530

$

404,159

See accompanying notes to the unaudited condensed consolidated financial statements

4

CHASE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

In thousands, except share and per share amounts

Three Months Ended November 30, 

    

2021

    

2020

 

Revenue

Sales

$

74,192

$

66,136

Royalties and commissions

818

1,040

75,010

67,176

Costs and Expenses

Cost of products and services sold

47,281

39,605

Selling, general and administrative expenses

13,375

12,260

Research and product development costs

993

1,051

Operations optimization costs (Note 15)

59

Loss on contingent consideration (Note 17)

475

Operating income

12,827

14,260

Interest expense

(87)

(69)

Other income (expense)

377

(214)

Income before income taxes

13,117

13,977

Income taxes (Note 14)

3,390

3,140

Net income

$

9,727

$

10,837

Net income available to common shareholders, per common and common equivalent share (Note 4)

Basic

$

1.03

$

1.15

Diluted

$

1.02

$

1.14

Weighted average shares outstanding

Basic

9,397,873

9,375,819

Diluted

9,438,434

9,418,675

Annual cash dividends declared per share

$

1.00

$

0.80

See accompanying notes to the unaudited condensed consolidated financial statements

5

CHASE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

In thousands, except share and per share amounts

Three Months Ended November 30, 

    

 

2021

2020

 

Net income

$

9,727

$

10,837

Other comprehensive income (loss):

Net unrealized gain (loss) on restricted investments, net of tax

(30)

70

Change in funded status of pension plans, net of tax

112

122

Foreign currency translation adjustment

(2,173)

91

Total other comprehensive income (loss)

(2,091)

283

Comprehensive income

$

7,636

$

11,120

See accompanying notes to the unaudited condensed consolidated financial statements

6

CHASE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

THREE MONTHS ENDED NOVEMBER 30, 2021 AND 2020

(UNAUDITED)

 

In thousands, except share and per share amounts

Additional

Accumulated Other

Total

Common Stock

Paid-In

Comprehensive

Retained

Stockholders'

    

Shares

    

Amount

    

Capital

    

Income (Loss)

    

Earnings

    

Equity

Balance at August 31, 2020

9,439,082

$

944

$

16,674

$

(13,092)

$

298,266

$

302,792

Restricted stock grants, net of forfeitures

7,378

1

(1)

Amortization of restricted stock grants

569

569

Amortization of stock option grants

248

248

Exercise of stock options

2,532

40

40

Common stock received for payment of stock option exercises

(386)

(40)

(40)

Common stock retained to pay statutory minimum withholding taxes on common stock

(2,325)

(226)

(226)

Cash dividend declared, $0.80 per share

(7,557)

(7,557)

Change in funded status of pension plans, net of tax $43

122

122

Foreign currency translation adjustment

91

91

Net unrealized gain (loss) on restricted investments, net of tax $25

70

70

Net income

10,837

10,837

Balance at November 30, 2020

9,446,281

$

945

$

17,264

$

(12,809)

$

301,546

$

306,946

Balance at August 31, 2021

9,447,905

$

946

$

18,959

$

(11,210)

$

335,629

$

344,324

Restricted stock grants, net of forfeitures

11,780

1

(1)

Amortization of restricted stock grants

556

556

Amortization of stock option grants

219

219

Cash dividend declared, $1.00 per share

(9,460)

(9,460)

Change in funded status of pension plans, net of tax $37

112

112

Foreign currency translation adjustment

(2,173)

(2,173)

Net unrealized gain (loss) on restricted investments, net of tax ($10)

(30)

(30)

Net income

9,727

9,727

Balance at November 30, 2021

9,459,685

$

947

$

19,733

$

(13,301)

$

335,896

$

343,275

See accompanying notes to the unaudited condensed consolidated financial statements

7

CHASE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

In thousands

Three Months Ended November 30, 

    

2021

    

2020

 

 

CASH FLOWS FROM OPERATING ACTIVITIES

Net income

$

9,727

$

10,837

Adjustments to reconcile net income to net cash provided by operating activities

Loss on contingent consideration

475

Depreciation

877

1,003

Amortization

3,125

3,071

Provision (recovery) of allowance for doubtful accounts

(40)

41

Stock-based compensation

775

817

Realized gain on restricted investments

(7)

(5)

Deferred taxes

34

Increase (decrease) from changes in assets and liabilities

Accounts receivable

2,272

(1,253)

Inventory

(6,021)

3,336

Prepaid expenses and other assets

(1,331)

(1,239)

Accounts payable

(2,024)

(701)

Accrued compensation and other expenses

(2,254)

(1,285)

Accrued income taxes

295

(570)

Net cash provided by operating activities

5,903

14,052

CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of property, plant and equipment

(496)

(660)

Payments for acquisitions

(22,241)

Changes in restricted investments

(121)

(62)

Net cash used in investing activities

(617)

(22,963)

CASH FLOWS FROM FINANCING ACTIVITIES

Payments of taxes on stock options and restricted stock

(226)

Net cash used in financing activities

(226)

INCREASE IN CASH & CASH EQUIVALENTS

5,286

(9,137)

Effect of foreign exchange rates on cash

(481)

131

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

119,429

99,068

CASH AND CASH EQUIVALENTS, END OF PERIOD

$

124,234

$

90,062

Non-cash Investing and Financing Activities

Common stock received for payment of stock option exercises

$

$

40

Property, plant and equipment additions included in accounts payable

$

207

$

159

Annual cash dividend declared

$

9,460

$

7,557

See accompanying notes to the unaudited condensed consolidated financial statements

8

CHASE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

In thousands, except share and per share amounts

Note 1 — Basis of Financial Statement Presentation

Description of Business

Chase Corporation (the “Company,” “Chase,” “we,” or “us”), a global specialty chemicals company founded in 1946, is a leading manufacturer of protective materials for high-reliability applications across diverse market sectors. The Company’s strategy is to maximize the performance of its core businesses and brands while seeking future opportunities through strategic acquisitions. Through investments in facilities, systems and organizational consolidation, the Company seeks to improve performance and gain economies of scale.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States of America generally accepted accounting principles (“U.S. GAAP”) for interim financial reporting, and instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Therefore, they do not include all information and footnote disclosures necessary for a complete presentation of Chase Corporation’s financial position, results of operations and cash flows in conformity with generally accepted accounting principles. The year-end condensed balance sheet was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. Chase Corporation filed audited consolidated financial statements which included all information and notes necessary for such a complete presentation for the three years ended August 31, 2021 in conjunction with its 2021 Annual Report on Form 10-K. Certain immaterial reclassifications have been made to the prior year amounts to conform to the current year’s presentation.

The results of operations for the interim period ended November 30, 2021 are not necessarily indicative of the results to be expected for any future period or the entire fiscal year. These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended August 31, 2021 which are contained in the Company’s 2021 Annual Report on Form 10-K.

The accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of normal recurring items) that are, in the opinion of management, necessary for a fair statement of the Company’s financial position as of November 30, 2021, and the results of its operations, comprehensive income, changes in equity and cash flows for the interim periods ended November 30, 2021 and 2020.

The financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. The Company uses the U.S. dollar as the reporting currency for financial reporting. The financial position and results of operations of the Company’s U.K.-based operations are measured using the British pound as the functional currency. The financial position and results of operations of the Company’s operations based in France are measured using the euro as the functional currency. The financial position and results of the Company’s HumiSeal India Private Limited business are measured using the Indian rupee as the functional currency. The functional currency for all Chase Corporation’s other operations is the U.S. dollar. Foreign currency translation gains and losses are determined using current exchange rates for monetary items and historical exchange rates for other balance sheet items and are recorded as a change in other comprehensive income. Transaction gains and losses generated from the remeasurement of assets and liabilities denominated in currencies other than the functional currency of each applicable operation are included in other income (expense) on the condensed consolidated statements of operations, and were $241 and ($96) for the three-month periods ended November 30, 2021 and 2020, respectively.

9

Other Business Developments

During the first quarter of fiscal 2022, Chase took steps to prepare for the future relocation of its Corporate Headquarters to a new location also located within Westwood, MA. The move, part of the Company’s ongoing consolidation and optimization initiative, takes advantage of the new work from home hybrid realities of many of Chase’s corporate employees and is expected to provide future operational cost savings. The facility will also house research and development operations currently performed at the existing Westwood, MA location as well as those currently housed in our Woburn, MA location. Operations optimization costs of $59 related to the planned relocation were expensed in the first quarter. The relocation to the new Corporate Headquarters is anticipated to be completed during the second fiscal quarter of 2022.

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

On February 5, 2021, the Company acquired certain assets of Emerging Technologies, Inc. (“ETi”), a superabsorbent polymers solutions provider, located in Greensboro, NC. The business was acquired for a purchase price of $9,997 comprising $8,997 paid on February 5, 2021 and an accrual of $1,000 to be paid out up to eighteen months after purchase, subsequent to final working capital adjustments, and excluding acquisition-related costs. As part of this transaction, Chase acquired substantially all working capital and fixed assets of the business and entered a multi-year lease at ETi’s existing location. The Company expensed $128 of acquisition-related costs during fiscal 2021 associated with this acquisition (but with no expense recognized in the first quarter of fiscal 2021). The purchase was funded with available cash on hand. ETi is a solutions provider and formulator of absorbent polymers for use in the packaging, recreational, consumer, and sanitation markets. The acquisition broadens the Company’s superabsorbent polymers product offerings and formulation capabilities while expanding its market reach. The Company finalized purchase accounting during the first quarter of fiscal 2022, with no significant change to amounts initially recorded. Since the effective date of the acquisition, the financial results of ETi’s acquired operations have been included in the Company’s financial statements within the functional additives product line, contained within the Adhesives, Sealants and Additives operating segment.

During the second quarter of fiscal 2021, Chase began moving the sealant systems operations, part of the Adhesives, Sealants and Additives segment’s electronic and industrial coatings product line, from its Newark, CA location to its Hickory, NC facility. This is in line with the Company’s ongoing initiative to consolidate its manufacturing plants and streamline its existing processes. The sealant systems operations and Newark, CA location came to Chase Corporation as part of the fiscal 2017 acquisition of the operations of Resin Designs, and the Company’s lease there terminated in fiscal 2021. The Company recognized $977 in expense related to the move during the prior fiscal year ended August 31, 2021 (but with no expense recognized in the first quarter of fiscal 2021). This project is now substantively completed, and no expense was recognized in the first quarter of fiscal 2022. Any future costs related to this move are not anticipated to be significant to the consolidated financial statements.

10

On September 1, 2020 (the first day of fiscal 2021), the Company acquired all the capital stock of ABchimie for €18,654 (approximately $22,241 at the time of the transaction) net of cash acquired, subsequent to final working capital adjustment, excluding acquisition-related costs totaling $274 recognized in fiscal 2020 and with a potential earn out based on performance potentially worth an additional €7,000 (approximately $8,330 at the time of the transaction). ABchimie is a Corbelin, France headquartered solutions provider for the cleaning and protection of electronic assemblies, with ‎further formulation, production, and research and development capabilities‎. The transaction was funded with cash on hand. Since the effective date of the acquisition, the financial results of the business have been included in the Company's financial statements within the Adhesives, Sealants and Additives operating segment in the electronic and industrial coatings product line.

Significant Accounting Policies

The Company’s significant accounting policies are detailed in Note 1 — “Summary of Significant Accounting Policies” within Item 8 of the Company’s Annual Report on Form 10-K for the year ended August 31, 2021. See Note 2 of the condensed consolidated financial statements for a discussion of the effects of recently issued accounting pronouncements.

11

Note 2 — Recent Accounting Standards

Recently Adopted Accounting Pronouncements

The Company’s significant accounting policies are detailed in Note 1 – “Summary of Significant Accounting Policies” within Item 8 of the Company’s Annual Report on Form 10-K for the year ended August 31, 2021. The Company did not adopt any new accounting pronouncements in the first quarter of fiscal 2022.

Note 3 — Inventory

Inventory consisted of the following as of November 30, 2021 and August 31, 2021:

November 30, 

August 31, 

    

    

2021

    

2021

Raw materials

$

28,080

$

24,055

Work in process

6,631

5,928

Finished goods

12,364

11,234

Total Inventory

$

47,075

$

41,217

12

Note 4 — Net Income Per Share

The Company has unvested share-based payment awards with a right to receive nonforfeitable dividends which are considered participating securities under ASC Topic 260, “Earnings Per Share.” The Company allocates earnings to participating securities and computes earnings per share using the two-class method. The determination of earnings per share under the two-class method is as follows:

Three Months Ended November 30, 

 

    

2021

    

2020

 

Basic Earnings per Share

Net income

 

$

9,727

 

$

10,837

Less: Allocated to participating securities

64

78

Net income available to common shareholders

 

$

9,663

 

$

10,759

Basic weighted average shares outstanding

9,397,873

9,375,819

Net income per share - Basic

 

$

1.03

 

$

1.15

Diluted Earnings per Share

Net income

 

$

9,727

 

$

10,837

Less: Allocated to participating securities

64

78

Net income available to common shareholders

 

$

9,663

 

$

10,759

Basic weighted average shares outstanding

9,397,873

9,375,819

Additional dilutive common stock equivalents

40,561

42,856

Diluted weighted average shares outstanding

9,438,434

9,418,675

Net income per share - Diluted

 

$

1.02

 

$

1.14

Included in the calculation of dilutive common stock equivalents are the unvested portion of restricted stock and stock options. For the three-month periods ended November 30, 2021 and 2020, stock options to purchase 72,690 and 91,275 shares of common stock, respectively, were outstanding but were not included in the calculation of diluted income per share because their inclusion would be anti-dilutive.

13

Note 5 — Stock-Based Compensation

In August 2020, the Board of Directors of the Company approved the fiscal year 2021 Long Term Incentive Plan (“2021 LTIP”) for the executive officers and other members of management. The 2021 LTIP is an equity-based plan with a grant date of September 1, 2020 and contains (a) a restricted stock grant of 8,717 shares in the aggregate (of which 3,798 included a performance-based vesting component and were subject to adjustment as discussed below), with a vesting date of August 31, 2023, and (b) options to purchase 14,845 shares of common stock in the aggregate with an exercise price of $97.57 per share, vesting in three equal annual installments ending on August 31, 2023.

Based on the fiscal year 2021 results, 2,633 additional shares of restricted stock were earned and granted subsequent to the end of fiscal year 2021 in accordance with the performance measurement criteria. No further performance-based measurements apply to this award. Compensation expense is being recognized on a ratable basis over the vesting period.

In August 2021, the Board of Directors of the Company approved the fiscal year 2022 Long Term Incentive Plan (“2022 LTIP”) for executive officers and other members of management. The 2022 LTIP is an equity-based plan with a grant date of September 1, 2021 and contains the following equity components:

Restricted Shares — (a) a performance and service-based restricted stock grant of 3,304 shares in the aggregate, subject to adjustment based on fiscal 2022 results, with a vesting date of August 31, 2024. Compensation expense is recognized on a ratable basis over the vesting period based on quarterly probability assessments; and (b) a time-based restricted stock grant of 6,280 shares in the aggregate, with a vesting date of August 31, 2024. Compensation expense is recognized on a ratable basis over the vesting period.

Stock Options — options to purchase 12,942 shares of common stock in the aggregate with an exercise price of $114.50 per share. The options will vest in three equal annual installments beginning on August 31, 2022 and ending on August 31, 2024. The options will expire ten years after the grant date. Compensation expense is recognized over the period of the award consistent with the vesting terms.

In the first quarter of fiscal 2022, restricted stock in the amount of 437 shares related to a second quarter of fiscal 2020 grant was forfeited in conjunction with the termination of employment of a non-executive member of management of the Company.

14

Note 6 — Segment Data and Foreign Operations

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

The Adhesives, Sealants and Additives segment offers innovative and specialized product offerings consisting of both end-use products and intermediates that are 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 line and 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 Tapes segment sells mostly to established markets, with some exposure to growth opportunities through further development of existing products. Markets served include cable manufacturing, utilities and telecommunications, and electronics packaging. The segment’s offerings include insulating and conducting materials for wire and cable manufacturers, laminated durable papers, laminates for the packaging and industrial laminate markets, custom manufacturing services, pulling and detection tapes used in the installation, measurement and location of fiber optic cables and water and natural gas lines and cover tapes essential to delivering semiconductor components via tape-and-reel packaging.

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

15

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

Three Months Ended November 30, 

2021

    

2020

    

 

Revenue

Adhesives, Sealants and Additives

$

31,049

$

30,071

Industrial Tapes

32,761

26,491

Corrosion Protection and Waterproofing

11,200

10,614

Total

$

75,010

$

67,176

Income before income taxes

Adhesives, Sealants and Additives

$

7,597

(a)

$

9,979

Industrial Tapes

9,290

7,868

Corrosion Protection and Waterproofing

4,446

4,086

Total for reportable segments

21,333

21,933

Corporate and common costs

(8,216)

(b)

(7,956)

Total

$

13,117

$

13,977

Includes the following costs by segment:

Adhesives, Sealants and Additives

Interest

$

35

$

30

Depreciation

243

242

Amortization

2,740

2,573

Industrial Tapes

Interest

$

35

$

27

Depreciation

410

465

Amortization

384

386

Corrosion Protection and Waterproofing

Interest

$

17

$

12

Depreciation

118

139

Amortization

1

112

(a) Includes $475 in loss on the upward adjustment of the performance-based earn-out contingent consideration associated with the September 2020 acquisition of ABchimie
(b) Includes $59 restructuring expense related to the future relocation of the Corporate Headquarters to another location in Westwood, MA

16

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

November 30, 

August 31, 

    

2021

    

2021

 

 

Total Assets

Adhesives, Sealants and Additives

$

157,926

$

161,968

Industrial Tapes

73,956

72,301

Corrosion Protection and Waterproofing

31,601

31,067

Total for reportable segments

263,483

265,336

Corporate and common assets

145,047

138,823

Total

$

408,530

$

404,159

The Company’s products are sold worldwide. Revenue for the three-month periods ended November 30, 2021 and 2020 was attributed to operations located in the following countries:

Three Months Ended November 30, 

2021

    

2020

Revenue

United States

$

65,053

$

55,742

United Kingdom

4,594

6,027

All other foreign (1)

5,363

5,407

Total

$

75,010

$

67,176

(1) Comprises sales originated from the Company’s French locations, royalty revenue attributable to its licensed manufacturer in Asia, and Chase foreign manufacturing operations.

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

November 30, 

August 31, 

2021

    

2021

Long-Lived Assets

United States

Property, plant and equipment, net

$

20,621

$

20,990

Goodwill and Intangible assets, less accumulated amortization

113,081

115,936

United Kingdom

Property, plant and equipment, net

2,037

2,174

Goodwill and Intangible assets, less accumulated amortization

3,781

3,905

All other foreign

Property, plant and equipment, net

1,094

1,103

Goodwill and Intangible assets, less accumulated amortization

23,621

24,979

Total

Property, plant and equipment, net

$

23,752

$

24,267

Goodwill and Intangible assets, less accumulated amortization

$

140,483

$

144,820

17

Note 7 — Goodwill and Other Intangibles

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

    

Adhesives, Sealants and Additives

    

Industrial Tapes

    

Corrosion Protection and Waterproofing

    

Consolidated

 

Balance at August 31, 2021

$

65,945

$

21,215

$

10,706

$

97,866

Foreign currency translation adjustment

(734)

(8)

(742)

Balance at November 30, 2021

$

65,211

$

21,215

$

10,698

$

97,124

The Company’s goodwill is allocated to each reporting unit based on the nature of the products manufactured by the respective business combinations that originally created the goodwill. The Company has identified a total of three reporting units, corresponding to its three operating segments, that are used to evaluate the possible impairment of goodwill. Assessments of possible impairment of goodwill are made when events or changes in circumstances indicate that the carrying value of the asset may not be recoverable through future operations. Additionally, testing for possible impairment of recorded goodwill and certain intangible asset balances is required annually. The amount and timing of any impairment charges based on these assessments require the estimation of future cash flows and the fair market value of the related assets based on management’s best estimates of certain key factors, including future selling prices and volumes; operating, raw material and energy costs; and various other projected operating and economic factors, including the anticipated future impact of the coronavirus disease 2019 (COVID-19) pandemic. When testing, fair values of the reporting units 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 consisted of the following as of November 30, 2021 and August 31, 2021:

Weighted Average

Gross Carrying

Accumulated

Net Carrying

    

Amortization Period

    

Value

    

Amortization

    

Value

 

November 30, 2021

Patents and agreements

14.6

years  

$

1,760

$

1,717

$

43

Formulas and technology

7.8

years  

10,924

9,881

1,043

Trade names

5.9

years  

8,799

8,373

426

Customer lists and relationships

9.1

years  

116,055

74,208

41,847

$

137,538

$

94,179

$

43,359

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

18

Aggregate amortization expense related to intangible assets for the three months ended November 30, 2021 and 2020 was $3,125 and $3,071 respectively. Estimated amortization expense for the remainder of fiscal year 2022 and for the next five years is as follows:

Years ending August 31,

    

2022 (remaining 9 months)

$

8,658

 

2023

8,660

2024

7,453

2025

5,853

2026

5,055

2027

2,508

Note 8 — Leases

The Company accounts for leases in accordance to ASU 2016-02, Leases (Topic 842). At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present in the arrangement. Leases with a term greater than one year are recognized on the balance sheet as right-of-use (ROU) assets and short-term and long-term lease liabilities, as applicable. The Company does not have any financing leases that are material in nature.

Operating lease liabilities and their corresponding right-of-use assets are initially recorded based on the present value of lease payments over the expected remaining lease term. The interest rate implicit in lease contracts is typically not readily determinable. As a result, the Company utilizes its incremental borrowing rate to discount lease payments, which reflects the fixed rate at which the Company believes it could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, in a similar economic environment.

The Company has elected not to recognize leases with an original term of one year or less on the balance sheet. The Company typically only includes an initial lease term in its assessment of a lease arrangement. Options to renew a lease are not included in the Company’s assessment unless there is reasonable certainty that the Company will renew.

The following table presents the right-of-use asset and short-term and long-term lease liabilities amounts recorded on the condensed consolidated balance sheet as of November 30, 2021 and August 31, 2021:

November 30, 

August 31,

2021

2021

Assets

    

    

Operating lease right-of-use asset

$

9,949

$

9,312

Liabilities

Current (accrued expenses)

$

1,520

$

1,515

Operating lease long-term liabilities

7,841

7,202

Total lease liability

$

9,361

$

8,717

19

Lease cost

 

The components of lease costs for the three months ended November 30, 2021 and 2020 are as follows: