Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended February 28, 2009

Commission File Number: 1-9852

CHASE CORPORATION

(Exact name of registrant as specified in its charter)

26 Summer Street, Bridgewater, Massachusetts 02324

(Address of Principal Executive Offices, Including Zip Code)

(508) 279-1789

(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  x    NO  o

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.

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

The number of shares of Common Stock outstanding as of March 31, 2009 was 8,544,372.

Table of Contents

CHASE CORPORATION

INDEX TO FORM 10-Q

For the Quarter Ended February 28, 2009

2

Table of Contents

Part 1 — FINANCIAL INFORMATION

Item 1 — Unaudited Financial Statements

CHASE CORPORATION
CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

See accompanying notes to the consolidated financial statements

3

Table of Contents

CHASE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

See accompanying notes to the consolidated financial statements

4

Table of Contents

CHASE CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

SIX MONTHS ENDED FEBRUARY 28, 2009

(UNAUDITED)

See accompanying notes to the consolidated financial statements

5

Table of Contents

CHASE CORPORATION

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

See accompanying notes to the consolidated financial statements

6

Table of Contents

CHASE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 1 - Basis of Presentation

The accompanying unaudited 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 (“Chase” or the “Company”) filed audited financial statements which included all information and notes necessary for such presentation for the three years ended August 31, 2008 in conjunction with the Company’s 2008 Annual Report on Form 10-K.

The accompanying unaudited consolidated financial statements contain all adjustments (consisting of normal recurring items) which are, in the opinion of management, necessary for a fair presentation of the Company’s financial position as of February 28, 2009, the results of operations and cash flows for the interim periods ended February 28, 2009 and February 29, 2008, and changes in stockholders’ equity for the interim period ended February 28, 2009.

The financial statements include the accounts of the Company and its wholly-owned subsidiaries.  All intercompany transactions and balances have been eliminated in consolidation.  The Company uses the U.S. dollar as the reporting currency for financial reporting.  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.

Certain amounts reported in prior years have been reclassified to be consistent with the current year presentation.  In the quarter ended November 30, 2008, the Company reclassed $443,263 of stock based compensation awards from accrued liabilities to stockholders’ equity.  The Company determined that the stock based compensation previously recorded in fiscal 2008 as a liability should be recorded in stockholder’s equity due to the fact that these awards were going to be settled in equity shares.  This reclassification entry had no impact on the statement of operations or cash flows.

The results of operations for the interim period ended February 28, 2009 are not necessarily indicative of the results to be expected for any future period or the entire fiscal year.  These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended August 31, 2008, which are contained in the Company’s 2008 Annual Report on Form 10-K.

Note 2 — Inventories

Inventories consist of the following as of February 28, 2009 and August 31, 2008:

7

Table of Contents

CHASE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 3 — Net Income Per Share

Net income per share is calculated as follows:

For the three and six months ended February 28, 2009 and February 29, 2008, stock options to purchase 250,000 and 0 shares of common stock, respectively, were outstanding but were not included in the calculation of diluted income per share because the options’ exercise prices were greater than the average market price of the common stock and thus would be anti-dilutive.

Note 4 — Stock Based Compensation

In August 2007, the Board of Directors of Chase Corporation approved a plan for issuing a performance and service based restricted stock grant of 48,600 shares to key members of management with an issue date of September 1, 2007 and a vesting date of August 31, 2010.  Based on the fiscal year 2008 financial results, 82,214 additional shares of restricted stock (total of 130,814 shares) were granted in the quarter ended November 30, 2008 in accordance with the performance measurement criteria.  Subsequent to fiscal year 2008, no further performance-based measurements apply to this award.  Compensation expense is being recognized on a ratable basis over the vesting period.

In August 2008, the Board of Directors of Chase Corporation approved a plan for issuing a performance and service based restricted stock grant of 50,657 shares to key members of management with an issue date of September 1, 2008 and a vesting date of August 31, 2011.  These shares are subject to a performance measurement based upon the results of fiscal year 2009 which will determine the final calculation of the number of shares that will be issued (which may be greater than or less than 50,657 shares). Compensation expense is being recognized on a ratable basis over the vesting period based on quarterly probability assessments.

As part of their annual retainer, non-employee members of the Board of Directors receive a combined total of $135,000 of Chase Corporation common stock, in the form of Restricted Stock valued at the closing price of the day preceding the first day of the new year of Board service which generally coincides with the Company’s annual shareholder meeting.  The stock award vests one year from the date of grant.  In January 2009, non-employee members of the Board received a total grant of 12,339 shares of restricted stock for service for the period from February 1, 2009 through February 1, 2010.  The shares of restricted stock will vest at the conclusion of this service period.  Compensation is being recognized on a ratable basis over the twelve month vesting period.

8

Table of Contents

CHASE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 5 — Segment Information

The Company operates in two business segments, a Specialized Manufacturing segment and an Electronic Manufacturing Services segment.  Specialized Manufacturing products include insulating and conducting materials for wire and cable manufacturers, protective coatings for pipeline applications and moisture protective coatings for electronics and printing services.  Electronic Manufacturing Services include printed circuit board and electromechanical assembly services for the electronics industry.  The Company evaluates segment performance based upon income before income taxes.

The following table summarizes information about the Company’s reportable segments:

The Company’s products are sold world-wide with no foreign geographic area accounting for more than 10% of revenues for the three and six month periods ended February 28, 2009 and February 29, 2008.

As of February 28, 2009 and August 31, 2008, the Company had long-lived assets (defined as providing the company with a future economic benefit beyond the current year or operating period, including buildings, equipment, goodwill and other intangibles) of $8,161,524 and $10,793,325, respectively, located in the United Kingdom.  The decrease in gross carrying value of these long-lived assets for the six months ended February 28, 2009 is primarily due to foreign currency translation loss.

9

Table of Contents

CHASE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 6 — Goodwill and Other Intangibles

The changes in the carrying value of goodwill, by reportable segment, are as follows:

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 at February 28, 2009 and August 31, 2008:

In addition to the intangible assets summarized above, the Company also has corporate trademarks with an indefinite life and a carrying value of $11,615 at February 28, 2009 and August 31, 2008.

The decrease in gross carrying value of intangible assets for the six months ended February 28, 2009 is due to a foreign currency translation loss of $1,328,977 related to the intangible assets associated with the Company’s European operations.

10

Table of Contents

CHASE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Aggregate amortization expense related to intangible assets for the six months ended February 28, 2009 and February 29, 2008 was $468,546 and $587,484, respectively.  Estimated amortization expense for the remainder of fiscal year 2009 and for each of the five succeeding fiscal years is as follows:

Note 7 – Commitments and Contingencies

From time to time, the Company is involved in litigation incidental to the conduct of its business. The Company is not party to any lawsuit or proceeding that, in management’s opinion, is likely to seriously harm the Company’s business, results of operations, financial conditions or cash flows.

The Company is one of over 100 defendants in a personal injury lawsuit, pending in Ohio, which alleges personal injury from exposure to asbestos contained in certain Chase products.  The plaintiff in the case issued discovery requests to Chase in August 2005, to which Chase timely responded in September 2005.  The trial had initially been scheduled to begin on April 30, 2007.  However, that date was postponed and no new trial date has been set.  As of March 31, 2009, there have been no new developments as this Ohio lawsuit has been inactive with respect to Chase.

Note 8 - Pensions and Other Post Retirement Benefits

The components of net periodic benefit cost for the three and six months ended February 28, 2009 and February 29, 2008 are as follows:

When funding is required, the Company’s policy is to contribute amounts that are deductible for federal income tax purposes.  As of February 28, 2009, the Company had not made any contributions in the current fiscal year to fund its obligations under the pension plan.  However, the Company plans to contribute $250,000 to fund pension plan obligations in the fiscal year ending August 31, 2009.

11

Table of Contents

CHASE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 9 – Split-Dollar Life Insurance Arrangements

In September 2006, the Emerging Issues Task Force (“EITF”) reached a final consensus on Issue 06-04, Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements.  In March 2007, the EITF reached a final conclusion on Issue 06–10, Accounting for Collateral Assignment Split-Dollar Life Insurance Arrangements.  Both of these Issues stipulate that an agreement by an employer to make life insurance premium payments and/or share a portion of the proceeds of a life insurance policy with an employee during the postretirement period is a postretirement benefit arrangement required to be accounted for by the employer.  The Issues conclude that the purchase of a split-dollar life insurance policy does not constitute a settlement and, therefore, a liability for the postretirement obligation must be recognized.  EITF Issues 06-04 and 06-10 allow the Company to record the initial recognition of the liability through stockholders’ equity.

The Company adopted EITF Issues 06-04 and 06-10 on September 1, 2008.  The net liability related to these postretirement benefits was calculated as the difference between the present value of future premiums to be paid by the Company reduced by the present value of the expected proceeds to be returned to the Company upon the insured’s death.  The Company prepared its calculation by using mortality assumptions which were based on the 2008 Combined Static Mortality Table, and an appropriate discount rate.  Upon the adoption of EITF Issues 06-04 and 06-10, the Company recorded a decrease of $183,842 to stockholders’ equity which represents the Company’s net liability related to these postretirement obligations.  Ongoing expenses in future years will be recognized through operations.

Note 10 – Fair Value Measurements

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“FAS 157”). The provisions of FAS 157 define fair value, establish a framework for measuring fair value in generally accepted accounting principles, and expand disclosures about fair value measurements.   FAS 157 is effective for financial assets and financial liabilities for fiscal years beginning after November 15, 2007.  FSP 157-2 “Partial Deferral of the Effective Date of Statement 157,” deferred the effective date of FAS 157 for all nonfinancial assets and nonfinancial liabilities except for those that are recognized at fair value on a recurring basis (at least annually) to fiscal years beginning after November 15, 2008.

The implementation of FAS 157 for financial assets and financial liabilities, effective September 1, 2008 for the Company, did not have a material impact on the Company’s consolidated financial position and results of operations.  The Company is currently assessing the impact of FAS 157 for nonfinancial assets and nonfinancial liabilities on its consolidated financial position and results of operations.

FAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price).  FAS 157 establishes a three-tier fair value hierarchy, which classifies the inputs used in measuring fair value. 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.

12

Table of Contents

CHASE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The Company endeavors to utilize the best available information in measuring fair value.  Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.  The Company has determined that it does not have any financial liabilities measured at fair value and that its financial assets are currently all classified within Level 1 in the fair value hierarchy.  The following table sets forth the Company’s financial assets that were accounted for at fair value on a recurring basis as of February 28, 2009:

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities — including an amendment of FAS No. 115”, (“FAS 159”).  FAS 159 permits entities to choose to measure many financial instruments and certain other assets and liabilities at fair value on an instrument-by-instrument basis (the fair value option). Unrealized gains and losses on items for which the fair value option has been elected are to be recognized in earnings at each subsequent reporting date. Upon adoption of FAS 159 as of September 1, 2008, the Company elected to not apply the provisions of FAS 159 to its eligible assets and liabilities.   As such, the adoption of FAS 159 did not impact the Company’s consolidated financial statements.

Note 11 – Recent Accounting Pronouncements

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (“FAS 141R”), which replaces FAS 141.  FAS 141R establishes principles and requirements for how an acquirer in a business combination recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree; recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; expensing acquisition related costs as incurred; and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination.  FAS 141R is to be applied prospectively to business combinations with an acquisition date in fiscal years beginning after December 15, 2008.  Earlier adoption is prohibited.  The Company expects that FAS 141R will have an impact on accounting for future business combinations once adopted, but the effect is dependent upon acquisitions at that time.

13

Table of Contents

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 Consolidated Financial Statements and notes thereto included in Item 1 of Part I of this Quarterly Report on Form 10-Q and the Company’s Annual Report on Form 10-K filed for the fiscal year ended August 31, 2008.

Overview

The Company continues to face challenges in the current economic environment as both sales and profits across most of the Company’s product lines remain down from the prior year.  While the Company’s second quarter ending in February is traditionally a slower time of year for many of its product offerings, this year has also been influenced by the global recession that has led to decreased demand and uncertainty for consumer and industrial products.   As discussed in the prior quarter, the financial results of the Company’s European Operations continue to be negatively impacted by the weakening pound sterling and euro whose values against the dollar have decreased 28% and 16%, respectively, from February 2008 to February 2009.  In spite of the decreased demand that has impacted sales volumes, management continues to be focused on maximizing production efficiencies across all product lines to maintain profit margins.

Revenues for the Chase Electronic Manufacturing Services business remained relatively flat in the second quarter as compared to the prior year period, as the focus on expanding this segment’s customer base has helped offset reduced demand for products and services from many of this segment’s key customers as they continue to assess inventory levels and their own customer demand.  We expect this segment’s operating results to continue to be profitable, but not at the same level observed in the prior fiscal year.  For the remainder of fiscal 2009, management’s attention will be on maintaining a healthy backlog of customer orders and proactively managing overhead costs.

Given the current economy, the Company has placed added importance on its supply chain management, consolidation goals and continuous improvement programs.  Cost control efforts have been intensified but are balanced with strategic investment to increase capabilities and productivity.  As part of this effort, the Company has acquired property (land and building) in Oxford, MA to reduce off-site storage expenses and provide capacity for future growth.   The Company has a strong balance sheet with substantial borrowing capacity for acquisition opportunities and facility reorganization needs.

14

Table of Contents

The Company has two reportable segments summarized below:

Results of Operations

Revenues and Operating Profit by Segment are as follows (dollars in thousands)

Note:  Percentages listed represent % of Revenues from External Customers (for each respective segment and period)

Total Revenues

Total revenues decreased $5,243,000 or 19% to $23,004,000 for the quarter ended February 28, 2009 compared to $28,247,000 in the same quarter of the prior year.  Total revenues decreased $8,809,000 or 14% to $54,073,000 in the fiscal year to date period compared to $62,882,000 in the same period in fiscal 2008.

Revenues from the Company’s Specialized Manufacturing segment decreased $5,242,000 and $8,125,000, in the current quarter and year to date periods, respectively.    The decrease in revenues as compared to the prior year periods is primarily due to the following for the current quarter and year to date periods, respectively: (a) decreased sales of $1,699,000 and $2,546,000 in the Electronic Coatings product lines due to decreased demand in the electronic and automotive markets; (b) decreased sales of $1,058,000 and $2,435,000 in the Pipeline and Construction product lines; (c) decreased sales of $26,000 and $1,258,000 in the Transportation product line (primarily a result of the strike at Boeing which negatively impacted sales of our Insulfab product); (d) decreased sales of $358,000 and $958,000 in the Digital & Print Media product line; and (e) decreased sales of $1,445,000 and $1,559,000 in the Wire & Cable market primarily due to decreased demand in the energy and communications markets.  These decreases in revenues were partially offset by increased year to date sales of $815,000 from Chase Protective Coatings Ltd., which was formed by the Company in September 2007.

15

Table of Contents

Compared to the prior year periods, revenues from the Company’s Electronic Manufacturing Services segment decreased $1,000 and $685,000 in the current quarter and year to date periods, respectively.  Although this business is facing softness in some key market segments, revenues remained relatively flat in the current quarter compared to the prior year period.  Sales from new customers and increased orders received from several existing customers offset reduced demand due to the economic recession. This segment’s decrease in year to date sales compared to the prior year period is primarily a result of decreased customer orders as many of the Company’s key customers continue to assess their inventory levels and closely monitor their own customers’ demand during this economic downturn.

Cost of Products and Services Sold

Cost of products and services sold decreased $2,068,000 or 10% to $17,640,000 for the quarter ended February 28, 2009 compared to $19,708,000 in the prior year quarter.  Cost of products and services sold decreased $3,473,000 or 8% to $39,199,000 in the fiscal year to date period compared to $42,672,000 in the same period in fiscal 2008.

Cost of products and services sold in the Company’s Specialized Manufacturing segment were $14,279,000 and $32,117,000 in the current quarter and year to date periods compared to $16,436,000 and $35,242,000 in the comparable periods in the prior year.  Cost of products and services sold in the Company’s Electronic Manufacturing Services segment were $3,361,000 and $7,082,000 in the current quarter and year to date periods compared to $3,272,000 and $7,430,000 in the comparable periods in the prior year.

The following table summarizes the relative percentages of revenues for costs of products and services sold for both of the Company’s reporting segments: