10-Q

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 29, 2016

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.)

26 Summer Street, Bridgewater, Massachusetts 02324

(Address of Principal Executive Offices, Including Zip Code)

(508) 819-4200

(Registrant’s Telephone Number, Including Area Code)

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).  YES ☒  NO ☐

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

Large accelerated filer ☐	Accelerated filer ☒
Non-accelerated filer ☐ (Do not check if a smaller reporting company)	Smaller reporting company ☐

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, 2016 was 9,244,052.

CHASE CORPORATION

INDEX TO FORM 10-Q

For the Quarter Ended February 29, 2016

Part I - FINANCIAL INFORMATION
Item 1 – Unaudited Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets as of February 29, 2016 and August 31, 2015	3
Condensed Consolidated Statements of Operations for the three and six months ended February 29, 2016 and February 28, 2015	4
Condensed Consolidated Statements of Comprehensive Income for the three and six months ended February 29, 2016 and February 28, 2015	5
Condensed Consolidated Statement of Equity for the six months ended February 29, 2016	6
Condensed Consolidated Statements of Cash Flows for the six months ended February 29, 2016 and February 28, 2015	7
Notes to Condensed Consolidated Financial Statements	8
Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3 – Quantitative and Qualitative Disclosures About Market Risk	32
Item 4 – Controls and Procedures	33
Part II – OTHER INFORMATION
Item 1 – Legal Proceedings	34
Item 1A – Risk Factors	34
Item 6 – Exhibits	35
SIGNATURES	36

2

Item 1 — Unaudited Condensed Consolidated Financial Statements

CHASE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

In thousands, except share and per share amounts

	February 29,		August 31,
	2016		2015
ASSETS
Current Assets
Cash & cash equivalents	$	51,708	$	43,819
Accounts receivable, less allowance for doubtful accounts of $551 and $705		32,918		39,488
Inventories		27,539		29,476
Prepaid expenses and other current assets		2,620		2,174
Due from sale of business		457		—
Assets held for sale		604		1,089
Deferred income taxes		2,255		2,255
Total current assets		118,101		118,301
Property, plant and equipment, net		37,397		40,921
Other Assets
Goodwill		43,668		44,123
Intangible assets, less accumulated amortization of $31,724 and $28,882		40,662		44,852
Cash surrender value of life insurance		7,140		7,133
Restricted investments		1,421		1,410
Funded pension plan		708		634
Deferred income taxes		365		390
Other assets		338		133
	$	249,800	$	257,897
LIABILITIES AND EQUITY
Current Liabilities
Current portion of long-term debt	$	8,400	$	8,400
Accounts payable		11,739		15,599
Accrued payroll and other compensation		3,842		6,286
Accrued expenses		3,945		4,448
Accrued income taxes		449		2,783
Total current liabilities		28,375		37,516
Long-term debt, less current portion		39,200		43,400
Deferred compensation		2,196		2,230
Accumulated pension obligation		13,067		12,901
Other liabilities		77		85
Accrued income taxes		1,249		1,249
Deferred income taxes		6,187		6,174
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; 9,244,052 shares at February 29, 2016 and 9,191,958 shares at August 31, 2015 issued and outstanding		924		919
Additional paid-in capital		14,898		14,296
Accumulated other comprehensive loss		(11,908)		(7,986)
Retained earnings		155,535		147,113
Total equity		159,449		154,342
Total liabilities and equity	$	249,800	$	257,897

See accompanying notes to the condensed consolidated financial statements

3

CHASE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

In thousands, except share and per share amounts

	Three Months Ended				Six Months Ended
	February 29, 2016		February 28, 2015		February 29, 2016		February 28, 2015
Revenue
Sales	$	53,706	$	51,380	$	110,452	$	106,670
Royalties and commissions		1,218		924		1,950		1,567
		54,924		52,304		112,402		108,237
Costs and Expenses
Cost of products and services sold		34,895		34,235		69,612		68,715
Selling, general and administrative expenses		10,226		11,340		21,736		22,135
Exit costs related to idle facility (Note 15)		209		—		209		—
Write-down of certain assets under construction (Note 8)		—		—		365		—
Acquisition-related costs (Note 14)		—		584		—		584
Operating income		9,594		6,145		20,480		16,803
Interest expense		(260)		(270)		(510)		(544)
Gain on sale of business  (Note 8)		—		—		1,031		—
Other income (expense)		1,419		381		1,388		766
Income before income taxes		10,753		6,256		22,389		17,025
Income taxes		3,781		2,190		7,968		5,959
Net income	$	6,972	$	4,066	$	14,421	$	11,066
Add: net income attributable to non-controlling interest		—		—		—		(95)
Net income attributable to Chase Corporation	$	6,972	$	4,066	$	14,421	$	10,971
Net income available to common shareholders, per common and common equivalent share
Basic	$	0.75	$	0.45	$	1.56	$	1.20
Diluted	$	0.74	$	0.44	$	1.54	$	1.18
Weighted average shares outstanding
Basic		9,155,365		9,065,511		9,148,493		9,057,738
Diluted		9,292,224		9,224,985		9,287,486		9,213,431
Annual cash dividends declared per share					$	0.65	$	0.60

See accompanying notes to the condensed consolidated financial statements

4

CHASE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

In thousands, except share and per share amounts

	Three Months Ended				Six Months Ended
	February 29, 2016		February 28, 2015		February 29, 2016		February 28, 2015
Net income	$	6,972	$	4,066	$	14,421	$	11,066
Other comprehensive income:
Net unrealized gain (loss) on restricted investments, net of tax		(127)		(20)		(99)		(8)
Change in funded status of pension plans, net of tax		93		109		187		219
Foreign currency translation adjustment		(2,995)		(818)		(4,010)		(2,909)
Total other comprehensive income (loss)		(3,029)		(729)		(3,922)		(2,698)
Comprehensive income		3,943		3,337		10,499		8,368
Comprehensive income attributable to non-controlling interest		—		—		—		(95)
Comprehensive income attributable to Chase Corporation	$	3,943	$	3,337	$	10,499	$	8,273

See accompanying notes to the condensed consolidated financial statements

5

CHASE CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

SIX MONTHS ENDED FEBRUARY 29, 2016

(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,  2015	9,191,958	$	919	$	14,296	$	(7,986)	$	147,113	$	154,342
Restricted stock grants, net of forfeitures	29,884		3		(3)						-
Amortization of restricted stock grants					472						472
Amortization of stock option grants					140						140
Exercise of stock options	40,608		4		633						637
Common stock received for payment of stock option exercises	(10,455)		(1)		(512)						(513)
Excess tax benefit (expense) from stock based compensation					274						274
Common stock retained to pay taxes on common stock	(7,943)		(1)		(402)						(403)
Cash dividend paid, $0.65 per share									(5,999)		(5,999)
Change in funded status of pension plan, net of tax $102							187				187
Foreign currency translation adjustment							(4,010)				(4,010)
Net unrealized gain (loss) on restricted investments, net of tax $52							(99)				(99)
Net income									14,421		14,421
Balance at February 29, 2016	9,244,052	$	924	$	14,898	$	(11,908)	$	155,535	$	159,449

See accompanying notes to the condensed consolidated financial statements

6

CHASE CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

In thousands, except share and per share amounts

	Six Months Ended
	February 29, 2016		February 28, 2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	14,421	$	11,066
Adjustments to reconcile net income to net cash provided by operating activities
Loss on write-down of certain assets under construction		365		—
Gain on sale of business		(1,031)		—
Depreciation		2,864		2,812
Amortization		3,836		2,884
Cost of sale of inventory step-up		—		49
Provision (recovery) for allowance for doubtful accounts		(136)		64
Stock based compensation		612		537
Realized gain on restricted investments		(63)		(75)
Decrease in cash surrender value life insurance		90		90
Excess tax expense from stock based compensation		(274)		(730)
Increase (decrease) from changes in assets and liabilities
Accounts receivable		5,877		(144)
Inventories		1,570		(1,617)
Prepaid expenses & other assets		(488)		(163)
Accounts payable		(3,596)		(1,216)
Accrued compensation and other expenses		(2,477)		(3,824)
Accrued income taxes		(1,893)		(2,029)
Deferred compensation		(34)		85
Net cash provided by operating activities		19,643		7,789
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment		(734)		(1,142)
Retirements (cost to acquire) intangible assets		15		(10)
Payments for acquisitions		—		(33,285)
Net proceeds from sale of business		1,500		—
Increase in restricted investments		(102)		(58)
Payments for cash surrender value life insurance		(92)		(92)
Net cash provided by (used in) investing activities		587		(34,587)
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on debt		—		2,000
Payments of principal on debt		(4,200)		(3,500)
Dividend paid		(5,999)		(5,477)
Proceeds from exercise of common stock options		124		—
Payments of taxes on stock options and restricted stock		(403)		(1,182)
Excess tax benefit from stock based compensation		274		730
Payment for acquisition of non-controlling interest		—		(500)
Net cash used in financing activities		(10,204)		(7,929)
INCREASE IN CASH & CASH EQUIVALENTS		10,026		(34,727)
Effect of foreign exchange rates on cash		(2,137)		(1,089)
CASH & CASH EQUIVALENTS, BEGINNING OF PERIOD		43,819		53,222
CASH & CASH EQUIVALENTS, END OF PERIOD	$	51,708	$	17,406
Non-cash Investing and Financing Activities
Common stock received for payment of stock option exercises	$	513	$	1,767
Property, plant & equipment additions included in accounts payable	$	6	$	23

See accompanying notes to the condensed consolidated financial statements

7

CHASE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

In thousands, except share and per share amounts

Note 1 - Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles 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 disclosure necessary for a complete presentation of Chase Corporation’s financial position, results of operations and cash flows, in conformity with generally accepted accounting principles.  Chase Corporation (the “Company,” “Chase,” “we,” or “us”) filed audited consolidated financial statements, which included all information and notes necessary for such complete presentation for the three years ended August 31, 2015 in conjunction with its 2015 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 29, 2016 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, 2015, which are contained in the Company’s 2015 Annual Report on Form 10-K.

The accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of normal recurring items) which are, in the opinion of management, necessary for a fair statement of the Company’s financial position as of February 29, 2016, the results of its operations, comprehensive income and cash flows for the interim periods ended February 29, 2016 and February 28, 2015, and changes in equity for the interim period ended February 29, 2016.

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 US dollar as the reporting currency for financial reporting.  The financial position and results of operations of the Company’s UK-based operations are measured using the UK pound sterling 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 functional currency for all of our other operations is the US 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 our foreign operations are included in other income / (expense) on the consolidated statements of operations.

On January 30, 2015, the Company acquired two product lines from Henkel Corporation (the “Seller”) for a purchase price of $33,285, excluding any acquisition-related costs.  As part of this transaction, Chase acquired the Seller’s microspheres product line, sold under the Dualite® brand, located in Greenville, SC, and obtained exclusive distribution rights and intellectual property related to the Seller’s polyurethane dispersions product line, operating in the Elgin, IL location. We refer to these collectively as our specialty chemical intermediates product line. Under the agreement, Chase entered into a ten-year facility operating lease at the Seller’s Greenville, SC location.  The Seller will perform certain manufacturing and application services for Chase at the Seller’s Elgin, IL location for three years following the acquisition. The purchase was funded entirely with available cash on hand. Since the effective date for this acquisition, the financial results of the specialty chemical intermediates product line have been included in the Company's financial statements within the Company’s Industrial Materials operating segment. Purchase accounting was completed in the quarter ended May 31, 2015 (third quarter of fiscal 2015) with no material adjustments made to the initial amounts recorded at the end of the second quarter of fiscal 2015. See Note 14 to the Condensed Consolidated Financial Statements for additional information on the acquisition of the specialty chemical intermediates product line.

On October 31, 2014, the Company purchased the 50% non-controlling membership interest of NEPTCO JV LLC (the "JV") owned by its now-former joint venture partner, an otherwise unrelated party. Because of the Company's

8

CHASE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

In thousands, except share and per share amounts

controlling financial interest, the JV's assets, liabilities and results of operations have been consolidated within the Company's consolidated financial statements since June 27, 2012, the date the Company acquired NEPTCO. The Company continues to fully consolidate the assets, liabilities and results of operations of the JV, but no longer records an offsetting amount for a non-controlling interest subsequent to October 31, 2014. The $95 recorded in the condensed consolidated statement of operations as net income attributable to non-controlling interest for the six month period ended February 28, 2015, represents the now-former joint venture partner’s share of the results of operations of the JV for the period from September 1, 2014 through October 31, 2014.

Note 2 — Recent Accounting Policies

Recently Issued Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers,” which will replace most of the existing revenue recognition guidance under U.S. Generally Accepted Accounting Principles. The core principle of the ASU is that an entity should recognize revenue for the transfer of goods or services equal to the amount that it expects to be entitled to receive for those goods or services. The ASU requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments. The ASU will be effective for the Company beginning September 1, 2018 (fiscal 2019), including interim periods in its fiscal year 2019, and allows for either retrospective or modified retrospective methods of adoption. The Company is in the process of determining the method of adoption and assessing the impact of this ASU on the Company’s consolidated financial position, results of operations and cash flows.

In July 2015, the FASB issued ASU No. 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory.” Under this accounting guidance, inventory will be measured at the lower of cost and net realizable value, and other options that currently exist for market value will be eliminated. ASU No. 2015-11 defines net realizable value as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. No other changes were made to the current guidance on inventory measurement. This accounting guidance is effective for us in the first quarter of fiscal 2018. Early adoption is permitted. We are currently evaluating the impact of the adoption of this accounting standard update on our consolidated financial position, results of operations and cash flows.

In November 2015, the FASB issued ASU No. 2015-17, “Income Taxes – Balance Sheet Classification of Deferred Taxes.” The purpose of the standard is to simplify the presentation of deferred taxes on a classified balance sheet.  Under current GAAP, deferred income tax assets and liabilities are separated into current and noncurrent amounts in the balance sheet.  The amendments in ASU 2015-17 require that all deferred tax assets and liabilities be classified as noncurrent in the balance sheet.  The ASU will be effective for the Company beginning September 1, 2017 (fiscal 2018), including interim periods in its fiscal year 2018, but with early adoption permitted.  The Company does not expect the adoption of ASU 2015-17 to have a material impact on its financial statements or presentation.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (a) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (b) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.  Changes were made to align lessor accounting with the lessee accounting model and ASU No. 2014-09, “Revenue from Contracts with Customers.”  The new lease guidance simplifies the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. The ASU will be effective for the Company beginning September 1, 2019 (fiscal 2020). Early application is permitted for all public business entities upon issuance.Lessees must apply a modified retrospective transition approach for leases existing at, or

9

CHASE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

In thousands, except share and per share amounts

entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees may not apply a full retrospective transition approach. We are currently evaluating the impact of the application of this accounting standard update on our consolidated financial position, results of operations and cash flows.

Note 3 — Inventories

Inventories consist of the following as of February 29, 2016 and August 31, 2015:

	February 29, 2016		August 31, 2015
Raw materials	$	12,603	$	12,937
Work in process		6,678		6,539
Finished goods		8,258		10,000
Total Inventories	$	27,539	$	29,476

Note 4 — Net Income Per Share

The Company has unvested share-based payment awards with a right to receive non-forfeitable dividends which are considered participating securities under ASC Topic 260, “Earnings Per Share.”  The Company allocates earnings to

10

CHASE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

In thousands, except share and per share amounts

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				Six Months Ended
	February 29, 2016		February 28, 2015		February 29, 2016		February 28, 2015
Basic Earnings per Share
Net income attributable to Chase Corporation	$	6,972	$	4,066	$	14,421	$	10,971
Less: Allocated to participating securities		65		30		128		81
Net income available to common shareholders	$	6,907	$	4,036	$	14,293	$	10,890
Basic weighted average shares outstanding		9,155,365		9,065,511		9,148,493		9,057,738
Net income per share - Basic	$	0.75	$	0.45	$	1.56	$	1.20
Diluted Earnings per Share
Net income attributable to Chase Corporation	$	6,972	$	4,066	$	14,421	$	10,971
Less: Allocated to participating securities		65		30		128		81
Net income available to common shareholders	$	6,907	$	4,036	$	14,293	$	10,890
Basic weighted average shares outstanding		9,155,365		9,065,511		9,148,493		9,057,738
Additional dilutive common stock equivalents		136,859		159,474		138,993		155,693
Diluted weighted average shares outstanding		9,292,224		9,224,985		9,287,486		9,213,431
Net income per share - Diluted	$	0.74	$	0.44	$	1.54	$	1.18

For the three and six months ended February 29, 2016, stock options to purchase 21,275 and 26,381 shares of common stock 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 months ended February 28, 2015, stock options to purchase 22,750 and 27,863 shares of common stock were outstanding, but were not included in the calculation of diluted income per share because their inclusion would be anti-dilutive.  Included in the calculation of dilutive common stock equivalents are the unvested portion of restricted stock and stock options.

Note 5 — Stock-Based Compensation

In August 2014, the Board of Directors of the Company approved the fiscal year 2015 Long Term Incentive Plan (“2015 LTIP”) for the executive officers and other members of management.  The 2015 LTIP is an equity-based plan with a grant date of September 1, 2014 and contains a performance and service-based restricted stock grant of 6,993 shares in the aggregate, subject to adjustment, with a vesting date of August 31, 2017.  Based on the fiscal year 2015 financial

11

CHASE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

In thousands, except share and per share amounts

results, 5,685 additional shares of restricted stock (total of 12,678 shares) were earned and granted subsequent to the end of fiscal year 2015 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 2015, the Board of Directors of the Company approved the fiscal year 2016 Long Term Incentive Plan (“2016 LTIP”) for the executive officers and other members of management.  The 2016 LTIP is an equity-based plan with a grant date of September 1, 2015 and contains the following equity components:

Restricted Shares — (a) a performance and service-based restricted stock grant of 6,962 shares in the aggregate, subject to adjustment based on fiscal 2016 results, with a vesting date of August 31, 2018.  Compensation expense is recognized on a ratable basis over the vesting period based on quarterly probability assessments; (b) a time-based restricted stock grant of 7,683 shares in the aggregate, with a vesting date of August 31, 2018. Compensation expense is recognized on a ratable basis over the vesting period.

Stock options — options to purchase 21,275 shares of common stock in the aggregate with an exercise price of $39.50 per share.  The options will vest in three equal annual installments beginning on August 31, 2016 and ending on August 31, 2018. The options granted will expire on September 1, 2025. Compensation expense is recognized over the period of the award on an annual basis consistent with the vesting terms.

During the first quarter of fiscal 2016, an additional grant of 5,000 restricted shares was issued to a non-executive member of management with a vesting date of October 20, 2020. Compensation expense is recognized on a ratable basis over the vesting period.

In February 2016, as part of their standard compensation for board service, non-employee members of the Board of Directors received a total grant of 4,554 shares of restricted stock ($219 grant date value) for service for the period from January 31, 2016 through January 31, 2017.  The shares of restricted stock will vest at the conclusion of this service period.  Compensation is recognized on a ratable basis over the twelve month vesting period.

Note 6 — Segment Data & Foreign Operations

The Company is organized into two operating segments, an Industrial Materials segment and a Construction Materials segment.  The segments are distinguished by the nature of the products and how they are delivered to their respective markets.

The Industrial Materials segment includes specified products that are used in, or integrated into, another company’s product, with demand typically dependent upon general economic conditions. Industrial Materials products 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, 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, and composite materials and elements.  This segment also includes glass-based strength element products designed to allow fiber optic cables to withstand mechanical and environmental strain and stress and which we operated as a joint venture prior to October 31, 2014. Further, beginning January 30, 2015, the Industrial Materials segment includes microspheres, sold under the Dualite brand, and polyurethane dispersions, both obtained through acquisition, and included in the Company’s specialty chemical intermediates product line.

The Construction Materials segment is composed of typically project-oriented product offerings that are primarily sold and used as “Chase” branded products. Construction Materials products include protective coatings for pipeline applications, coating and lining systems for use in liquid storage and containment applications, adhesives and sealants

12

CHASE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

In thousands, except share and per share amounts

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

	Three Months Ended						Six Months Ended
	February 29, 2016			February 28, 2015			February 29, 2016			February 28, 2015
Revenue
Industrial Materials	$	43,769		$	40,330		$	87,068		$	82,725
Construction Materials		11,155			11,974			25,334			25,512
Total	$	54,924		$	52,304		$	112,402		$	108,237
Income before taxes
Industrial Materials	$	13,271		$	10,213	(b)	$	26,200	(d)	$	22,828	(b)
Construction Materials		3,668			2,592			9,123			6,465
Total for reportable segments		16,939			12,805			35,323			29,293
Corporate and common costs		(6,186)	(a)		(6,549)	(c)		(12,934)	(a)		(12,268)	(c)
Total	$	10,753		$	6,256		$	22,389		$	17,025
Includes the following costs by segment:
Industrial Materials
Interest	$	195		$	225		$	382		$	455
Depreciation		954			976			1,945			1,953
Amortization		1,569			1,283			3,129			2,053
Construction Materials
Interest	$	65		$	45		$	128		$	89
Depreciation		260			280			524			569
Amortization		351			418			707			831

(a) Includes Randolph, MA facility exit and demolition costs of $209 incurred during the period

(b) Includes $49 of expenses related to inventory step-up in fair value related to the January 2015 acquisition of the specialty chemical intermediates product line

(c) Includes $584 in expenses related to the January 2015 acquisition of the specialty chemical intermediates product line

(d) Includes both a $1,031 gain on sale of our RodPack® wind energy business contained within our structural composites product line and a $365 write-down on certain other structural composites assets based on usage constraints following the sale, both recognized in November 2015

The Company’s products are sold worldwide.  For the quarters ended February 29, 2016 and February 28, 2015, sales from its operations located in the United Kingdom accounted for 11% and 14% of total Company revenue, respectively.In the current fiscal year-to-date period, sales from its operations located in the United Kingdom accounted for 10% of total Company revenue compared to 12% in the same period in fiscal 2015.  No other foreign geographic area accounted for more than 10% of consolidated revenue for the three or six month periods ended February 29, 2016 and February 28, 2015.

13

CHASE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

In thousands, except share and per share amounts

Total assets for the Company’s reportable segments as of February 29, 2016 and August 31, 2015:

	February 29,		August 31,
	2016		2015
Total assets
Industrial Materials	$	139,566	$	146,870
Construction Materials		39,868		48,016
Total for reportable segments		179,434		194,886
Corporate and common assets		70,366		63,011
Total	$	249,800	$	257,897

As of February 29, 2016 and August 31, 2015, the Company had long-lived assets (that provide future economic benefit beyond the current year or operating period, including buildings, equipment and leasehold improvements) of $3,423 and $3,947, respectively, located in the United Kingdom.   These balances exclude goodwill and intangibles of $7,047and $8,266, as of February 29, 2016 and August 31, 2015, respectively, associated with its operations in the United Kingdom.

Note 7 — Goodwill and Other Intangibles

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

	Industrial Materials		Construction Materials		Consolidated
Balance at August 31, 2015	$	33,390	$	10,733	$	44,123
Foreign currency translation adjustment		(430)		(25)		(455)
Balance at February 29, 2016	$	32,960	$	10,708	$	43,668

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 ten reporting units within its two 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. When testing, fair values of the reporting units and the related implied fair values of their respective goodwill are established using public company analysis and discounted cash flows.

The Company evaluates the possible impairment of goodwill annually each fourth quarter and whenever events or circumstances indicate the carrying value of goodwill may not be recoverable.

14

CHASE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

In thousands, except share and per share amounts

Intangible assets subject to amortization consist of the following as of February 29, 2016 and August 31, 2015:

	Weighted-Average		Gross Carrying		Accumulated		Net Carrying
	Amortization Period		Value		Amortization		Value
February 29, 2016
Patents and agreements	12.6	years	$	2,483	$	2,259	$	224
Formulas and technology	8.4	years		8,305		3,887		4,418
Trade names	5.9	years		7,185		4,475		2,710
Customer lists and relationships	9.3	years		54,413		21,103		33,310
			$	72,386	$	31,724	$	40,662
August 31, 2015
Patents and agreements	12.5	years	$	2,568	$	2,267	$	301
Formulas and technology	8.4	years		8,415		3,513		4,902
Trade names	5.9	years		7,278		4,088		3,190
Customer lists and relationships	9.3	years		55,473		19,014		36,459
			$	73,734	$	28,882	$	44,852

Aggregate amortization expense related to intangible assets for the six months ended February 29, 2016 and February 28, 2015 was $3,836 and $2,884, respectively.  Estimated amortization expense for the remainder of fiscal year 2016 and for the next five years is as follows:

Years ending August 31,
2016 (remaining 6 months)	$	3,854
2017		7,246
2018		7,041
2019		6,348
2020		5,481
2021		5,219

Note 8 — Sale of RodPack Business

In November 2015 (the first quarter of fiscal 2016), the Company sold its RodPack wind energy business, contained within its structural composites product line, to an otherwise unrelated party (“Buyer”) for proceeds of $2,186. The Company’s structural composites product line is a part of the Company’s Industrial Materials segment. The Company is not restricted in its use of the net proceeds from the sale.  At August 31, 2015, the related RodPack assets were recorded as assets held for sale on the consolidated balance sheet.

The following table summarizes information about the RodPack assets sold as of November 10, 2015 (the date of the sale) and August 31, 2015:

	November 10, 2015		August 31, 2015
RodPack - Property, plant and equipment	$	846	$	773
RodPack - Patents and other intangible assets		309		316
Total	$	1,155	$	1,089

The sale resulted in a pre-tax book gain of $1,031 (approximately $660 after-tax gain), which was recorded within the consolidated statement of operations as gain on sale of business in the six month period ended February 29, 2016.  The Company received $1,500 of the proceeds in the first quarter of fiscal 2016 and will receive the remaining balance in

15

CHASE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

In thousands, except share and per share amounts

three equal installments of $229 at six month intervals, with the final payment due 18 months after the date of the sale. The $457 current portion of the amount due has been recorded as a current asset (Due from sale of business) as of February 29, 2016, while the portion due 18 months from the sale has been included in other long-term assets.  The payment of these owed amounts is not subject to any further contingency or deliverable. Further, the Company will provide ongoing development support to the Buyer for which it will receive additional consideration upon the completion of services.

The sale of this business prompted the Company to perform a review of other long-lived assets within the structural composites product line, as the sale of the related intangible assets resulted in a limitation of the Company’s capacity to sell certain other goods produced by the product line. This review resulted in the identification of construction in progress assets with a net book value of $365, which the Company fully wrote down. This charge was recorded within the condensed consolidated statement of operations as write-down of certain assets under construction during the first quarter of fiscal 2016.

Note 9 — Joint Venture

On October 31, 2014, the Company purchased the 50% non-controlling membership interest of NEPTCO JV LLC (the “JV”) that had been owned by its joint venture partner, an otherwise unrelated party. The purchase consideration is subject to certain contingent adjustments based on certain future events related to the JV. The purchase price, including these contingent adjustments, was not, nor will be, material to the Company. Because of the Company’s controlling financial interest, the JV’s assets, liabilities, and results of operations have been consolidated within the Company’s consolidated financial statements since June 27, 2012, the date the Company acquired NEPTCO. The Company continues to fully consolidate the assets, liabilities and results of operations of the JV, but no longer records an offsetting amount for a non-controlling interest.  The $95 recorded in the consolidated statement of operations as net income attributable to non-controlling interest for the six months ended February 28, 2015, represents the now-former joint venture partner’s share of the results of operations of the JV for the period from September 1, 2014 through October 31, 2014.

The Company accounted for the joint venture partner’s non-controlling interest in the JV under ASC Topic 810 “Consolidations” (“ASC 810”). Based on the criteria in ASC 810, the Company had determined that the JV qualified as a variable interest entity (“VIE”).

Under the JV agreement, which terminated with the Company’s October 2014 acquisition of the 50% outstanding non-controlling membership interest in the JV, the JV had agreed to purchase a minimum of 80% of its total glass fiber requirements from the now-former joint venture partner. Additionally, the JV had agreed to purchase private-label products exclusively from an affiliate of the now-former joint venture partner; however, the JV was not subject to a minimum purchase requirement on private-label products. Purchases from the now-former joint venture partner totaled $332 for the period from September 1, 2014 through October 31, 2014.

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 entered, that could adversely affect the Company’s operating results or cash flows in a particular period. The Company routinely assesses all of its litigation and threatened litigation as to the probability of ultimately incurring a liability, and records its best forecast of the ultimate loss in situations where the Company assesses the likelihood of loss as probable.

16

CHASE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

In thousands, except share and per share amounts

Note 11 — Pensions and Other Post-Retirement Benefits

The components of net periodic benefit cost for the three and six months ended February 29, 2016 and February 28, 2015 are as follows:

	Three Months Ended				Six Months Ended
	February 29, 2016		February 28, 2015		February 29, 2016		February 28, 2015
Components of net periodic benefit cost
Service cost	$	74	$	91	$	148	$	181
Interest cost		182		170		364		339
Expected return on plan assets		(129)		(153)		(258)		(306)
Amortization of prior service cost		1		1		2		2
Amortization of accumulated loss		143		167		286		335
Net periodic benefit cost	$	271	$	276	$	542	$	551

When funding is required, the Company’s policy is to contribute amounts that are deductible for federal income tax purposes.  As of February 29, 2016, the Company has made contributions of $154 in the current fiscal year to fund its obligations under its pension plans, and plans to make the necessary contributions over the remainder of fiscal 2016 to ensure the qualified plan continues to be adequately funded given the current market conditions. The Company made contributions of $115 in the first six months of the prior year.

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 include: 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 February 29, 2016 and August 31, 2015 represent investments that are restricted for use in a nonqualified retirement savings plan 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 February 29, 2016 and August 31, 2015:

				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	February 29, 2016	$	1,421	$	1,382	39	—
Restricted investments	August 31, 2015	$	1,410	$	1,394	16	—

17

CHASE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

In thousands, except share and per share amounts

The following table presents the fair value of the Company’s long-term debt as of February 29, 2016 and August 31, 2015, 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	February 29, 2016	$	47,600	$	—	47,600	—
Long-term debt	August 31, 2015	$	51,800	$	—	51,800	—

The carrying value of the long-term debt approximates its fair value, as the monthly interest rate is set based on the movement of the underlying market rates.

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 Plan		Adjustment		Total
Balance at August 31, 2015	$	47	$	(5,934)	$	(2,099)	$	(7,986)
Other comprehensive gains (losses) before reclassifications (1)		(58)		—		(4,010)		(4,068)
Reclassifications to net income of previously deferred (gains) losses (2)		(41)		187		—		146
Other comprehensive income (loss)		(99)		187		(4,010)		(3,922)
Balance at February 29, 2016	$	(52)	$	(5,747)	$	(6,109)	$	(11,908)

(1) Net of tax expense of $30, $0, $0, respectively.

(2) Net of tax expense of $22, tax benefit of $102, $0, respectively.

18

CHASE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

In thousands, except share and per share amounts

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				Six Months Ended				Location of Gain (Loss) Reclassified from Accumulated
	February 29, 2016		February 28, 2015		February 29, 2016		February 28, 2015		Other Comprehensive Income (Loss) into Income
Gains on Restricted Investments:
Realized gain on sale of restricted investments	$	(61)	$	(75)	$	(63)	$	(76)	Selling, general and administrative expenses
Tax expense (benefit)		21		26		22		27
Gain net of tax	$	(40)	$	(48)	$	(41)	$	(48)
Loss on Funded Pension Plan adjustments:
Amortization of prior pension service costs and unrecognized losses	$	6	$	5	$	12	$	10	Cost of products and services sold
Amortization of prior pension service costs and unrecognized losses		138	$	163		277	$	326	Selling, general and administrative expenses
Tax expense (benefit)		(51)		(59)		(102)		(118)
Loss net of tax	$	93	$	109	$	187	$	219
Total net loss reclassified for the period	$	53	$	62	$	146	$	171

Note: Gains on Restricted Investments and losses on funded pension plan adjustments may not sum for the quarter end or year-to-date period due to rounding.

Note 14 — Acquisition of Specialty Chemical Intermediates Product Line

On January 30, 2015, the Company acquired two product lines from Henkel Corporation (the “Seller”) for a purchase price of $33,285, after working capital adjustments and excluding any acquisition-related costs.  As part of this transaction, Chase acquired the Seller’s microspheres product line, sold under the Dualite brand, located in Greenville, SC, and obtained exclusive distribution rights and intellectual property related to the Seller’s polyurethane dispersions product line, operating in the Elgin, IL location. Under the agreement, Chase entered into a ten-year facility operating lease at the Seller’s Greenville, SC location. The Seller will perform certain manufacturing and application services for Chase at the Seller’s Elgin, IL location for three years. The purchase was funded entirely with available cash on hand.

Since the effective date for this acquisition, January 30, 2015, the financial results of the specialty chemical intermediates product line have been included in the Company’s financial statements within the Industrial Materials operating segment. The acquisition was accounted for as a business combination under ASC Topic 805, “Business Combinations.” In accordance with this accounting standard, the Company expensed $584 of acquisition-related costs during both the three and six month periods ended February 28, 2015 to acquisition-related costs.

Purchase accounting was completed in the quarter ended May 31, 2015 (third quarter of fiscal 2015) with no material adjustments made to the initial amounts recorded at the end of the second fiscal quarter. The purchase price has been

19

CHASE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

In thousands, except share and per share amounts

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
Inventory	$	610
Property, plant & equipment		1,064
Goodwill		6,371
Intangible assets		25,240
Total purchase price	$	33,285

The excess of the purchase price over the net tangible and intangible assets acquired resulted in goodwill of $6,371 that is largely attributable to the synergies and economies of scale from combining the operations and technologies of Chase and the two product lines, particularly as it pertains to the expansion of the Company's product and service offerings, the established workforce, and marketing efforts. This goodwill is not deductible for income tax purposes.

All assets, including goodwill, acquired as part of the specialty chemical intermediates product line are included in the Industrial Materials operating segment. Identifiable intangible assets purchased with this transaction are as follows:

Intangible Asset	Amount		Useful life
Customer relationships	$	21,300	8	years
Technology		2,700	7	years
Trade name		910	7	years
Backlog		330	2	months
Total intangible assets	$	25,240

Supplemental Pro Forma Data

The following table presents the pro forma results of the Company for the three and six month periods ended February 28, 2015 as though the specialty chemical intermediates product line acquisition described above occurred on September 1, 2013 (the first day of fiscal 2014). The actual revenue and expenses for the specialty chemical intermediates product line acquisition are included in the Company’s fiscal 2016 and 2015 consolidated results beginning on January 30, 2015. The pro forma results include adjustments for the estimated amortization of intangibles, acquisition-related costs, sale of inventory step-up cost and the income tax impact of the pro forma adjustments at the statutory rate of 35%. The following pro forma information is not necessarily indicative of the results that would have been achieved if the acquisition had been effective on September 1, 2013 (the first day of fiscal 2014).

	Three Months Ended		Six Months Ended
	February 28, 2015		February 28, 2015
Revenue	$	55,873	$	116,766
Net income		4,955		12,329
Net income attributable to Chase Corporation		4,955		12,234
Net income  available to common shareholders, per common and common equivalent share
Basic earnings per share	$	0.54	$	1.34
Diluted earnings per share	$	0.53	$	1.32

Note 15 – Exit Costs Related to Idle Facility

20

CHASE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

In thousands, except share and per share amounts

In the quarter ended February 29, 2016, the Company recognized $209 in expenses to raze its Randolph, MA facility, which has been idle with regard to production for several years. Additionally, the Company began marketing the site for sale and reclassified the net book value of the facility to assets held for sale at February 29, 2016. These actions were taken as part of the Company’s on-going facility consolidation and rationalization initiative. The Company anticipates an additional $800 in expenses associated with completing the project, and expects the demolition work to be completed during the third fiscal quarter, with the sale of the property to follow. 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 the Company decides to dispose of an asset 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 additional impairments due to declines 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. 

In the second quarter of fiscal 2016, the Company, as part of its on-going facility consolidation and rationalization initiative, committed to a plan to actively market for sale its Paterson, NJ property. Chase owns the building and leases the land from the landowner.  Currently, the building is being leased to a tenant and the land is being sub-leased. Upon commitment to this plan, the Company reclassified the net book value of the related assets to assets held for sale.

Assets held for sale as of February 29, 2016 and August 31, 2015:

	February 29, 2016		August 31, 2015
Paterson, NJ - Building and leasehold improvements	$	590	$	—
Randolph, MA - Property, plant and equipment (a)		14		—
RodPack - Property, plant and equipment (b)		—		773
RodPack - Patents and other intangible assets (b)		—		316
Total	$	604	$	1,089

(a) See Note 15 to the condensed consolidated financial statements for additional information on Randolph, MA location assets held for sale as of February 29, 2016.

(b) See Note 8 to the condensed consolidated financial statements for additional information on RodPack assets held for sale as of August 31, 2015.

21

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, 2015.

Overview

The Company achieved growth over the prior year in revenue, operating income and net income attributable to Chase Corporation for both the quarter and year-to-date periods ended February 29, 2016. The specialty chemical intermediates product line, acquired in the second quarter of the prior year, continued to contribute to the Company’s revenue growth, as well as prove accretive to earnings, for both the quarter and year-to-date periods. Our pulling and detection, electronic coatings, coating and lining systems, and bridge and highway products all delivered higher sales volume and corresponding margin contribution for both the quarter and year-to-date periods, as compared to the prior year. Additionally, our electronic coatings product line results benefited from both a quarterly and year-to-date increase in royalty revenue generated on higher sales volumes obtained by our licensed manufacturer in Asia. Net income attributable to Chase Corporation further benefited in the six month period ended February 29, 2016 from the sale of our RodPack wind energy business during the first quarter of our fiscal year.

Second quarter and year-to-date revenue from our Industrial Materials segment increased over the prior year as a result of continued high demand for our pulling and detection, electronic coatings and specialty chemical intermediates products. All three product lines have proved strong contributors to both top and bottom line growth for fiscal 2016, and demonstrate Chase’s ability to grow profits through both existing and newly acquired product offerings. These increases in sales were partially offset by a reduction in demand for wire and cable and fiber optic cable components products.

Revenue for our Construction Materials segment decreased for both the current quarter and current year-to-date periods, as compared to the same periods in the prior year. Quarter-over-quarter and year-to-date sales volume decreases in our pipeline coatings product line resulted in the overall segment dip. Demand continued for pipeline coatings products produced at our Rye, UK facility for water infrastructure projects in the Middle East, but at a lower volume than achieved in the prior year periods. Our domestically produced pipeline coatings products, which sell predominantly into North American oil and gas markets, had a year-to-date increase in sales volume, but was down for the current quarter as compared to the second quarter of the prior year. Our domestically produced pipeline coatings products are more focused on maintenance and repair, and as such, have not been as heavily impacted by the dynamics in the markets into which they are sold. Our coating and lining systems products saw increased demand for both the quarter-over-quarter and year-to-date periods, as did our bridge and highway products, which partially offset the net results of the pipeline coatings product line.

Historically, the Company has experienced its most favorable financial operating results in its third and fourth fiscal quarters. Our results, especially the domestic sales in our Construction Materials segment, benefit from seasonal building, roadwork and infrastructure repair and maintenance trends in the second half of our fiscal year. These same trends result in historically lower overall results during our second quarter, when many of the markets into which we sell are negatively affected by winter-weather conditions. During the remainder of fiscal 2016, we will continue to focus on our core strategies: generating organic growth, by building upon our core businesses and leveraging those technologies to new markets; maintaining an active M&A program, with an emphasis on identifying potential acquisition targets to further facilitate strategic growth; and controlling operating costs, by leveraging our existing resources and further streamlining our processes.

Our balance sheet remains strong, with cash on hand of $51,708,000 and a current ratio of 4.2.  Our $15,000,000 line of credit is fully available, while the balance of our term debt is $47,600,000.

22

We have two reportable segments as summarized below:

Segment	Product Lines	Manufacturing Focus and Products
Industrial Materials	Wire and Cable Electronic 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 for electronics; laminated durable papers, packaging and industrial laminate products; 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; Dualite brand microspheres; and polyurethane dispersions.
Construction Materials	Pipeline Bridge and Highway Coating and Lining Systems Building Envelope	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) 50% owned joint venture until October 31, 2014, when we purchased the remaining 50% non-controlling interest.

23

Results of Operations

Revenue and Operating Profit by Segment are 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 29, 2016			Revenue		February 28, 2015			Revenue		February 29, 2016			Revenue		February 28, 2015			Revenue
Revenue
Industrial Materials	$	43,769		80	%	$	40,330		77	%	$	87,068		77	%	$	82,725		76	%
Construction Materials		11,155		20	%		11,974		23	%		25,334		23	%		25,512		24	%
Total	$	54,924				$	52,304				$	112,402				$	108,237
				% of					% of					% of					% of
	Three Months Ended			Segment		Three Months Ended			Segment		Six Months Ended			Segment		Six Months Ended			Segment
	February 29, 2016			Revenue		February 28, 2015			Revenue		February 29, 2016			Revenue		February 28, 2015			Revenue
Income before income taxes
Industrial Materials	$	13,271		30	%	$	10,213	(b)	25	%	$	26,200	(d)	30	%	$	22,828	(b)	28	%
Construction Materials		3,668		33	%		2,592		22	%		9,123		36	%		6,465		25	%
Total for reportable segments		16,939		31	%		12,805		24	%		35,323		31	%		29,293		27	%
Corporate and Common Costs		(6,186)	(a)				(6,549)	(c)				(12,934)	(a)				(12,268)	(c)
Total	$	10,753		20	%	$	6,256		12	%	$	22,389		20	%	$	17,025		16	%

(a) Includes Randolph, MA facility exit and demolition costs of $209 incurred during the period

(b) Includes $49 of expenses related to inventory step-up in fair value related to the January 2015 acquisition of the specialty chemical intermediates product line

(c) Includes $584 in expenses related to the January 2015 acquisition of the specialty chemical intermediates product line

(d) Includes both a $1,031 gain on sale of our RodPack wind energy business contained within our structural composites product line and a $365 write-down on certain other structural composites assets based on usage constraints following the sale, both recognized in November 2015

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Total Revenue

Total revenue increased $2,620,000 or 5% to $54,924,000 for the quarter ended February 29, 2016 compared to $52,304,000 in the same quarter of the prior year.  Total revenue increased $4,165,000 or 4% to $112,402,000 in the fiscal year-to-date period compared to $108,237,000 in the same period in fiscal 2015.

Revenue in our Industrial Materials segment increased $3,439,000 or 9% and $4,343,000 or 5% in the current quarter and year-to-date periods, respectively. The increase in this segment compared to the prior year periods was primarily due to the following for the current quarter and year-to-date periods, respectively:  (a) sales from our specialty chemical intermediates product line, which was acquired in the second quarter of the prior year, had increases in sales volume of $3,380,000 and $8,216,000; (b) increased sales volume of $1,043,000 and $1,650,000 from our pulling and detection products, as we continue to meet the utility and telecommunication industries’ high demand for our products, and (c) revenue increases of $484,000 and $556,000 from our electronic coatings products, inclusive of the product line’s industrial coatings offerings, driven primarily by both increased demand from the North American automotive and appliance industries, and increased royalty revenue generated by higher sales volumes obtained by our licensed manufacturer in Asia.  These increases were partially offset by: (a) decreased sales volume of our wire and cable products in the current quarter and year-to-date periods of $933,000 and $3,726,000, respectively, reflecting a year-over-year trend of reduced product demand from the energy and mining-related markets; and (b) quarter-over-quarter and year-to-date reductions of $770,000 and $1,205,000, respectively, in sales of our fiber optic cable components products. In addition, while second quarter sales volume for our electronic materials products was up $82,000 year-over-year, sales volume decreased $970,000 on a year-to-date basis from the prior year.

Revenue from our Construction Materials segment decreased $819,000 or 7% and $178,000 or 1% in the current quarter and year-to-date periods, respectively.  The decrease in our Construction Materials segment compared to the prior year periods was primarily due to net decreases in our pipeline coatings products sales for both the quarter-over-quarter and year-to-date periods of $1,241,000 and $2,052,000, respectively. While sales for our domestically produced pipeline products decreased compared to the second quarter of the prior year, our year-to-date sales continued to exceed our prior year-to-date results. Middle East water infrastructure project demand for pipeline coatings products produced at our Rye, UK facility remained solid, but at a lower volume than obtained in both the quarter-over-quarter and year-to-date periods in the prior year. These decreases were partially offset by our coating and lining systems, whose sales exceeded prior year quarter and year-to-date results by $515,000 and $1,563,000, respectively. These product offerings continue to benefit from increased acceptance in architectural and general waterproofing applications. The decreases were also partially offset by bridge and highway products, which early in our fiscal year capitalized on a weather-lengthened road construction season, with quarter-to-date and year-over-year increases of $7,000 and $558,000 over the prior year second quarter and prior year-to-date periods, respectively.

Cost of Products and Services Sold

Cost of products and services sold increased $660,000 or 2% to $34,895,000 for the quarter ended February 29, 2016, compared to $34,235,000 in the prior year quarter.  Cost of products and services sold increased $897,000 or 1% to $69,612,000 in the fiscal year-to-date period compared to $68,715,000 in the same period in fiscal 2015.

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				Six Months Ended
Cost of products and services sold	February 29, 2016		February 28, 2015		February 29, 2016		February 28, 2015
Industrial Materials	63	%	65	%	62	%	63	%
Construction Materials	67	%	69	%	61	%	65	%
Total	64	%	65	%	62	%	63	%

Cost of products and services sold in our Industrial Materials segment were $27,374,000 and $54,205,000 in the current quarter and year-to-date periods compared to $26,022,000 and $52,128,000 in the comparable periods in the prior year.  Cost of products and services sold in our Construction Materials segment were $7,521,000 and $15,407,000 for the quarter and year-to-date periods ended February 29, 2016, compared to $8,213,000 and $16,587,000 in the same periods

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of the prior year.  As a percentage of revenue, cost of products and services sold decreased for both Industrial Materials and Construction Materials, for both the quarter and year-over-year periods. These decreases were primarily due to product mix, as we had decreased sales volume from our lower margin products.  We continue to closely monitor raw material pricing across all product lines to preserve margins. This monitoring includes the price tracking of those commodities which can both directly and indirectly affect the purchase price of our raw materials and the demand and sales price for our finished goods.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased $1,114,000 or 10% to $10,226,000 for the quarter ended February 29, 2016 compared to $11,340,000 in the prior year quarter. As a percentage of revenue, selling, general and administrative expenses decreased to 19% in the current fiscal quarter compared to 22% in the prior year period. Selling, general and administrative expenses decreased $399,000 or 2%to $21,736,000 in the fiscal year-to-date period compared to $22,135,000 in the same period in fiscal 2015.  As a percentage of revenue, selling, general and administrative expenses decreased to 19% in the current fiscal year-to-date period compared to 20% in the prior year period. The percentage decrease for both the current fiscal quarter and year-to-date period compared to the prior year periods, respectively, was primarily attributable to: (a) decreases in international sales commissions of $377,000 and $651,000 based on a change in commission structure in the current year; (b) $180,000 and $26,000 decreases in medical and dental insurance expenditures; and (c) net decreases of $181,000 and $162,000 in expense recognized in association with the Company’s nonqualified retirement savings plan for certain key employees and directors. These decreases were partially offset by quarter-over-quarter and year-to-date increases in amortization expense of $219,000 and $952,000, respectively, which are predominantly related to our January 30, 2015 acquisition of the specialty chemical intermediates product line. In order to temper and eliminate the growth of expenses, the Company has and will continue to leverage its existing resources and streamline its processes. Controlling costs will continue to be one of our core operating strategies throughout the remainder of fiscal 2016, and into the future.

Exit Costs Related to Idle Facility

In the quarter ended February 29, 2016, the Company recognized $209,000 in demolition costs associated with its site in Randolph, MA, which has been idle with regard to production for several years. The Company also began marketing the site for sale. 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. Prior to the current fiscal year, production previously housed in Randolph, MA had been relocated to the Company’s Oxford, MA and Blawnox, PA locations.The Company anticipates an additional $800,000 in expenses associated with completing the project, and expects the demolition work to be completed during the third fiscal quarter, with the sale of the property to follow.

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Write-down of Certain Assets Under Construction

In the first quarter of fiscal 2016, we recorded a $365,000 charge related to the full write-down of certain structural composites tangible assets (construction in progress) located in our Granite Falls, NC facility. Based on the first quarter sale of our RodPack wind energy business (and related intangible assets) also contained within the structural composites product line, a limitation was placed on the Company’s ability to sell certain other goods produced by the product line, resulting in our determination to fully write-down certain assets under construction during the first quarter of fiscal 2016.

Acquisition-Related Costs

In the three months ended February 28, 2015, the Company incurred $584,000 of acquisition costs related to our acquisition of the specialty chemical intermediates product line.   This acquisition was accounted for as a business combination in accordance with applicable accounting standards, and as such all related professional service fees (i.e., banking, legal, accounting, actuarial, etc.) were expensed as incurred during the period ended February 28, 2015.   

Interest Expense

Interest expense decreased $10,000 or 4% to $260,000 for the quarter ended February 29, 2016 compared to $270,000 in the prior year second quarter.  Interest expense decreased $34,000 or 6% to $510,000 for the fiscal year-to-date period compared to $544,000 in the same period in fiscal 2015.  The decrease in interest expense from the prior year period is a result of a reduction in our overall average debt balance through principal payments made from operating cash flow over the past year.

Gain on Sale of Business

In the first quarter of fiscal 2016, we sold the RodPack wind energy business formerly contained within our structural composites product line. This transaction resulted in a pre-tax book gain of $1,031,000, which was recorded in the six month period ended February 29, 2016.The Company will provide ongoing development support to the buyer for which we will receive additional consideration upon the completion of services.

Other Income (Expense)

Other income (expense) was an income of $1,419,000 in the quarter ended February 29, 2016 compared to an income of $381,000 in the same period in the prior year, a difference of $1,038,000.  Other income (expense) was an income of $1,388,000 for the fiscal year-to-date period compared to an income of $766,000 in the same period in the prior year, an increase of $622,000.  Other income (expense) primarily includes interest income and 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.  Income in the current quarter and year-to-date periods is primarily the result of sales made from our UK-based operations and denominated in US dollars and euros.

Income Taxes

The effective tax rates for the second quarter and six month period ended February 29, 2016 were 35.2% and 35.6%, respectively, and 35% for both the quarter and year-to-date period ended February 28, 2015.

Non-Controlling Interest

The income (loss) from non-controlling interest relates to a joint venture we had, prior to our October 2014 acquisition of the 50% outstanding non-controlling membership interest.  The joint venture between the Company and its now-former joint venture partner (an otherwise unrelated party) was managed and operated on a day-to-day basis by the Company.The $95,000 recorded in the condensed consolidated statement of operations as net income attributable to non-controlling interest for the six month period ended February 28, 2015, represents the now-former joint venture partner’s share of the results of operations of the JV for the period from September 1, 2014 through October 31, 2014.

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Net Income Attributable to Chase Corporation

Net income attributable to Chase Corporation increased $2,906,000 or 71% to $6,972,000 in the quarter ended February 29, 2016 compared to $4,066,000 in the prior year second quarter.  The increase in net income in the current quarter is primarily due to increased sales for the period, including the inclusion of the specialty chemical intermediates product line for the full three months of the current fiscal quarter, as well asforeign exchange gains recognized.

Net income attributable to Chase Corporation increased $3,450,000 or 31% to $14,421,000 in the six months ended February 29, 2016 compared to $10,971,000 in the same period in the prior year.  The increase in net income in the current six month period is primarily due to increased sales volume, including increases in revenue and earnings provided by the recently acquired specialty chemical intermediates product line, and a gain on the sale of our RodPack wind energy business in November 2015. These increases were partially offset by the recognition of increased amortization expense associated with the recent product line acquisition, and the structural composites asset write-down charge in the first quarter referenced above.

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Other Important Performance Measures

We believe that EBITDA and Adjusted EBITDA are useful performance measures.  They are used by our executive management team and Board of Directors 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 and Adjusted EBITDA are commonly used by financial analysts and others in the industries in which the Company operates and thus provide useful information to investors.  EBITDA and Adjusted EBITDA are non-GAAP financial measures.

We define EBITDA as follows:  net income attributable to Chase Corporation 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.

The use of EBITDA and Adjusted EBITDA 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.  Our measurements of EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures used by other companies.

The following table provides a reconciliation of net income attributable to Chase Corporation, 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				Six Months Ended
	February 29, 2016		February 28, 2015		February 29, 2016		February 28, 2015
Net income attributable to Chase Corporation	$	6,972	$	4,066	$	14,421	$	10,971
Interest expense		260		270		510		544
Income taxes		3,781		2,190		7,968		5,959
Depreciation expense		1,391		1,395		2,864		2,812
Amortization expense		1,920		1,701		3,836		2,884
EBITDA	$	14,324	$	9,622	$	29,599	$	23,170
Exit costs related to idle facility (a)		209		—		209		—
Gain on sale of business (b)		—		—		(1,031)		—
Write-down of certain assets under construction (c)		—		—		365		—
Acquisition-related costs (d)		—		584		—		584
Cost of sale of inventory step-up (e)		—		49		—		49
Adjusted EBITDA	$	14,533	$	10,255	$	29,142	$	23,803

(a) Represents costs incurred to raze the idle Randolph, MA facility in preparation for sale of the property

(b) Represents gain on sale of the RodPack wind energy business contained within the structural composites product line that was completed in November 2015

(c) Represents a write-down of certain structural composites assets under construction based on usage constraints recognized following the sale of the RodPack wind energy business in November 2015

(d) Represents costs related to the January 2015 acquisition of the specialty chemical intermediates product line

(e) Represents expenses related to the step-up in fair value of inventory through purchase accounting from the January 2015 acquisition of the specialty chemical intermediates product line

Liquidity and Sources of Capital

Our overall cash and cash equivalents balance increased $7,889,000 to $51,708,000 at February 29, 2016, from $43,819,000 at August 31, 2015.  The increased cash balance is primarily attributable to cash from operations and the sale of the RodPack wind energy business formerly contained within our structural composites product line.  Of the

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above noted amounts, $23,351,000 and $18,659,000 were held outside the U.S. by our foreign subsidiaries as of February 29, 2016 and August 31, 2015, respectively. Given our cash position and borrowing capability in the U.S. 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 to be permanently reinvested. Accordingly, we recognize a deferred tax liability for the estimated future tax effects attributable to temporary differences due to these unremitted earnings. In the event that circumstances should 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 $19,643,000 in the first six months of fiscal year 2016 compared to $7,789,000 in the prior year period.  Cash provided by operations during the first six months of fiscal 2016 was primarily related to operating income and a decrease in accounts receivable (driven primarily by collections on international sales, which customarily have longer collection terms), and a reduction in our overall inventory balance. These were offset by decreases in accounts payable and accrued compensation and other expenses. The decrease in accrued compensation and other expenses related primarily to the payment of the Company’s annual employee incentive plan in November 2015.

The ratio of current assets to current liabilities was 4.2 as of February 29, 2016 compared to 3.2 as of August 31, 2015.  The increase in our current ratio at February 29, 2016 was primarily attributable to an increase in cash and cash equivalents and decreases in accounts payable and accrued payroll and other compensation, due to the payment of our annual incentive plan in November 2015.

Cash flow provided by investing activities of $587,000 was primarily due to the sale of the RodPack wind energy business in November 2015, partially offset by cash paid for purchases of machinery and equipment at our manufacturing locations during the first six months of fiscal 2016.

Cash flow used in financing activities of $10,204,000 was primarily due to scheduled payments made on the bank loans used to finance our June 2012 acquisition of NEPTCO, as well as payment of our annual dividend in December 2015 (both of which are described in more detail below).

On October 28, 2015, we announced a cash dividend of $0.65 per share (totaling $5,999,000).  The dividend was paid on December 4, 2015 to shareholders of record on November 9, 2015.

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 “CreditFacility”). The applicable interest rate is based on the effective LIBOR plus a range of 1.75% to 2.25%, depending on our consolidated leverage ratio.  At February 29, 2016, the applicable interest rate was 2.18% per annum and the outstanding principal amount was $47,600,000.  We are required to repay 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 to $2,100,000 per quarter thereafter through March 2017.  The Credit Facility matures in June 2017, at which time the remaining principal balance will be due. Prepayment of the Credit Facility is allowed at any time.

We have a revolving line of credit with Bank of America (the “Revolver”) totaling $15,000,000, which bears interest at LIBOR plus a 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 both February 29, 2016, and March 31, 2016, the entire amount of $15,000,000 was available for use.  The Revolver is scheduled to mature in June 2017.  This Revolver allows for increased flexibility for working capital requirements going forward, and we plan to use this availability to help finance our cash needs, including potential acquisitions, in future periods.

The Credit Facility with Bank of America contains customary affirmative and negative covenants that, among other things, restrict our ability to incur additional indebtedness.  It also requires 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

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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 as of February 29, 2016.

Currently, we have several on-going capital projects, as well as our facility consolidation and rationalization initiative, which are important to our long-term strategic goals.  Machinery and equipment will be added as needed to increase capacity or enhance operating efficiencies in our production facilities.

During the second quarter, we took action to market for sale two non-production properties owned by the Company. Included in this was the razing of our idle facility in Randolph, MA, which is being done in part to make the location more attractive to a potential buyer. We anticipate the demolition work to be completed during the third fiscal quarter, with the sale of the property to follow.   Our Paterson, NJ site was reclassified to assets held for sale during the quarter, and we are currently working to execute a sales agreement with terms we deem beneficial to the Company.

We may also consider the acquisition of companies or other assets in fiscal 2016 or in future periods which are complementary to our business.  We believe that our existing resources, including cash on hand and our Revolver, together with cash generated from operations and additional bank borrowings, will be sufficient to fund our cash flow requirements through at least the next twelve months.  However, there can be no assurances that additional financing 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 off-balance sheet arrangements.

Contractual Obligations

Please refer to Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section in our Annual Report on Form 10-K for the fiscal year ended August 31, 2015 for a complete discussion of our contractual obligations.

Recent Accounting Standards

In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers,”  which will replace most of the existing revenue recognition guidance under U.S. Generally Accepted Accounting Principles. The core principle of the ASU is that an entity should recognize revenue for the transfer of goods or services equal to the amount that it expects to be entitled to receive for those goods or services. The ASU requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments. The ASU will be effective for the Company beginning September 1, 2018 (fiscal 2019), including interim periods in its fiscal year 2019, and allows for either retrospective or modified retrospective methods of adoption. The Company is in the process of determining the method of adoption and assessing the impact of this ASU on the Company’s consolidated financial position, results of operations and cash flows.

In July 2015, the FASB issued ASU No. 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory.” Under this accounting guidance, inventory will be measured at the lower of cost and net realizable value and other options that currently exist for market value will be eliminated. ASU No. 2015-11 defines net realizable value as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. No other changes were made to the current guidance on inventory measurement. This accounting guidance is effective for us in the first quarter of fiscal 2018. Early adoption is permitted. We are currently evaluating the impact of the adoption of this accounting standard update on our consolidated financial statements.

In November 2015, the FASB issued ASU No. 2015-17, “Income Taxes – Balance Sheet Classification of Deferred Taxes.” The purpose of the standard is to simplify the presentation of deferred taxes on a classified balance sheet.  Under current GAAP, deferred income tax assets and liabilities are separated into current and noncurrent amounts in the

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balance sheet.  The amendments in ASU 2015-17 require that all deferred tax assets and liabilities be classified as noncurrent in the balance sheet.  The ASU will be effective for the Company beginning September 1, 2017 (fiscal 2018), including interim periods in its fiscal year 2018, but with early adoption permitted.  The Company does not expect the adoption of ASU 2015-17 to have a material impact its financial statements or presentation.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (a) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (b) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.  Changes were made to align lessor accounting with the lessee accounting model and ASU No. 2014-09, “Revenue from Contracts with Customers.”  The new lease guidance simplifies the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. The ASU will be effective for the Company beginning September 1, 2019 (fiscal 2020). Early application is permitted for all public business entities upon issuance. Lessees must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees may not apply a full retrospective transition approach. We are currently evaluating the impact of the application of this accounting standard update on our consolidated financial position, results of operations and cash flows.

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 six months ended February 29, 2016 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, 2015.

Forward Looking Information

The part of this Quarterly Report on Form 10-Q captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contains certain forward-looking statements, which involve risks and uncertainties.  Forward-looking statements include, without limitation, statements as to our future operating results, seasonality expectations, plans for manufacturing facilities, future economic conditions and expectations or plans relating to the implementation or realization of our strategic goals and future growth.  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.  Readers should refer to the discussions under “Forward Looking Information” and “Risk Factors” contained in our Annual Report on Form 10-K for the fiscal year ended August 31, 2015 concerning certain factors that could cause our actual results to differ materially from the results anticipated in such forward-looking statements. These discussions and Risk Factors are hereby incorporated by reference into this Quarterly Report.

Item 3 — Quantitative and Qualitative Disclosures about Market Risk

We limit the amount of credit exposure to any one issuer.  At February 29, 2016, other than our restricted investments (which are restricted for use in a non-qualified retirement savings plan for certain key employees and members of the

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Board of Directors), all of our funds were either in demand deposit accounts or investment instruments that meet high credit quality standards such as money market funds, government securities, or commercial paper.

Our domestic operations have limited currency exposure since substantially all transactions are denominated in U.S. dollars. However, our European operations are subject to currency exchange fluctuations. We continue to review our policies and procedures to control this exposure while maintaining the benefit from these operations and sales to European customers. As of February 29, 2016, the Company had cash balances in the following foreign currencies (with USD equivalents):

Currency Code	Currency Name	USD Equivalent at February 29, 2016
GBP	British Pound	$	10,849,000
EUR	Euro	$	7,634,000
CNY	Chinese Yuan	$	353,000
CAD	Canadian Dollar	$	177,000

We will continue to review our current cash balances denominated in foreign currency in light of current tax guidelines, working capital requirements, infrastructure improvements and potential acquisitions.

We recognized a foreign currency translation loss for the six months ended February 29, 2016 in the amount of $4,010,000 related to our European operations, which is recorded in other comprehensive income (loss) within our Statement of Equity and Statement of Comprehensive Income.  We do not have or utilize any derivative financial instruments.

We pay interest on our outstanding long-term debt at interest rates that fluctuate based upon changes in various base interest rates. The carrying value of our long-term debt, including current portion, was $47,600,000 at February 29, 2016.  See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Sources of Capital” and Note 12 — “Fair Value Measurements” to the Consolidated Financial Statements for additional information regarding our outstanding long-term debt.  An immediate hypothetical 10% change in variable interest rates would not have a material effect on our Consolidated Financial Statements.

Item 4 — Controls and Procedures

Evaluation of disclosure controls and procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our 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 management, including our 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 out a variety of ongoing procedures under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, to evaluate the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of the end of the period covered by this report.

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Changes in internal control over financial reporting

There have not been any changes in the Company’s internal control over financial reporting during the second quarter of fiscal 2016 that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

Part II — OTHER INFORMATION

Item 1 — Legal Proceedings

We are involved from time to time in litigation incidental to the conduct of our business.  Although we do not expect that the outcome in any of these matters, individually or collectively, will have a material adverse effect on our financial condition, results of operations or cash flows, litigation is inherently unpredictable.  Therefore, judgments could be rendered or settlements entered into, that could adversely affect our operating results or cash flows in a particular period.  We routinely assess all of our litigation and threatened litigation as to the probability of ultimately incurring a liability, and record our best estimate of the ultimate loss in situations where we assess the likelihood of loss as probable.

Item 1A — Risk Factors

Please refer to Item 1A in our Form 10-K for the fiscal year ended August 31, 2015 for a complete discussion of the risk factors which could materially affect our business, financial condition or future results.

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Item 6 — Exhibits

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	XBRL Instance Document
101.SCH	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

*Furnished, not filed

35

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
Dated: April 8, 2016	By:	/s/ Adam P. Chase
		Adam P. Chase,
		President and Chief Executive Officer
Dated: April 8, 2016	By:	/s/ Kenneth J. Feroldi
		Kenneth J. Feroldi
		Treasurer and Chief Financial Officer

36

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Adam P. Chase, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Chase Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date:  April 8, 2016

/s/ Adam P. Chase

Adam P. Chase

President and Chief Executive Officer

(Principal executive officer)

1

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Kenneth J. Feroldi, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Chase Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date:  April 8, 2016

/s/ Kenneth J. Feroldi

Kenneth J. Feroldi

Treasurer and Chief Financial Officer

(Principal financial officer)

1

EX-32.1

Exhibit 32.1

CERTIFICATION

PURSUANT TO

18 U.S.C. 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned officer of Chase Corporation (the “Company”) hereby certifies that the Company’s Quarterly Report on Form 10-Q for the period ended  February 29, 2016 (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. This certificate is furnished solely pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Date:  April 8, 2016

/s/ Adam P. Chase

Adam P. Chase

President and Chief Executive Officer

(Principal executive officer)

1

EX-32.2

Exhibit 32.2

CERTIFICATION

PURSUANT TO

18 U.S.C. 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned officer of Chase Corporation (the “Company”) hereby certifies that the Company’s Quarterly Report on Form 10-Q for the period ended February 29, 2016 (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. This certificate is furnished solely pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Date:  April 8, 2016

/s/ Kenneth J. Feroldi

Kenneth J. Feroldi

Treasurer and Chief Financial Officer

(Principal financial officer)

1

XML

Document and Entity Information - shares	6 Months Ended
	Feb. 29, 2016	Mar. 31, 2016
Document and Entity Information
Entity Registrant Name	CHASE CORP
Entity Central Index Key	0000830524
Document Type	10-Q
Document Period End Date	Feb. 29, 2016
Amendment Flag	false
Current Fiscal Year End Date	--08-31
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		9,244,052
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q2

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Feb. 29, 2016	Aug. 31, 2015
Current Assets:
Cash & cash equivalents	$ 51,708	$ 43,819
Accounts receivable, less allowance for doubtful accounts of $551 and $705	32,918	39,488
Inventories	27,539	29,476
Prepaid expenses and other current assets	2,620	2,174
Due from sale of business	457
Assets held for sale	604	1,089
Deferred income taxes	2,255	2,255
Total current assets	118,101	118,301
Property, plant and equipment, net	37,397	40,921
Other Assets:
Goodwill	43,668	44,123
Intangible assets, less accumulated amortization of $31,773 and $28,882	40,662	44,852
Cash surrender value of life insurance	7,140	7,133
Restricted investments	1,421	1,410
Funded pension plan	708	634
Deferred income taxes	365	390
Other assets	338	133
Total assets	249,800	257,897
Current Liabilities:
Current portion of long-term debt	8,400	8,400
Accounts payable	11,739	15,599
Accrued payroll and other compensation	3,842	6,286
Accrued expenses	3,945	4,448
Accrued income taxes	449	2,783
Total current liabilities	28,375	37,516
Long-term debt, less current portion	39,200	43,400
Deferred compensation	2,196	2,230
Accumulated pension obligation	13,067	12,901
Other liabilities	77	85
Accrued income taxes	1,249	1,249
Deferred income taxes	$ 6,187	$ 6,174
Commitments and Contingencies (Note 10)
Equity:
Common stock, $0.10 par value: Authorized 20,000,000 shares; 9,244,052 shares at February 29, 2016 and 9,191,958 shares at August 31, 2015 issued and outstanding	$ 924	$ 919
Additional paid-in capital	14,898	14,296
Accumulated other comprehensive loss	(11,908)	(7,986)
Retained earnings	155,535	147,113
Total equity	159,449	154,342
Total liabilities and equity	$ 249,800	$ 257,897

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Feb. 29, 2016	Aug. 31, 2015
CONSOLIDATED BALANCE SHEETS
Accounts receivable, allowance for doubtful accounts (in dollars)	$ 551	$ 705
Intangible assets, accumulated amortization (in dollars)	$ 31,724	$ 28,882
First Serial Preferred Stock, par value (in dollars per share)	$ 1.00	$ 1.00
First Serial Preferred Stock, Authorized shares	100,000	100,000
First Serial Preferred Stock, issued shares	0	0
Common stock, par value (in dollars per share)	$ 0.10	$ 0.10
Common stock, Authorized shares	20,000,000	20,000,000
Common stock, shares issued	9,244,052	9,191,958
Common stock, shares outstanding	9,244,052	9,191,958

XML

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Feb. 29, 2016	Feb. 28, 2015	Feb. 29, 2016	Feb. 28, 2015
Revenue
Sales	$ 53,706	$ 51,380	$ 110,452	$ 106,670
Royalties and commissions	1,218	924	1,950	1,567
Total revenues	54,924	52,304	112,402	108,237
Costs and Expenses
Cost of products and services sold	34,895	34,235	69,612	68,715
Selling, general and administrative expenses	10,226	11,340	21,736	22,135
Exit costs related to idle facility (Note 15)	209		209
Write-down of certain assets under construction (Note 8)			365
Acquisition related costs (Note 14)		584		584
Operating income	9,594	6,145	20,480	16,803
Interest expense	(260)	(270)	(510)	(544)
Gain on sale of business (Note 8)			1,031
Other (expense) income	1,419	381	1,388	766
Income before income taxes	10,753	6,256	22,389	17,025
Income taxes	3,781	2,190	7,968	5,959
Net income	6,972	4,066	14,421	11,066
Add: net gain attributable to non-controlling interest				(95)
Net income attributable to Chase Corporation	$ 6,972	$ 4,066	$ 14,421	$ 10,971
Net income available to common shareholders, per common and common equivalent share
Basic (in dollars per share)	$ 0.75	$ 0.45	$ 1.56	$ 1.20
Diluted (in dollars per share)	$ 0.74	$ 0.44	$ 1.54	$ 1.18
Weighted average shares outstanding
Basic (in shares)	9,155,365	9,065,511	9,148,493	9,057,738
Diluted (in shares)	9,292,224	9,224,985	9,287,486	9,213,431
Annual cash dividends declared per share			$ 0.65	$ 0.60

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Feb. 29, 2016	Feb. 28, 2015	Feb. 29, 2016	Feb. 28, 2015
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Net income	$ 6,972	$ 4,066	$ 14,421	$ 11,066
Other comprehensive income:
Net unrealized gain on restricted investments, net of tax	(127)	(20)	(99)	(8)
Change in funded status of pension plans, net of tax	93	109	187	219
Foreign currency translation adjustment	(2,995)	(818)	(4,010)	(2,909)
Total other comprehensive income (loss)	(3,029)	(729)	(3,922)	(2,698)
Comprehensive income	3,943	3,337	10,499	8,368
Comprehensive gain attributable to non-controlling interest				(95)
Comprehensive income attributable to Chase Corporation	$ 3,943	$ 3,337	$ 10,499	$ 8,273

XML

CONSOLIDATED STATEMENTS OF EQUITY - 6 months ended Feb. 29, 2016 - USD ($) $ in Thousands	Common Stock	Additional Paid-In Capital	Accumulated Other Comprehensive Income (loss)	Retained Earnings	Total
Balance at Aug. 31, 2015	$ 919	$ 14,296	$ (7,986)	$ 147,113	$ 154,342
Balance (in shares) at Aug. 31, 2015	9,191,958
Increase (Decrease) in Stockholders' Equity
Restricted stock grants, net of forfeitures	$ 3	(3)
Restricted stock grants, net of forfeitures (in shares)	29,884
Amortization of restricted stock grants		472			472
Amortization of stock option grants		140			140
Exercise of stock options	$ 4	633			637
Exercise of stock options (in shares)	40,608
Common stock received for payment of stock option exercises	$ (1)	(512)			(513)
Common stock received for payment of stock option exercises (in shares)	(10,455)
Cash dividend accrued, $0.65 per share				(5,999)	(5,999)
Increase in Minimum Pension Liability, net of tax $102			187		187
Foreign currency translation adjustment			(4,010)		(4,010)
Net unrealized gain on restricted investments, net of tax $51			(99)		(99)
Net income				14,421	14,421
Balance at Feb. 29, 2016	$ 924	14,898	$ (11,908)	$ 155,535	159,449
Balance (in shares) at Feb. 29, 2016	9,244,052
Increase (Decrease) in Stockholders' Equity
Excess tax benefit (expense) from stock based compensation		274			274
Common stock retained to pay statutory minimum withholding taxes on common stock	$ (1)	$ (402)			$ (403)
Common stock retained to pay statutory minimum withholding taxes on common stock (in shares)	(7,943)

XML

CONSOLIDATED STATEMENTS OF EQUITY (Parenthetical) $ in Thousands	6 Months Ended
	Feb. 29, 2016 USD ($) $ / shares
CONSOLIDATED STATEMENT OF EQUITY
Annual cash dividends declared per share | $ / shares	$ 0.65
Increase in Minimum pension liability, tax	$ 102
Net unrealized gain on restricted investments, tax	$ 52

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Feb. 29, 2016	Feb. 28, 2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$ 14,421	$ 11,066
Adjustments to reconcile net income to net cash provided by operating activities
Loss on write-down of certain assets under contruction	365
Gain on sale of business	(1,031)
Depreciation	2,864	2,812
Amortization	3,836	2,884
Cost of sale of inventory step-up		49
Provision for allowance for doubtful accounts	(136)	64
Stock based compensation	612	537
Realized gain on restricted investments	(63)	(75)
Decrease in cash surrender value life insurance	90	90
Excess tax expense from stock based compensation	(274)	(730)
Net cash provided by operating activities	19,643	7,789
Increase (decrease) from changes in assets and liabilities
Accounts receivable	5,877	(144)
Inventories	1,570	(1,617)
Prepaid expenses & other assets	(488)	(163)
Accounts payable	(3,596)	(1,216)
Accrued compensation and other expenses	(2,477)	(3,824)
Accrued income taxes	(1,893)	(2,029)
Deferred compensation	(34)	85
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment	(734)	(1,142)
Cost to acquire intangible assets	15	(10)
Contingent purchase price paid for acquisition		(33,285)
Net proceeds from sale of business	1,500
Increase in restricted investments	(102)	(58)
Payments for cash surrender value life insurance	(92)	(92)
Net cash provided by (used in) investing activities	587	(34,587)
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on long-term debt		2,000
Payments of principal on debt	(4,200)	(3,500)
Dividend paid	(5,999)	(5,477)
Proceeds from exercise of common stock options	124
Payments of statutory minimum taxes on stock options and restricted stock	(403)	(1,182)
Excess tax benefit from stock based compensation	274	730
Payment for acquisition of non-controlling interest		(500)
Net cash used in financing activities	(10,204)	(7,929)
INCREASE IN CASH & CASH EQUIVALENTS	10,026	(34,727)
Effect of foreign exchange rates on cash	(2,137)	(1,089)
CASH & CASH EQUIVALENTS, BEGINNING OF PERIOD	43,819	53,222
CASH & CASH EQUIVALENTS, END OF PERIOD	51,708	17,406
Non-cash Investing and Financing Activities
Common stock received for payment of stock option exercises	513	1,767
Property, plant & equipment additions included in accounts payable	$ 6	$ 23

XML

Basis of Presentation

6 Months Ended

Feb. 29, 2016

Basis of Presentation

Basis of Presentation

Note 1 - Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles 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 disclosure necessary for a complete presentation of Chase Corporation’s financial position, results of operations and cash flows, in conformity with generally accepted accounting principles.  Chase Corporation (the “Company,” “Chase,” “we,” or “us”) filed audited consolidated financial statements, which included all information and notes necessary for such complete presentation for the three years ended August 31, 2015 in conjunction with its 2015 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 29, 2016 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, 2015, which are contained in the Company’s 2015 Annual Report on Form 10-K.

The accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of normal recurring items) which are, in the opinion of management, necessary for a fair statement of the Company’s financial position as of February 29, 2016, the results of its operations, comprehensive income and cash flows for the interim periods ended February 29, 2016 and February 28, 2015, and changes in equity for the interim period ended February 29, 2016.

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 US dollar as the reporting currency for financial reporting.  The financial position and results of operations of the Company’s UK-based operations are measured using the UK pound sterling 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 functional currency for all of our other operations is the US 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 our foreign operations are included in other income / (expense) on the consolidated statements of operations.

On January 30, 2015, the Company acquired two product lines from Henkel Corporation (the “Seller”) for a purchase price of $33,285, excluding any acquisition-related costs.  As part of this transaction, Chase acquired the Seller’s microspheres product line, sold under the Dualite® brand, located in Greenville, SC, and obtained exclusive distribution rights and intellectual property related to the Seller’s polyurethane dispersions product line, operating in the Elgin, IL location. We refer to these collectively as our specialty chemical intermediates product line. Under the agreement, Chase entered into a ten-year facility operating lease at the Seller’s Greenville, SC location.  The Seller will perform certain manufacturing and application services for Chase at the Seller’s Elgin, IL location for three years following the acquisition. The purchase was funded entirely with available cash on hand. Since the effective date for this acquisition, the financial results of the specialty chemical intermediates product line have been included in the Company's financial statements within the Company’s Industrial Materials operating segment. Purchase accounting was completed in the quarter ended May 31, 2015 (third quarter of fiscal 2015) with no material adjustments made to the initial amounts recorded at the end of the second quarter of fiscal 2015. See Note 14 to the Condensed Consolidated Financial Statements for additional information on the acquisition of the specialty chemical intermediates product line.

On October 31, 2014, the Company purchased the 50% non-controlling membership interest of NEPTCO JV LLC (the "JV") owned by its now-former joint venture partner, an otherwise unrelated party. Because of the Company's controlling financial interest, the JV's assets, liabilities and results of operations have been consolidated within the Company's consolidated financial statements since June 27, 2012, the date the Company acquired NEPTCO. The Company continues to fully consolidate the assets, liabilities and results of operations of the JV, but no longer records an offsetting amount for a non-controlling interest subsequent to October 31, 2014. The $95recorded in the condensed consolidated statement of operations as net income attributable to non-controlling interest for the six month period ended February 28, 2015, represents the now-former joint venture partner’s share of the results of operations of the JV for the period from September 1, 2014 through October 31, 2014.

XML

Recent Accounting Policies

6 Months Ended

Feb. 29, 2016

Recent Accounting Policies

Summary of Significant Accounting Policies

Note 2 — Recent Accounting Policies

Recently Issued Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers,” which will replace most of the existing revenue recognition guidance under U.S. Generally Accepted Accounting Principles. The core principle of the ASU is that an entity should recognize revenue for the transfer of goods or services equal to the amount that it expects to be entitled to receive for those goods or services. The ASU requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments. The ASU will be effective for the Company beginning September 1, 2018 (fiscal 2019), including interim periods in its fiscal year 2019, and allows for either retrospective or modified retrospective methods of adoption. The Company is in the process of determining the method of adoption and assessing the impact of this ASU on the Company’s consolidated financial position, results of operations and cash flows.

In July 2015, the FASB issued ASU No. 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory.” Under this accounting guidance, inventory will be measured at the lower of cost and net realizable value, and other options that currently exist for market value will be eliminated. ASU No. 2015-11 defines net realizable value as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. No other changes were made to the current guidance on inventory measurement. This accounting guidance is effective for us in the first quarter of fiscal 2018. Early adoption is permitted. We are currently evaluating the impact of the adoption of this accounting standard update on our consolidated financial position, results of operations and cash flows.

In November 2015, the FASB issued ASU No. 2015-17, “Income Taxes – Balance Sheet Classification of Deferred Taxes.” The purpose of the standard is to simplify the presentation of deferred taxes on a classified balance sheet.  Under current GAAP, deferred income tax assets and liabilities are separated into current and noncurrent amounts in the balance sheet.  The amendments in ASU 2015-17 require that all deferred tax assets and liabilities be classified as noncurrent in the balance sheet.  The ASU will be effective for the Company beginning September 1, 2017 (fiscal 2018), including interim periods in its fiscal year 2018, but with early adoption permitted.  The Company does not expect the adoption of ASU 2015-17 to have a material impact on its financial statements or presentation.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (a) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (b) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.  Changes were made to align lessor accounting with the lessee accounting model and ASU No. 2014-09, “Revenue from Contracts with Customers.”  The new lease guidance simplifies the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. The ASU will be effective for the Company beginning September 1, 2019 (fiscal 2020). Early application is permitted for all public business entities upon issuance.Lessees must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees may not apply a full retrospective transition approach. We are currently evaluating the impact of the application of this accounting standard update on our consolidated financial position, results of operations and cash flows.

XML

Inventories

6 Months Ended

Feb. 29, 2016

Inventories

Inventories

Note 3 — Inventories

Inventories consist of the following as of February 29, 2016 and August 31, 2015:

	February 29, 2016		August 31, 2015
Raw materials	$	12,603	$	12,937
Work in process		6,678		6,539
Finished goods		8,258		10,000
Total Inventories	$	27,539	$	29,476

XML

Net Income Per Share

6 Months Ended

Feb. 29, 2016

Net Income Per Share

Net Income Per Share

Note 4 — Net Income Per Share

The Company has unvested share-based payment awards with a right to receive non-forfeitable 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				Six Months Ended
	February 29, 2016		February 28, 2015		February 29, 2016		February 28, 2015
Basic Earnings per Share
Net income attributable to Chase Corporation	$	6,972	$	4,066	$	14,421	$	10,971
Less: Allocated to participating securities		65		30		128		81
Net income available to common shareholders	$	6,907	$	4,036	$	14,293	$	10,890
Basic weighted average shares outstanding		9,155,365		9,065,511		9,148,493		9,057,738
Net income per share - Basic	$	0.75	$	0.45	$	1.56	$	1.20
Diluted Earnings per Share
Net income attributable to Chase Corporation	$	6,972	$	4,066	$	14,421	$	10,971
Less: Allocated to participating securities		65		30		128		81
Net income available to common shareholders	$	6,907	$	4,036	$	14,293	$	10,890
Basic weighted average shares outstanding		9,155,365		9,065,511		9,148,493		9,057,738
Additional dilutive common stock equivalents		136,859		159,474		138,993		155,693
Diluted weighted average shares outstanding		9,292,224		9,224,985		9,287,486		9,213,431
Net income per share - Diluted	$	0.74	$	0.44	$	1.54	$	1.18

For the three and six months ended February 29, 2016, stock options to purchase 21,275 and 26,381shares of common stock 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 months ended February 28, 2015, stock options to purchase 22,750 and 27,863shares of common stock were outstanding, but were not included in the calculation of diluted income per share because their inclusion would be anti-dilutive.  Included in the calculation of dilutive common stock equivalents are the unvested portion of restricted stock and stock options.

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Stock Based Compensation

6 Months Ended

Feb. 29, 2016

Stock Based Compensation

Stock Based Compensation

Note 5 — Stock-Based Compensation

In August 2014, the Board of Directors of the Company approved the fiscal year 2015 Long Term Incentive Plan (“2015 LTIP”) for the executive officers and other members of management.  The 2015 LTIP is an equity-based plan with a grant date of September 1, 2014 and contains a performance and service-based restricted stock grant of 6,993 shares in the aggregate, subject to adjustment, with a vesting date of August 31, 2017.  Based on the fiscal year 2015 financial results, 5,685 additional shares of restricted stock (total of 12,678 shares) were earned and granted subsequent to the end of fiscal year 2015 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 2015, the Board of Directors of the Company approved the fiscal year 2016 Long Term Incentive Plan (“2016 LTIP”) for the executive officers and other members of management.  The 2016 LTIP is an equity-based plan with a grant date of September 1, 2015 and contains the following equity components:

Restricted Shares — (a) a performance and service-based restricted stock grant of 6,962 shares in the aggregate, subject to adjustment based on fiscal 2016 results, with a vesting date of August 31, 2018.  Compensation expense is recognized on a ratable basis over the vesting period based on quarterly probability assessments; (b) a time-based restricted stock grant of 7,683 shares in the aggregate, with a vesting date of August 31, 2018. Compensation expense is recognized on a ratable basis over the vesting period.

Stock options — options to purchase 21,275 shares of common stock in the aggregate with an exercise price of $39.50 per share.  The options will vest in three equal annual installments beginning on August 31, 2016 and ending on August 31, 2018. The options granted will expire on September 1, 2025. Compensation expense is recognized over the period of the award on an annual basis consistent with the vesting terms.

During the first quarter of fiscal 2016, an additional grant of 5,000 restricted shares was issued to a non-executive member of management with a vesting date of October 20, 2020. Compensation expense is recognized on a ratable basis over the vesting period.

In February 2016, as part of their standard compensation for board service, non-employee members of the Board of Directors received a total grant of 4,554 shares of restricted stock ($219 grant date value) for service for the period from January 31, 2016 through January 31, 2017.  The shares of restricted stock will vest at the conclusion of this service period.  Compensation is recognized on a ratable basis over the twelve month vesting period.

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Segment Data & Foreign Operations

6 Months Ended

Feb. 29, 2016

Segment Data & Foreign Operations

Segment Data & Foreign Operations

Note 6 — Segment Data & Foreign Operations

The Company is organized into two operating segments, an Industrial Materials segment and a Construction Materials segment.  The segments are distinguished by the nature of the products and how they are delivered to their respective markets.

The Industrial Materials segment includes specified products that are used in, or integrated into, another company’s product, with demand typically dependent upon general economic conditions. Industrial Materials products 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, 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, and composite materials and elements.  This segment also includes glass-based strength element products designed to allow fiber optic cables to withstand mechanical and environmental strain and stress and which we operated as a joint venture prior to October 31, 2014. Further, beginning January 30, 2015, the Industrial Materials segment includes microspheres, sold under the Dualite brand, and polyurethane dispersions, both obtained through acquisition, and included in the Company’s specialty chemical intermediates product line.

The Construction Materials segment is composed of typically project-oriented product offerings that are primarily sold and used as “Chase” branded products. Construction Materials products include protective coatings for pipeline applications, coating and lining systems for use in 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 in the transportation and architectural markets. The following tables summarize information about the Company’s reportable segments:

	Three Months Ended						Six Months Ended
	February 29, 2016			February 28, 2015			February 29, 2016			February 28, 2015
Revenue
Industrial Materials	$	43,769		$	40,330		$	87,068		$	82,725
Construction Materials		11,155			11,974			25,334			25,512
Total	$	54,924		$	52,304		$	112,402		$	108,237
Income before taxes
Industrial Materials	$	13,271		$	10,213	(b)	$	26,200	(d)	$	22,828	(b)
Construction Materials		3,668			2,592			9,123			6,465
Total for reportable segments		16,939			12,805			35,323			29,293
Corporate and common costs		(6,186)	(a)		(6,549)	(c)		(12,934)	(a)		(12,268)	(c)
Total	$	10,753		$	6,256		$	22,389		$	17,025
Includes the following costs by segment:
Industrial Materials
Interest	$	195		$	225		$	382		$	455
Depreciation		954			976			1,945			1,953
Amortization		1,569			1,283			3,129			2,053
Construction Materials
Interest	$	65		$	45		$	128		$	89
Depreciation		260			280			524			569
Amortization		351			418			707			831

(a) Includes Randolph, MA facility exit and demolition costs of $209 incurred during the period

(b) Includes $49 of expenses related to inventory step-up in fair value related to the January 2015 acquisition of the specialty chemical intermediates product line

(c) Includes $584 in expenses related to the January 2015 acquisition of the specialty chemical intermediates product line

(d) Includes both a $1,031 gain on sale of our RodPack® wind energy business contained within our structural composites product line and a $365 write-down on certain other structural composites assets based on usage constraints following the sale, both recognized in November 2015

The Company’s products are sold worldwide.  For the quarters ended February 29, 2016 and February 28, 2015, sales from its operations located in the United Kingdom accounted for 11% and 14% of total Company revenue, respectively.In the current fiscal year-to-date period, sales from its operations located in the United Kingdom accounted for 10% of total Company revenue compared to 12% in the same period in fiscal 2015.  No other foreign geographic area accounted for more than 10% of consolidated revenue for the three or six month periods ended February 29, 2016 and February 28, 2015.

Total assets for the Company’s reportable segments as of February 29, 2016 and August 31, 2015:

	February 29,		August 31,
	2016		2015
Total assets
Industrial Materials	$	139,566	$	146,870
Construction Materials		39,868		48,016
Total for reportable segments		179,434		194,886
Corporate and common assets		70,366		63,011
Total	$	249,800	$	257,897

As of February 29, 2016 and August 31, 2015, the Company had long-lived assets (that provide future economic benefit beyond the current year or operating period, including buildings, equipment and leasehold improvements) of $3,423 and $3,947, respectively, located in the United Kingdom.   These balances exclude goodwill and intangibles of $7,047and $8,266, as of February 29, 2016 and August 31, 2015, respectively, associated with its operations in the United Kingdom.

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Goodwill and Other Intangibles

6 Months Ended

Feb. 29, 2016

Goodwill and Other Intangibles

Goodwill and Other Intangibles

Note 7 — Goodwill and Other Intangibles

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

	Industrial Materials		Construction Materials		Consolidated
Balance at August 31, 2015	$	33,390	$	10,733	$	44,123
Foreign currency translation adjustment		(430)		(25)		(455)
Balance at February 29, 2016	$	32,960	$	10,708	$	43,668

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 ten reporting units within its two 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. When testing, fair values of the reporting units and the related implied fair values of their respective goodwill are established using public company analysis and discounted cash flows.

The Company evaluates the possible impairment of goodwill annually each fourth quarter and whenever events or circumstances indicate the carrying value of goodwill may not be recoverable.

Intangible assets subject to amortization consist of the following as of February 29, 2016 and August 31, 2015:

	Weighted-Average		Gross Carrying		Accumulated		Net Carrying
	Amortization Period		Value		Amortization		Value
February 29, 2016
Patents and agreements	12.6	years	$	2,483	$	2,259	$	224
Formulas and technology	8.4	years		8,305		3,887		4,418
Trade names	5.9	years		7,185		4,475		2,710
Customer lists and relationships	9.3	years		54,413		21,103		33,310
			$	72,386	$	31,724	$	40,662
August 31, 2015
Patents and agreements	12.5	years	$	2,568	$	2,267	$	301
Formulas and technology	8.4	years		8,415		3,513		4,902
Trade names	5.9	years		7,278		4,088		3,190
Customer lists and relationships	9.3	years		55,473		19,014		36,459
			$	73,734	$	28,882	$	44,852

Aggregate amortization expense related to intangible assets for the six months ended February 29, 2016 and February 28, 2015 was $3,836 and $2,884, respectively.  Estimated amortization expense for the remainder of fiscal year 2016 and for the next five years is as follows:

Years ending August 31,
2016 (remaining 6 months)	$	3,854
2017		7,246
2018		7,041
2019		6,348
2020		5,481
2021		5,219

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Sale of RodPack Business

6 Months Ended

Feb. 29, 2016

Sale of RodPack Business

Sale of RodPack Business

Note 8 — Sale of RodPack Business

In November 2015 (the first quarter of fiscal 2016), the Company sold its RodPack wind energy business, contained within its structural composites product line, to an otherwise unrelated party (“Buyer”) for proceeds of $2,186. The Company’s structural composites product line is a part of the Company’s Industrial Materials segment. The Company is not restricted in its use of the net proceeds from the sale.  At August 31, 2015, the related RodPack assets were recorded as assets held for sale on the consolidated balance sheet.

The following table summarizes information about the RodPack assets sold as of November 10, 2015 (the date of the sale) and August 31, 2015:

	November 10, 2015		August 31, 2015
RodPack - Property, plant and equipment	$	846	$	773
RodPack - Patents and other intangible assets		309		316
Total	$	1,155	$	1,089

The sale resulted in a pre-tax book gain of $1,031 (approximately $660 after-tax gain), which was recorded within the consolidated statement of operations as gain on sale of business in the six month period ended February 29, 2016.  The Company received $1,500of the proceeds in the first quarter of fiscal 2016 and will receive the remaining balance in three equal installments of $229 at six month intervals, with the final payment due 18 months after the date of the sale. The $457 current portion of the amount due has been recorded as a current asset (Due from sale of business) as of February 29, 2016, while the portion due 18 months from the sale has been included in other long-term assets.  The payment of these owed amounts is not subject to any further contingency or deliverable. Further, the Company will provide ongoing development support to the Buyer for which it will receive additional consideration upon the completion of services.

The sale of this business prompted the Company to perform a review of other long-lived assets within the structural composites product line, as the sale of the related intangible assets resulted in a limitation of the Company’s capacity to sell certain other goods produced by the product line. This review resulted in the identification of construction in progress assets with a net book value of $365, which the Company fully wrote down.   This charge was recorded within the condensed consolidated statement of operations as write-down of certain assets under construction during the first quarter of fiscal 2016.

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Joint Venture

6 Months Ended

Feb. 29, 2016

Joint Venture

Joint Venture

Note 9 — Joint Venture

On October 31, 2014, the Company purchased the 50% non-controlling membership interest of NEPTCO JV LLC (the “JV”) that had been owned by its joint venture partner, an otherwise unrelated party. The purchase consideration is subject to certain contingent adjustments based on certain future events related to the JV. The purchase price, including these contingent adjustments, was not, nor will be, material to the Company. Because of the Company’s controlling financial interest, the JV’s assets, liabilities, and results of operations have been consolidated within the Company’s consolidated financial statements since June 27, 2012, the date the Company acquired NEPTCO. The Company continues to fully consolidate the assets, liabilities and results of operations of the JV, but no longer records an offsetting amount for a non-controlling interest. The $95 recorded in the consolidated statement of operations as net income attributable to non-controlling interest for the six months ended February 28, 2015, represents the now-former joint venture partner’s share of the results of operations of the JV for the period from September 1, 2014 through October 31, 2014.

The Company accounted for the joint venture partner’s non-controlling interest in the JV under ASC Topic 810 “Consolidations” (“ASC 810”). Based on the criteria in ASC 810, the Company had determined that the JV qualified as a variable interest entity (“VIE”).

Under the JV agreement, which terminated with the Company’s October 2014 acquisition of the 50% outstanding non-controlling membership interest in the JV, the JV had agreed to purchase a minimum of 80% of its total glass fiber requirements from the now-former joint venture partner. Additionally, the JV had agreed to purchase private-label products exclusively from an affiliate of the now-former joint venture partner; however, the JV was not subject to a minimum purchase requirement on private-label products. Purchases from the now-former joint venture partner totaled $332 for the period from September 1, 2014 through October 31, 2014.

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Commitments and Contingencies

6 Months Ended

Feb. 29, 2016

Commitments and Contingencies

Commitments and Contingencies

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 entered, that could adversely affect the Company’s operating results or cash flows in a particular period. The Company routinely assesses all of its litigation and threatened litigation as to the probability of ultimately incurring a liability, and records its best forecast of the ultimate loss in situations where the Company assesses the likelihood of loss as probable.

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Pensions and Other Post Retirement Benefits

6 Months Ended

Feb. 29, 2016

Pensions and Other Post Retirement Benefits

Pensions and Other Post Retirement Benefits

Note 11 — Pensions and Other Post-Retirement Benefits

The components of net periodic benefit cost for the three and six months ended February 29, 2016 and February 28, 2015 are as follows:

	Three Months Ended				Six Months Ended
	February 29, 2016		February 28, 2015		February 29, 2016		February 28, 2015
Components of net periodic benefit cost
Service cost	$	74	$	91	$	148	$	181
Interest cost		182		170		364		339
Expected return on plan assets		(129)		(153)		(258)		(306)
Amortization of prior service cost		1		1		2		2
Amortization of accumulated loss		143		167		286		335
Net periodic benefit cost	$	271	$	276	$	542	$	551

When funding is required, the Company’s policy is to contribute amounts that are deductible for federal income tax purposes.  As of February 29, 2016, the Company has made contributions of $154 in the current fiscal year to fund its obligations under its pension plans, and plans to make the necessary contributions over the remainder of fiscal 2016 to ensure the qualified plan continues to be adequately funded given the current market conditions. The Company made contributions of $115 in the first six months of the prior year.

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Fair Value Measurements

6 Months Ended

Feb. 29, 2016

Fair Value Measurements

Fair Value Measurements

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 include: 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 February 29, 2016 and August 31, 2015 represent investments that are restricted for use in a nonqualified retirement savings plan 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 February 29, 2016 and August 31, 2015:

				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	February 29, 2016	$	1,421	$	1,382	39	—
Restricted investments	August 31, 2015	$	1,410	$	1,394	16	—

The following table presents the fair value of the Company’s long-term debt as of February 29, 2016 and August 31, 2015, 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	February 29, 2016	$	47,600	$	—	47,600	—
Long-term debt	August 31, 2015	$	51,800	$	—	51,800	—

The carrying value of the long-term debt approximates its fair value, as the monthly interest rate is set based on the movement of the underlying market rates.

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Accumulated Other Comprehensive Income

6 Months Ended

Feb. 29, 2016

Accumulated Other Comprehensive Income

Accumulated Other Comprehensive Income

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 Plan		Adjustment		Total
Balance at August 31, 2015	$	47	$	(5,934)	$	(2,099)	$	(7,986)
Other comprehensive gains (losses) before reclassifications (1)		(58)		—		(4,010)		(4,068)
Reclassifications to net income of previously deferred (gains) losses (2)		(41)		187		—		146
Other comprehensive income (loss)		(99)		187		(4,010)		(3,922)
Balance at February 29, 2016	$	(52)	$	(5,747)	$	(6,109)	$	(11,908)

(1) Net of tax expense of $30,  $0,  $0, respectively.

(2) Net of tax expense of $22, tax benefit of $102,  $0, respectively.

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				Six Months Ended				Location of Gain (Loss) Reclassified from Accumulated
	February 29, 2016		February 28, 2015		February 29, 2016		February 28, 2015		Other Comprehensive Income (Loss) into Income
Gains on Restricted Investments:
Realized gain on sale of restricted investments	$	(61)	$	(75)	$	(63)	$	(76)	Selling, general and administrative expenses
Tax expense (benefit)		21		26		22		27
Gain net of tax	$	(40)	$	(48)	$	(41)	$	(48)
Loss on Funded Pension Plan adjustments:
Amortization of prior pension service costs and unrecognized losses	$	6	$	5	$	12	$	10	Cost of products and services sold
Amortization of prior pension service costs and unrecognized losses		138	$	163		277	$	326	Selling, general and administrative expenses
Tax expense (benefit)		(51)		(59)		(102)		(118)
Loss net of tax	$	93	$	109	$	187	$	219
Total net loss reclassified for the period	$	53	$	62	$	146	$	171

Note: Gains on Restricted Investments and losses on funded pension plan adjustments may not sum for the quarter end or year-to-date period due to rounding.

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Acquisition of Specialty Chemical Intermediates Product Lines

6 Months Ended

Feb. 29, 2016

Acquisition of Specialty Chemical Intermediates Product Lines

Acquisition of Specialty Chemical Intermediates Product Lines

Note 14 — Acquisition of Specialty Chemical Intermediates Product Line

On January 30, 2015, the Company acquired two product lines from Henkel Corporation (the “Seller”) for a purchase price of $33,285, after working capital adjustments and excluding any acquisition-related costs.  As part of this transaction, Chase acquired the Seller’s microspheres product line, sold under the Dualite brand, located in Greenville, SC, and obtained exclusive distribution rights and intellectual property related to the Seller’s polyurethane dispersions product line, operating in the Elgin, IL location. Under the agreement, Chase entered into a ten-year facility operating lease at the Seller’s Greenville, SC location. The Seller will perform certain manufacturing and application services for Chase at the Seller’s Elgin, IL location for three years. The purchase was funded entirely with available cash on hand.

Since the effective date for this acquisition, January 30, 2015, the financial results of the specialty chemical intermediates product line have been included in the Company’s financial statements within the Industrial Materials operating segment. The acquisition was accounted for as a business combination under ASC Topic 805, “Business Combinations.” In accordance with this accounting standard, the Company expensed $584 of acquisition-related costs during both the three and six month periods ended February 28, 2015 to acquisition-related costs.

Purchase accounting was completed in the quarter ended May 31, 2015 (third quarter of fiscal 2015) with no material adjustments made to the initial amounts recorded at the end of the second fiscal quarter. 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
Inventory	$	610
Property, plant & equipment		1,064
Goodwill		6,371
Intangible assets		25,240
Total purchase price	$	33,285

The excess of the purchase price over the net tangible and intangible assets acquired resulted in goodwill of $6,371 that is largely attributable to the synergies and economies of scale from combining the operations and technologies of Chase and the two product lines, particularly as it pertains to the expansion of the Company's product and service offerings, the established workforce, and marketing efforts. This goodwill is not deductible for income tax purposes.

All assets, including goodwill, acquired as part of the specialty chemical intermediates product line are included in the Industrial Materials operating segment. Identifiable intangible assets purchased with this transaction are as follows:

Intangible Asset	Amount		Useful life
Customer relationships	$	21,300	8	years
Technology		2,700	7	years
Trade name		910	7	years
Backlog		330	2	months
Total intangible assets	$	25,240

Supplemental Pro Forma Data

The following table presents the pro forma results of the Company for the three and six month periods ended February 28, 2015 as though the specialty chemical intermediates product line acquisition described above occurred on September 1, 2013 (the first day of fiscal 2014). The actual revenue and expenses for the specialty chemical intermediates product line acquisition are included in the Company’s fiscal 2016 and 2015 consolidated results beginning on January 30, 2015. The pro forma results include adjustments for the estimated amortization of intangibles, acquisition-related costs, sale of inventory step-up cost and the income tax impact of the pro forma adjustments at the statutory rate of 35%. The following pro forma information is not necessarily indicative of the results that would have been achieved if the acquisition had been effective on September 1, 2013 (the first day of fiscal 2014).

	Three Months Ended		Six Months Ended
	February 28, 2015		February 28, 2015
Revenue	$	55,873	$	116,766
Net income		4,955		12,329
Net income attributable to Chase Corporation		4,955		12,234
Net income  available to common shareholders, per common and common equivalent share
Basic earnings per share	$	0.54	$	1.34
Diluted earnings per share	$	0.53	$	1.32

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Exit Costs Related to Idle Facility

6 Months Ended

Feb. 29, 2016

Restructuring Charges

Exit Costs Related to Idle Facility

Note 15 – Exit Costs Related to Idle Facility

In the quarter ended February 29, 2016, the Company recognized $209 in expenses to raze its Randolph, MA facility, which has been idle with regard to production for several years. Additionally, the Company began marketing the site for sale and reclassified the net book value of the facility to assets held for sale at February 29, 2016. These actions were taken as part of the Company’s on-going facility consolidation and rationalization initiative. The Company anticipates an additional $800 in expenses associated with completing the project, and expects the demolition work to be completed during the third fiscal quarter, with the sale of the property to follow. See Note 16 to the condensed consolidated financial statements for additional information on assets held for sale.

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Assets Held for Sale

6 Months Ended

Feb. 29, 2016

Assets held for sale

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 the Company decides to dispose of an asset 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 additional impairments due to declines 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. 

In the second quarter of fiscal 2016, the Company, as part of its on-going facility consolidation and rationalization initiative, committed to a plan to actively market for sale its Paterson, NJ property. Chase owns the building and leases the land from the landowner.  Currently, the building is being leased to a tenant and the land is being sub-leased. Upon commitment to this plan, the Company reclassified the net book value of the related assets to assets held for sale.

Assets held for sale as of February 29, 2016 and August 31, 2015:

	February 29, 2016		August 31, 2015
Paterson, NJ - Building and leasehold improvements	$	590	$	—
Randolph, MA - Property, plant and equipment (a)		14		—
RodPack - Property, plant and equipment (b)		—		773
RodPack - Patents and other intangible assets (b)		—		316
Total	$	604	$	1,089

(a) See Note 15 to the condensed consolidated financial statements for additional information on Randolph, MA location assets held for sale as of February 29, 2016.

(b) See Note 8 to the condensed consolidated financial statements for additional information on RodPack assets held for sale as of August 31, 2015.

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Feb. 29, 2016

Recent Accounting Policies

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers,” which will replace most of the existing revenue recognition guidance under U.S. Generally Accepted Accounting Principles. The core principle of the ASU is that an entity should recognize revenue for the transfer of goods or services equal to the amount that it expects to be entitled to receive for those goods or services. The ASU requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments. The ASU will be effective for the Company beginning September 1, 2018 (fiscal 2019), including interim periods in its fiscal year 2019, and allows for either retrospective or modified retrospective methods of adoption. The Company is in the process of determining the method of adoption and assessing the impact of this ASU on the Company’s consolidated financial position, results of operations and cash flows.

In July 2015, the FASB issued ASU No. 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory.” Under this accounting guidance, inventory will be measured at the lower of cost and net realizable value, and other options that currently exist for market value will be eliminated. ASU No. 2015-11 defines net realizable value as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. No other changes were made to the current guidance on inventory measurement. This accounting guidance is effective for us in the first quarter of fiscal 2018. Early adoption is permitted. We are currently evaluating the impact of the adoption of this accounting standard update on our consolidated financial position, results of operations and cash flows.

In November 2015, the FASB issued ASU No. 2015-17, “Income Taxes – Balance Sheet Classification of Deferred Taxes.” The purpose of the standard is to simplify the presentation of deferred taxes on a classified balance sheet.  Under current GAAP, deferred income tax assets and liabilities are separated into current and noncurrent amounts in the balance sheet.  The amendments in ASU 2015-17 require that all deferred tax assets and liabilities be classified as noncurrent in the balance sheet.  The ASU will be effective for the Company beginning September 1, 2017 (fiscal 2018), including interim periods in its fiscal year 2018, but with early adoption permitted.  The Company does not expect the adoption of ASU 2015-17 to have a material impact on its financial statements or presentation.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (a) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (b) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.  Changes were made to align lessor accounting with the lessee accounting model and ASU No. 2014-09, “Revenue from Contracts with Customers.”  The new lease guidance simplifies the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. The ASU will be effective for the Company beginning September 1, 2019 (fiscal 2020). Early application is permitted for all public business entities upon issuance.Lessees must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees may not apply a full retrospective transition approach. We are currently evaluating the impact of the application of this accounting standard update on our consolidated financial position, results of operations and cash flows.

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Inventories (Tables)

6 Months Ended

Feb. 29, 2016

Inventories

Schedule of inventories

	February 29, 2016		August 31, 2015
Raw materials	$	12,603	$	12,937
Work in process		6,678		6,539
Finished goods		8,258		10,000
Total Inventories	$	27,539	$	29,476

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Net Income Per Share (Tables)

6 Months Ended

Feb. 29, 2016

Net Income Per Share

Schedule of determination of earnings per share under the two-class method

	Three Months Ended				Six Months Ended
	February 29, 2016		February 28, 2015		February 29, 2016		February 28, 2015
Basic Earnings per Share
Net income attributable to Chase Corporation	$	6,972	$	4,066	$	14,421	$	10,971
Less: Allocated to participating securities		65		30		128		81
Net income available to common shareholders	$	6,907	$	4,036	$	14,293	$	10,890
Basic weighted average shares outstanding		9,155,365		9,065,511		9,148,493		9,057,738
Net income per share - Basic	$	0.75	$	0.45	$	1.56	$	1.20
Diluted Earnings per Share
Net income attributable to Chase Corporation	$	6,972	$	4,066	$	14,421	$	10,971
Less: Allocated to participating securities		65		30		128		81
Net income available to common shareholders	$	6,907	$	4,036	$	14,293	$	10,890
Basic weighted average shares outstanding		9,155,365		9,065,511		9,148,493		9,057,738
Additional dilutive common stock equivalents		136,859		159,474		138,993		155,693
Diluted weighted average shares outstanding		9,292,224		9,224,985		9,287,486		9,213,431
Net income per share - Diluted	$	0.74	$	0.44	$	1.54	$	1.18

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Segment Data & Foreign Operations (Tables)

6 Months Ended

Feb. 29, 2016

Segment Data & Foreign Operations

Summary of information about the Company's reportable segments

	Three Months Ended						Six Months Ended
	February 29, 2016			February 28, 2015			February 29, 2016			February 28, 2015
Revenue
Industrial Materials	$	43,769		$	40,330		$	87,068		$	82,725
Construction Materials		11,155			11,974			25,334			25,512
Total	$	54,924		$	52,304		$	112,402		$	108,237
Income before taxes
Industrial Materials	$	13,271		$	10,213	(b)	$	26,200	(d)	$	22,828	(b)
Construction Materials		3,668			2,592			9,123			6,465
Total for reportable segments		16,939			12,805			35,323			29,293
Corporate and common costs		(6,186)	(a)		(6,549)	(c)		(12,934)	(a)		(12,268)	(c)
Total	$	10,753		$	6,256		$	22,389		$	17,025
Includes the following costs by segment:
Industrial Materials
Interest	$	195		$	225		$	382		$	455
Depreciation		954			976			1,945			1,953
Amortization		1,569			1,283			3,129			2,053
Construction Materials
Interest	$	65		$	45		$	128		$	89
Depreciation		260			280			524			569
Amortization		351			418			707			831

(a) Includes Randolph, MA facility exit and demolition costs of $209 incurred during the period

(b) Includes $49 of expenses related to inventory step-up in fair value related to the January 2015 acquisition of the specialty chemical intermediates product line

(c) Includes $584 in expenses related to the January 2015 acquisition of the specialty chemical intermediates product line

(d) Includes both a $1,031 gain on sale of our RodPack® wind energy business contained within our structural composites product line and a $365 write-down on certain other structural composites assets based on usage constraints following the sale, both recognized in November 2015

Schedule of total assets for the Company's reportable segments

	February 29,		August 31,
	2016		2015
Total assets
Industrial Materials	$	139,566	$	146,870
Construction Materials		39,868		48,016
Total for reportable segments		179,434		194,886
Corporate and common assets		70,366		63,011
Total	$	249,800	$	257,897

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Goodwill and Other Intangibles (Tables)

6 Months Ended

Feb. 29, 2016

Goodwill and Other Intangibles

Schedule of changes in the carrying value of goodwill by operating segment

	Industrial Materials		Construction Materials		Consolidated
Balance at August 31, 2015	$	33,390	$	10,733	$	44,123
Foreign currency translation adjustment		(430)		(25)		(455)
Balance at February 29, 2016	$	32,960	$	10,708	$	43,668

Schedule of intangible assets subject to amortization

	Weighted-Average		Gross Carrying		Accumulated		Net Carrying
	Amortization Period		Value		Amortization		Value
February 29, 2016
Patents and agreements	12.6	years	$	2,483	$	2,259	$	224
Formulas and technology	8.4	years		8,305		3,887		4,418
Trade names	5.9	years		7,185		4,475		2,710
Customer lists and relationships	9.3	years		54,413		21,103		33,310
			$	72,386	$	31,724	$	40,662
August 31, 2015
Patents and agreements	12.5	years	$	2,568	$	2,267	$	301
Formulas and technology	8.4	years		8,415		3,513		4,902
Trade names	5.9	years		7,278		4,088		3,190
Customer lists and relationships	9.3	years		55,473		19,014		36,459
			$	73,734	$	28,882	$	44,852

Schedule of estimated amortization expense related to intangible assets

Years ending August 31,
2016 (remaining 6 months)	$	3,854
2017		7,246
2018		7,041
2019		6,348
2020		5,481
2021		5,219

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Sale of RodPack Business (Tables)

6 Months Ended

Feb. 29, 2016

Sale of RodPack Business

Summary of information about the certain structural composites assets sold

	November 10, 2015		August 31, 2015
RodPack - Property, plant and equipment	$	846	$	773
RodPack - Patents and other intangible assets		309		316
Total	$	1,155	$	1,089

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Pensions and Other Post Retirement Benefits (Tables)

6 Months Ended

Feb. 29, 2016

Pensions and Other Post Retirement Benefits

Schedule of components of net periodic benefit cost

	Three Months Ended				Six Months Ended
	February 29, 2016		February 28, 2015		February 29, 2016		February 28, 2015
Components of net periodic benefit cost
Service cost	$	74	$	91	$	148	$	181
Interest cost		182		170		364		339
Expected return on plan assets		(129)		(153)		(258)		(306)
Amortization of prior service cost		1		1		2		2
Amortization of accumulated loss		143		167		286		335
Net periodic benefit cost	$	271	$	276	$	542	$	551

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Fair Value Measurements (Tables)

6 Months Ended

Feb. 29, 2016

Fair Value Measurements

Schedule of financial assets that were accounted for at fair value on a recurring basis

				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	February 29, 2016	$	1,421	$	1,382	39	—
Restricted investments	August 31, 2015	$	1,410	$	1,394	16	—

Schedule of fair values of the Company's long-term debt

				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 29, 2016	$	47,600	$	—	47,600	—
Long-term debt	August 31, 2015	$	51,800	$	—	51,800	—

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Accumulated Other Comprehensive Income (Tables)

6 Months Ended

Feb. 29, 2016

Accumulated Other Comprehensive Income

Schedule of components of accumulated other comprehensive income (loss)

			Change in Funded		Foreign Currency
	Restricted		Status of		Translation
	Investments		Pension Plan		Adjustment		Total
Balance at August 31, 2015	$	47	$	(5,934)	$	(2,099)	$	(7,986)
Other comprehensive gains (losses) before reclassifications (1)		(58)		—		(4,010)		(4,068)
Reclassifications to net income of previously deferred (gains) losses (2)		(41)		187		—		146
Other comprehensive income (loss)		(99)		187		(4,010)		(3,922)
Balance at February 29, 2016	$	(52)	$	(5,747)	$	(6,109)	$	(11,908)

(1) Net of tax expense of $30,  $0,  $0, respectively.

Net of tax expense of $22, tax benefit of $102,  $0, respectively.

Summary of 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				Six Months Ended				Location of Gain (Loss) Reclassified from Accumulated
	February 29, 2016		February 28, 2015		February 29, 2016		February 28, 2015		Other Comprehensive Income (Loss) into Income
Gains on Restricted Investments:
Realized gain on sale of restricted investments	$	(61)	$	(75)	$	(63)	$	(76)	Selling, general and administrative expenses
Tax expense (benefit)		21		26		22		27
Gain net of tax	$	(40)	$	(48)	$	(41)	$	(48)
Loss on Funded Pension Plan adjustments:
Amortization of prior pension service costs and unrecognized losses	$	6	$	5	$	12	$	10	Cost of products and services sold
Amortization of prior pension service costs and unrecognized losses		138	$	163		277	$	326	Selling, general and administrative expenses
Tax expense (benefit)		(51)		(59)		(102)		(118)
Loss net of tax	$	93	$	109	$	187	$	219
Total net loss reclassified for the period	$	53	$	62	$	146	$	171

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Acquisition of Specialty Chemical Intermediates Product Lines (Tables)

6 Months Ended

Feb. 29, 2016

Acquisition of Specialty Chemical Intermediates Product Lines

Schedule of allocation of acquisition cost to the acquired tangible and identifiable intangible assets and liabilities assumed based on their fair values as of the date of the acquisition

Assets & Liabilities	Amount
Inventory	$	610
Property, plant & equipment		1,064
Goodwill		6,371
Intangible assets		25,240
Total purchase price	$	33,285

Schedule of identifiable intangible assets purchased as part of business acquisition

Intangible Asset	Amount		Useful life
Customer relationships	$	21,300	8	years
Technology		2,700	7	years
Trade name		910	7	years
Backlog		330	2	months
Total intangible assets	$	25,240

Schedule of pro forma information

	Three Months Ended		Six Months Ended
	February 28, 2015		February 28, 2015
Revenue	$	55,873	$	116,766
Net income		4,955		12,329
Net income attributable to Chase Corporation		4,955		12,234
Net income  available to common shareholders, per common and common equivalent share
Basic earnings per share	$	0.54	$	1.34
Diluted earnings per share	$	0.53	$	1.32

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Assets Held for Sale (Tables)

6 Months Ended

Feb. 29, 2016

Assets held for sale

Summary of information about assets held for sale

Assets held for sale as of February 29, 2016 and August 31, 2015:

	February 29, 2016		August 31, 2015
Paterson, NJ - Building and leasehold improvements	$	590	$	—
Randolph, MA - Property, plant and equipment (a)		14		—
RodPack - Property, plant and equipment (b)		—		773
RodPack - Patents and other intangible assets (b)		—		316
Total	$	604	$	1,089

(a) See Note 15 to the condensed consolidated financial statements for additional information on Randolph, MA location assets held for sale as of February 29, 2016.

(b) See Note 8 to the condensed consolidated financial statements for additional information on RodPack assets held for sale as of August 31, 2015.

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Basis of Presentation (Details) $ in Thousands		6 Months Ended
	Jan. 30, 2015 USD ($) item	Feb. 28, 2015 USD ($)	Oct. 31, 2014
Basis of Presentation
Net gain attributable to non-controlling interest		$ 95
NEPTCO
Basis of Presentation
Net gain attributable to non-controlling interest		$ 95
NEPTCO | JV | Joint venture partner
Basis of Presentation
Membership interest purchased			50.00%
Henkel Corporation ( Seller)
Basis of Presentation
Number Of Product Lines Acquired | item	2
Purchase price	$ 33,285
Lease term	10 years
Period to perform certain manufacturing and application services	3 years

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Inventories (Details) - USD ($) $ in Thousands	Feb. 29, 2016	Aug. 31, 2015
Inventories
Raw materials	$ 12,603	$ 12,937
Work in process	6,678	6,539
Finished goods	8,258	10,000
Total Inventories	$ 27,539	$ 29,476

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Net Income Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Feb. 29, 2016	Feb. 28, 2015	Feb. 29, 2016	Feb. 28, 2015
Basic Earnings per Share
Net income attributable to Chase Corporation	$ 6,972	$ 4,066	$ 14,421	$ 10,971
Less: Allocated to participating securities	65	30	128	81
Available to common shareholders	$ 6,907	$ 4,036	$ 14,293	$ 10,890
Basic weighted average shares outstanding	9,155,365	9,065,511	9,148,493	9,057,738
Net income per share - Basic (in dollars per share)	$ 0.75	$ 0.45	$ 1.56	$ 1.20
Diluted Earnings per Share
Net income attributable to Chase Corporation	$ 6,972	$ 4,066	$ 14,421	$ 10,971
Less: Allocated to participating securities	65	30	128	81
Net income available to common shareholders	$ 6,907	$ 4,036	$ 14,293	$ 10,890
Basic weighted average shares outstanding	9,155,365	9,065,511	9,148,493	9,057,738
Additional dilutive common stock equivalents (in shares)	136,859	159,474	138,993	155,693
Diluted weighted average shares outstanding	9,292,224	9,224,985	9,287,486	9,213,431
Net income per share - Diluted (in dollars per share)	$ 0.74	$ 0.44	$ 1.54	$ 1.18
Antidilutive securities
Antidilutive stock options excluded from computation of earnings per share amount (in shares)	21,275	22,750	26,381	27,863

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Stock-Based Compensation (Details) $ / shares in Units, $ in Thousands			1 Months Ended	3 Months Ended
	Sep. 01, 2015 item $ / shares shares	Sep. 01, 2014 shares	Feb. 29, 2016 USD ($) shares	Nov. 30, 2015 shares
Non-employee members of BOD
Stock Based Compensation
Shares granted			4,554
Value of common stock issued in the form of restricted stock as part of annual retainer | $			$ 219
Restricted stock | Non-executive members of management
Stock Based Compensation
Shares issued				5,000
2015 LTIP | Performance and service based restricted stock | Executive officers
Stock Based Compensation
Shares granted		5,685
Cumulative shares granted		12,678
2015 LTIP | Performance and service based restricted stock | Executive officers | August 31, 2017 vesting date
Stock Based Compensation
Shares granted		6,993
2016 LTIP | Performance and service based restricted stock | Executive officers and other members of management | August 31, 2018 vesting date
Stock Based Compensation
Shares granted	6,962
2016 LTIP | Time-based restricted stock | Executive officers and other members of management | August 31, 2018 vesting date
Stock Based Compensation
Shares granted	7,683
2016 LTIP | Stock options | Executive officers and other members of management
Stock Based Compensation
Number Options Outstanding (in shares)	21,275
Weighted Average Exercise Price (in dollars per share) | $ / shares	$ 39.50
Number of equal annual allotments in which awards will vest | item	3

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Segment Data and Disposal Groups (Details) $ in Thousands	3 Months Ended		6 Months Ended
	Feb. 29, 2016 USD ($)	Feb. 28, 2015 USD ($)	Feb. 29, 2016 USD ($) segment	Feb. 29, 2016 USD ($) item	Feb. 29, 2016 USD ($)	Feb. 28, 2015 USD ($)	Aug. 31, 2015 USD ($)
Segment data
Number of operating segments			2	2
Revenue	$ 54,924	$ 52,304			$ 112,402	$ 108,237
Income before income taxes	10,753	6,256			22,389	17,025
Total assets	249,800		$ 249,800	$ 249,800	249,800		$ 257,897
Interest	260	270			510	544
Depreciation					2,864	2,812
Amortization					3,836	2,884
Cost of sale of inventory step-up						49
Gain on sale of business					1,031
Asset Impairment Charges					365
RodPack Business
Segment data
Gain on sale of business					1,031
Industrial Materials
Segment data
Revenue	43,769	40,330			87,068	82,725
Income before income taxes	13,271	10,213			26,200	22,828
Total assets	139,566		139,566	139,566	139,566		146,870
Interest	195	225			382	455
Depreciation	954	976			1,945	1,953
Amortization	1,569	1,283			3,129	2,053
Construction Materials
Segment data
Revenue	11,155	11,974			25,334	25,512
Income before income taxes	3,668	2,592			9,123	6,465
Total assets	39,868		39,868	39,868	39,868		48,016
Interest	65	45			128	89
Depreciation	260	280			524	569
Amortization	351	418			707	831
Reportable segments
Segment data
Income before income taxes	16,939	12,805			35,323	29,293
Total assets	179,434		179,434	179,434	179,434		194,886
Corporate and common costs
Segment data
Income before income taxes	(6,186)	$ (6,549)			(12,934)	$ (12,268)
Total assets	$ 70,366		$ 70,366	$ 70,366	$ 70,366		$ 63,011

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Segment Data & Foreign Operations (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Feb. 29, 2016	Feb. 28, 2015	Feb. 29, 2016	Feb. 28, 2015	Aug. 31, 2015	Aug. 31, 2014
Concentration risk
Long-lived assets	$ 37,397		$ 37,397		$ 40,921
United Kingdom
Concentration risk
Goodwill and intangible assets	$ 7,047		$ 7,047		$ 8,266
Revenue | Geographic concentration risk | United Kingdom
Concentration risk
Percentage of concentration risk	11.00%	14.00%	10.00%	12.00%
Long-lived assets | Geographic concentration risk | United Kingdom
Concentration risk
Long-lived assets	$ 3,423		$ 3,423			$ 3,947

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Goodwill and Other Intangibles - Segments (Details) - 6 months ended Feb. 29, 2016 $ in Thousands	segment	item	USD ($)
Changes in the carrying value of goodwill
Balance at the beginning of the period			$ 44,123
Foreign currency translation adjustment			(455)
Balance at the end of the period			43,668
Number of reportable segments | segment	10
Number of operating segments	2	2
Construction Materials
Changes in the carrying value of goodwill
Balance at the beginning of the period			10,733
Foreign currency translation adjustment			(25)
Balance at the end of the period			10,708
Industrial Materials
Changes in the carrying value of goodwill
Balance at the beginning of the period			33,390
Foreign currency translation adjustment			(430)
Balance at the end of the period			$ 32,960

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Goodwill and Other Intangibles - By Class (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Feb. 29, 2016	Aug. 31, 2015
Goodwill and intangible assets
Gross Carrying Value	$ 72,386	$ 73,734
Accumulated Amortization	31,724	28,882
Net Carrying Value	40,662	44,852
Aggregate amortization expense	3,836	$ 2,884
Estimated amortization expense
2016 (remaining 9 months)	3,854
2017	7,246
2018	7,041
2019	6,348
2020	5,481
2021	$ 5,219
Patents and agreements
Goodwill and intangible assets
Weighted-Average Amortization Period	12 years 7 months 6 days	12 years 6 months
Gross Carrying Value	$ 2,483	$ 2,568
Accumulated Amortization	2,259	2,267
Net Carrying Value	$ 224	$ 301
Formulas and technology
Goodwill and intangible assets
Weighted-Average Amortization Period	8 years 4 months 24 days	8 years 4 months 24 days
Gross Carrying Value	$ 8,305	$ 8,415
Accumulated Amortization	3,887	3,513
Net Carrying Value	$ 4,418	$ 4,902
Trade names
Goodwill and intangible assets
Weighted-Average Amortization Period	5 years 10 months 24 days	5 years 10 months 24 days
Gross Carrying Value	$ 7,185	$ 7,278
Accumulated Amortization	4,475	4,088
Net Carrying Value	$ 2,710	$ 3,190
Customer lists and relationships
Goodwill and intangible assets
Weighted-Average Amortization Period	9 years 3 months 18 days	9 years 3 months 18 days
Gross Carrying Value	$ 54,413	$ 55,473
Accumulated Amortization	21,103	19,014
Net Carrying Value	$ 33,310	$ 36,459

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Sale of RodPack Business (Details) $ in Thousands	3 Months Ended	6 Months Ended
	Nov. 30, 2015 USD ($)	Feb. 29, 2016 USD ($) installment	Nov. 10, 2015 USD ($)	Aug. 31, 2015 USD ($)
Sale of RodPack Business
Proceeds from the sale of property and assets		$ 1,500
Due from sale of business		457
Acquisition related costs (Note 14)		365
RodPack Business
Sale of RodPack Business
Proceeds from the sale of property and assets	$ 2,186
Property, plant and equipment			$ 846	$ 773
Patents and other intangible assets			309	316
Total			$ 1,155	$ 1,089
Pre-tax book gain from the sale of property and assets		1,031
After-tax book gain from the sale of property and assets		$ 660
Number of installments | installment		3
Remaining balance		$ 229
Period of intervals		6 months

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Joint Venture (Details) - USD ($) $ in Thousands	2 Months Ended	6 Months Ended	9 Months Ended
	Oct. 31, 2014	Feb. 28, 2015	May. 31, 2015
Joint Venture
Net gain attributable to non-controlling interest		$ 95
JV | Joint venture partner
Joint Venture
Purchases made	$ 332
NEPTCO
Joint Venture
Net gain attributable to non-controlling interest		$ 95
NEPTCO | Joint venture partner
Joint Venture
Ownership interest (as a percent)	50.00%
NEPTCO | Joint venture partner | Minimum
Joint Venture
Percentage of total glass fiber requirements agreed to be purchased			80.00%
NEPTCO | JV | Joint venture partner
Joint Venture
Membership interest purchased	50.00%

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Pensions and Other Post-Retirement Benefits (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Feb. 29, 2016	Feb. 28, 2015	Feb. 29, 2016	Feb. 28, 2015
Components of net periodic benefit cost
Service cost	$ 74	$ 91	$ 148	$ 181
Interest cost	182	170	364	339
Expected return on plan assets	(129)	(153)	(258)	(306)
Amortization of prior service cost	1	1	2	2
Amortization of accumulated loss	143	167	286	335
Net periodic benefit cost	$ 271	$ 276	542	551
Employer contribution			$ 154	$ 115

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Fair Value Measurements (Details) - Recurring basis - USD ($) $ in Thousands	Feb. 29, 2016	Feb. 28, 2015
Fair value measurements
Restricted investments	$ 1,421	$ 1,410
Long-term debt	47,600	51,800
Quoted prices in active markets (Level 1)
Fair value measurements
Restricted investments	1,382	1,394
Significant other observable inputs (Level 2)
Fair value measurements
Restricted investments	39	16
Long-term debt	$ 47,600	$ 51,800

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Accumulated Other Comprehensive Income (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Feb. 29, 2016	Feb. 28, 2015	Feb. 29, 2016	Feb. 28, 2015
Accumulated other comprehensive income
Balance at the beginning of the period			$ (7,986)
Other comprehensive gains (losses) before reclassifications			(4,068)
Reclassifications to net income of previously deferred (gains) losses			146
Total other comprehensive income (loss)	$ (3,029)	$ (729)	(3,922)	$ (2,698)
Balance at the ending of the period	(11,908)		(11,908)
Restricted investments, other comprehensive gains (losses) before reclassifications, tax benefit			30
Change in funded status of pension plan, other comprehensive gains (losses) before reclassifications, tax benefit			0
Foreign currency translation adjustment, other comprehensive gains (losses) before reclassifications, tax benefit			0
Restricted investments, reclassifications to net income of previously deferred (gains) losses, tax (expense) benefit			22
Change in funded status of pension plan, reclassifications to net income of previously deferred (gains) losses, tax (expense) benefit			102
Foreign currency translation adjustment, reclassifications to net income of previously deferred (gains) losses, tax (expense) benefit			0
Restricted investments
Accumulated other comprehensive income
Balance at the beginning of the period			47
Other comprehensive gains (losses) before reclassifications			(58)
Reclassifications to net income of previously deferred (gains) losses			(41)
Total other comprehensive income (loss)			(99)
Balance at the ending of the period	(52)		(52)
Change in funded status of pension plan
Accumulated other comprehensive income
Balance at the beginning of the period			(5,934)
Reclassifications to net income of previously deferred (gains) losses			187
Total other comprehensive income (loss)			187
Balance at the ending of the period	(5,747)		(5,747)
Foreign currency translation adjustment
Accumulated other comprehensive income
Balance at the beginning of the period			(2,099)
Other comprehensive gains (losses) before reclassifications			(4,010)
Total other comprehensive income (loss)			(4,010)
Balance at the ending of the period	$ (6,109)		$ (6,109)

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Accumulated Other Comprehensive Income - Equity Component (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Feb. 29, 2016	Feb. 28, 2015	Feb. 29, 2016	Feb. 28, 2015
Accumulated other comprehensive income
Cost of products and services sold	$ 34,895	$ 34,235	$ 69,612	$ 68,715
Selling, general and administrative expenses	10,226	11,340	21,736	22,135
Tax expense (benefit)	3,781	2,190	7,968	5,959
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest	6,972	4,066	14,421	11,066
Reclassification out of accumulated other comprehensive income (loss)
Accumulated other comprehensive income
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest	53	62	146	171
Restricted investments | Reclassification out of accumulated other comprehensive income (loss)
Accumulated other comprehensive income
Selling, general and administrative expenses	(61)	(75)	(63)	(76)
Tax expense (benefit)	21	26	22	27
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest	(40)	(48)	(41)	(48)
Change in funded status of pension plan | Reclassification out of accumulated other comprehensive income (loss)
Accumulated other comprehensive income
Cost of products and services sold	6	5	12	10
Selling, general and administrative expenses	138	163	277	326
Tax expense (benefit)	(51)	(59)	(102)	(118)
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest	$ 93	$ 109	$ 187	$ 219

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Acquisition of Specialty Chemical Intermediates Product Lines (Details) $ in Thousands		3 Months Ended	6 Months Ended
	Jan. 30, 2015 USD ($) item	Feb. 28, 2015 USD ($)	Feb. 29, 2016 USD ($)	Feb. 28, 2015 USD ($)	Aug. 31, 2015 USD ($)
Acquisitions
Acquisition related costs (Note 14)		$ 584		$ 584
Acquisition cost has been allocated to the acquired tangible and identifiable intangible assets and liabilities assumed based on their fair values
Goodwill			$ 43,668		$ 44,123
Henkel Corporation ( Seller)
Acquisitions
Number of product lines acquired | item	2
Purchase price	$ 33,285
Lease term	10 years
Period to perform certain manufacturing and application services	3 years
Acquisition cost has been allocated to the acquired tangible and identifiable intangible assets and liabilities assumed based on their fair values
Inventory	$ 610
Property, plant & equipment	1,064
Goodwill	6,371
Intangible assets	25,240
Total purchase price	$ 33,285
Henkel Corporation ( Seller) | Selling, General and Administrative Expenses
Acquisitions
Acquisition related costs (Note 14)			$ 584

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Acquisition of Specialty Chemical Intermediates Product Lines - By Acquiree (Details) - USD ($) $ / shares in Units, $ in Thousands		3 Months Ended		6 Months Ended
	Jan. 30, 2015	Feb. 29, 2016	Feb. 28, 2015	Feb. 29, 2016	Feb. 28, 2015
Pro Forma Information
Acquisition related costs (Note 14)			$ 584		$ 584
Net income		$ 6,972	4,066	$ 14,421	11,066
Henkel Corporation ( Seller)
Acquisition of Specialty Chemical Intermediates Businesses
Intangible assets	$ 25,240
Pro Forma Information
Statutory tax rate (as a percent)				35.00%
Revenue			55,873		116,766
Net income			4,955		12,329
Net income attributable to Chase Corporation			$ 4,955		$ 12,234
Net income available to common shareholders, per common and common equivalent share
Basic earnings per share (in dollars per share)			$ 0.54		$ 1.34
Diluted earning per share (in dollars per share)			$ 0.53		$ 1.32
Henkel Corporation ( Seller) | Customer Relationships
Acquisition of Specialty Chemical Intermediates Businesses
Intangible assets	$ 21,300
Useful life	8 years
Henkel Corporation ( Seller) | Technology
Acquisition of Specialty Chemical Intermediates Businesses
Intangible assets	$ 2,700
Useful life	7 years
Henkel Corporation ( Seller) | Trade names
Acquisition of Specialty Chemical Intermediates Businesses
Intangible assets	$ 910
Useful life	7 years
Henkel Corporation ( Seller) | Backlog
Acquisition of Specialty Chemical Intermediates Businesses
Intangible assets	$ 330
Useful life	2 months

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Exit Costs Related to Idle Facility (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	May. 31, 2016	Feb. 29, 2016	Feb. 29, 2016
Exit Costs Related to Idle Facility
Acquisition related costs (Note 14)			$ 365
Business Exit Costs		$ 209	$ 209
Forecast
Exit Costs Related to Idle Facility
Business Exit Costs	$ 800

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Assets Held for Sale (Details) - USD ($) $ in Thousands	Feb. 29, 2016	Aug. 31, 2015
Assets held for sale
Assets Held for sale	$ 604	$ 1,089
Buildings and improvements | Paterson NJ
Assets held for sale
Assets Held for sale	590
Property, Plant, and Equipment | Randolph MA
Assets held for sale
Assets Held for sale	$ 14
Property, Plant, and Equipment | RodPack Business
Assets held for sale
Assets Held for sale		773
Patents And Other Intangible Assets | RodPack Business
Assets held for sale
Assets Held for sale		$ 316