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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 February 28, 2022

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.)

375 University Avenue, Westwood, Massachusetts 02090

(Address of Principal Executive Offices) (Zip Code)

(781) 332-0700

(Registrant’s Telephone Number, Including Area Code)

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

 

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 March 31, 2022 was 9,468,888.

CHASE CORPORATION

INDEX TO FORM 10-Q

For the Quarter Ended February 28, 2022

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 February 28, 2022 (unaudited) and August 31, 2021

4

Condensed Consolidated Statements of Operations for the three and six months ended February 28, 2022 and 2021 (unaudited)

5

Condensed Consolidated Statements of Comprehensive Income for the three and six months ended February 28, 2022 and 2021 (unaudited)

6

Condensed Consolidated Statements of Equity for the three and six months ended February 28, 2022 and 2021 (unaudited)

7

Condensed Consolidated Statements of Cash Flows for the six months ended February 28, 2022 and 2021 (unaudited)

9

Notes to Unaudited Condensed Consolidated Financial Statements

10

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

31

Item 3 – Quantitative and Qualitative Disclosures About Market Risk

42

Item 4 – Controls and Procedures

43

Part II – OTHER INFORMATION

Item 1 – Legal Proceedings

44

Item 1A – Risk Factors

44

Item 6 – Exhibits

44

SIGNATURES

45

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

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; none 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

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 February 28, 

Six Months Ended February 28, 

    

2022

    

2021

 

2022

    

2021

 

Revenue

Sales

$

73,182

$

67,575

$

147,374

$

133,711

Royalties and commissions

771

872

1,589

1,912

73,953

68,447

148,963

135,623

Costs and Expenses

Cost of products and services sold

46,911

40,915

94,192

80,520

Selling, general and administrative expenses

13,125

12,331

26,500

24,591

Research and product development costs

1,095

1,026

2,088

2,077

Operations optimization costs (Note 15)

589

98

648

98

Acquisition-related costs (Note 17)

128

128

(Gain) loss on contingent consideration (Note 17)

(200)

733

275

733

Operating income

12,433

13,216

25,260

27,476

Interest expense

(86)

(67)

(173)

(136)

Other income (expense)

20

(284)

397

(498)

Income before income taxes

12,367

12,865

25,484

26,842

Income taxes (Note 14)

3,241

3,694

6,631

6,834

Net income

$

9,126

$

9,171

$

18,853

$

20,008

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

Basic

$

0.96

$

0.97

$

1.99

$

2.12

Diluted

$

0.96

$

0.97

$

1.98

$

2.11

Weighted average shares outstanding

Basic

9,399,231

9,381,666

9,398,552

9,378,743

Diluted

9,436,415

9,426,626

9,437,425

9,422,651

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 February 28, 

Six Months Ended February 28, 

    

2022

    

2021

 

2022

2021

 

Net income

$

9,126

    

$

9,171

$

18,853

$

20,008

Other comprehensive income (loss):

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

(135)

48

(165)

118

Change in funded status of pension plans, net of tax

112

125

224

247

Foreign currency translation adjustment

115

1,796

(2,058)

1,887

Total other comprehensive income (loss)

92

1,969

(1,999)

2,252

Comprehensive income

$

9,218

$

11,140

$

16,854

$

22,260

See accompanying notes to the unaudited condensed consolidated financial statements

6

CHASE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

THREE MONTHS ENDED FEBRUARY 28, 2022 AND 2021

(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 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

See accompanying notes to the unaudited condensed consolidated financial statements

7

CHASE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

SIX MONTHS ENDED FEBRUARY 28, 2022 AND 2021

(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

10,693

2

(2)

Amortization of restricted stock grants

1,190

1,190

Amortization of stock option grants

225

225

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

(3,550)

(366)

(366)

Cash dividend on common stock, $0.80 per share

(7,557)

(7,557)

Change in funded status of pension plans, net of tax $83

247

247

Foreign currency translation adjustment

1,887

1,887

Net unrealized gain (loss) on restricted investments, net of tax $39

118

118

Net income

20,008

20,008

Balance at February 28, 2021

9,448,371

$

946

$

17,721

$

(10,840)

$

310,717

$

318,544

Balance at August 31, 2021

9,447,905

$

946

$

18,959

$

(11,210)

$

335,629

$

344,324

Restricted stock grants, net of forfeitures

20,983

2

(2)

Amortization of restricted stock grants

1,108

1,108

Amortization of stock option grants

448

448

Cash dividend on common stock, $1.00 per share

(9,460)

(9,460)

Change in funded status of pension plans, net of tax $74

224

224

Foreign currency translation adjustment

(2,058)

(2,058)

Net unrealized gain (loss) on restricted investments, net of tax ($57)

(165)

(165)

Net income

18,853

18,853

Balance at February 28, 2022

9,468,888

$

948

$

20,513

$

(13,209)

$

345,022

$

353,274

See accompanying notes to the unaudited condensed consolidated financial statements

8

CHASE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

In thousands

Six Months Ended February 28, 

    

2022

    

2021

 

 

CASH FLOWS FROM OPERATING ACTIVITIES

Net income

$

18,853

$

20,008

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

Loss on contingent consideration

275

Depreciation

1,776

1,952

Amortization

6,167

6,190

Provision for allowance for doubtful accounts

80

7

Stock-based compensation

1,556

1,415

Realized gain on restricted investments

(80)

(49)

Deferred taxes

419

Increase (decrease) from changes in assets and liabilities

Accounts receivable

(197)

(4,712)

Inventory

(11,917)

3,344

Prepaid expenses and other assets

(1,953)

(913)

Accounts payable

(2,100)

1,862

Accrued compensation and other expenses

(3,371)

(1,470)

Accrued income taxes

(751)

(1,248)

Net cash provided by operating activities

8,757

26,386

CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of property, plant and equipment

(1,769)

(1,060)

Payments for acquisitions

(31,238)

Changes in restricted investments

(205)

10

Net cash used in investing activities

(1,974)

(32,288)

CASH FLOWS FROM FINANCING ACTIVITIES

Dividend paid

(9,460)

(7,557)

Payments of taxes on stock options and restricted stock

(366)

Net cash used in financing activities

(9,460)

(7,923)

DECREASE IN CASH & CASH EQUIVALENTS

(2,677)

(13,825)

Effect of foreign exchange rates on cash

(708)

986

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

119,429

99,068

CASH AND CASH EQUIVALENTS, END OF PERIOD

$

116,044

$

86,229

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

$

186

$

220

See accompanying notes to the unaudited condensed consolidated financial statements

9

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 February 28, 2022 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 February 28, 2022, and the results of its operations, comprehensive income, changes in equity and cash flows for the interim periods ended February 28, 2022 and 2021.

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 $96 and $337 for the three- and six-month periods ended February 28, 2022, respectively, and ($341) and ($437) for the three- and six-month periods ended February 28, 2021, respectively.

10

Other Business Developments

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 costs 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 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 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.

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 the second quarter of fiscal 2021 associated with this acquisition. The purchase was funded with available cash on hand. ETi is a solutions provider and formulator of absorbent polymers for use in the packaging, recreational, consumer, and sanitation markets. The acquisition broadens the Company’s superabsorbent polymers product offerings and formulation capabilities while expanding its market reach. The Company finalized purchase accounting during the first quarter of fiscal 2022, with no significant change to amounts initially recorded. Since the effective date of the acquisition, the financial results of ETi’s acquired operations have been included in the Company’s financial statements within the functional additives product line, contained within the Adhesives, Sealants and Additives operating segment.

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 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.

11

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.

12

Note 2 — Recent Accounting Standards

Recently Issued Accounting Pronouncements

In November 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2021-10, “Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance”, which requires entities to make annual disclosures about transactions with a government they account for by analogizing to a grant or contribution accounting model under ASC 958-605. The ASU is effective for the Company beginning September 1, 2022 (the start of fiscal 2023). ASU 2021-10 has not had, and the Company does not expect it to have in future periods, a material impact on the Company’s condensed consolidated financial statements and disclosures.

Recently Adopted Accounting Pronouncements

In October 2021, the FASB issued ASU No. 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers”, which amends the accounting for contract assets and contract liabilities from revenue contracts with customers in a business combination. The amendment requires that an entity acquiring the contract assets and contract liabilities in a business combination be recognized in accordance with ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”. The ASU is effective for all public entities for fiscal years beginning after December 15, 2022, and interim periods therein. The Company early adopted ASU 2021-08 on February 28, 2022 and any impact on the condensed consolidated financial statements will be dependent on the magnitude and nature of future acquired entities.

Note 3 — Inventory

Inventory consisted of the following as of February 28, 2022 and August 31, 2021:

February 28, 

August 31, 

    

    

2022

    

2021

Raw materials

$

30,957

$

24,055

Work in process

7,825

5,928

Finished goods

14,214

11,234

Total Inventory

$

52,996

$

41,217

13

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 February 28, 

Six Months Ended February 28, 

 

    

2022

    

2021

    

2022

    

2021

 

Basic Earnings per Share

Net income

 

$

9,126

 

$

9,171

 

$

18,853

 

$

20,008

Less: Allocated to participating securities

61

62

124

142

Net income available to common shareholders

 

$

9,065

 

$

9,109

 

$

18,729

 

$

19,866

Basic weighted average shares outstanding

9,399,231

9,381,666

9,398,552

9,378,743

Net income per share - Basic

 

$

0.96

 

$

0.97

 

$

1.99

 

$

2.12

Diluted Earnings per Share

Net income

 

$

9,126

 

$

9,171

 

$

18,853

 

$

20,008

Less: Allocated to participating securities

61

62

124

142

Net income available to common shareholders

 

$

9,065

 

$

9,109

 

$

18,729

 

$

19,866

Basic weighted average shares outstanding

9,399,231

9,381,666

9,398,552

9,378,743

Additional dilutive common stock equivalents

37,184

44,960

38,873

43,908

Diluted weighted average shares outstanding

9,436,415

9,426,626

9,437,425

9,422,651

Net income per share - Diluted

 

$

0.96

 

$

0.97

 

$

1.98

 

$

2.11

Included in the calculation of dilutive common stock equivalents are the unvested portion of restricted stock and stock options. For the three- and six-month periods ended February 28, 2022, stock options to purchase 100,524 and 86,607 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. For the three- and six-month periods ended February 28, 2021, stock options to purchase 68,815 and 80,045 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.

14

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 being 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 being recognized over the period of the award consistent with the vesting terms.

In the first and second quarter of fiscal 2022, restricted stock in the amount of 437 and 1,129 shares, respectively, related to the second quarter of fiscal 2020 grants were forfeited in conjunction with the termination of employment of non-executive members of management of the Company.

In February 2022, the Board of Directors of the Company approved an equity retention agreements with the Treasurer and Chief Financial Officer. The equity-based retention agreements have a grant date of February 1, 2022 and contain the following equity components: (a) a time-based restricted stock grant of 5,332 shares with a vesting date of January 31, 2025; and (b) options to purchase 14,480 shares of common stock with an exercise price of $94.88 per share. The options will vest on January 31, 2025 and will expire on February 1, 2032. Compensation expense for both the restricted stock and the stock option components of the equity retention agreements is being recognized on a ratable basis over the vesting period.

In February 2022, as part of their standard compensation for board service, non-employee members of the Board received a total grant of 5,000 shares of restricted stock for service for the period from January 31, 2022 through January 31, 2023. The shares of restricted stock will vest at the conclusion of this service period. Compensation expense for restricted stock is being recognized on a ratable basis over the twelve-month vesting period.

15

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 wire and 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 and industrial structures. 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.

16

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