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, 2008

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, 2008 was 8,313,477.

CHASE CORPORATION

INDEX TO FORM 10-Q

For the Quarter Ended February 29, 2008

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Part 1 – FINANCIAL INFORMATION

Item 1 – Unaudited Financial Statements

CHASE CORPORATION
CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

See accompanying notes to the consolidated financial statements

3

CHASE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

See accompanying notes to the consolidated financial statements

4

CHASE CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

SIX MONTHS ENDED FEBRUARY 29, 2008

(UNAUDITED)

See accompanying notes to the consolidated financial statements

5

CHASE CORPORATION

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

See accompanying notes to the consolidated financial statements

6

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, 2007 in conjunction with the Company’s 2007 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 29, 2008, the results of operations and cash flows for the interim periods ended February 29, 2008 and February 28, 2007, and changes in stockholders’ equity for the interim period ended February 29, 2008.

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.

Certain amounts reported in prior years have been reclassified to be consistent with the current year presentation.  These reclassifications had no effect on the Company’s financial position or results of operations.

The results of operations for the interim period ended February 29, 2008 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, 2007, which are contained in the Company’s 2007 Annual Report on Form 10-K.

On June 27, 2007, Chase Corporation completed a two-for-one stock split, in the form of a 100% stock dividend.  The stock split entitled all stockholders of record at the close of business on June 13, 2007 to receive one additional share of the Company’s common stock, par value $.10 per share, for each share of Common Stock held on that date. All references to common shares and per share amounts herein have been restated to reflect the stock split for all periods presented.

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CHASE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 2 – Inventories

Inventories consist of the following as of February 29, 2008 and August 31, 2007:

Note 3 – Net Income Per Share

Net income per share is calculated as follows:

Note 4 – Stock Based Compensation

As part of their annual retainer, non-employee members of the Board of Directors receive $15,000 of Chase Corporation common stock, in the form of Restricted Stock or Restricted Stock Units 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 will vest one year from the date of grant. In January 2008 non-employee members of the Board received a total grant of 4,569 shares of restricted stock for service for the period from February 1, 2008 through February 1, 2009.  The shares of restricted stock will vest at the conclusion of this service period. The Company is recognizing this compensation expense over the twelve month vesting period on a ratable basis.

In August 2007, the Board of Directors of Chase Corporation approved a plan for issuing a performance and service based restricted stock grant of approximately 48,600 shares to key members of management with an issue date of September 1, 2007 and a vesting date of August 31, 2010.  These shares are subject to a performance measurement based upon the results of fiscal 2008 which will determine the final calculation of the number of shares that will be issued (which may be greater than or less than 48,600 shares). Compensation expense is being recognized on a ratable basis over the vesting period based on quarterly probability assessments.

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, custom pressure sensitive labels, protective coatings for pipeline applications and moisture protective coatings for electronics, as well as high performance polymeric asphalt additives.  Electronic Manufacturing Services include printed circuit board and electro-mechanical

8

CHASE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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:

Note 6 – Goodwill and Other Intangibles

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

Management is still finalizing the purchase price allocation for assets acquired by the Company’s wholly owned subsidiary, Chase Protective Coatings Ltd. (see Note 7).  Accordingly, the amount allocated to goodwill above as well as other identifiable intangible assets will be finalized no later than the end of the current fiscal year (August 31, 2008).

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.

9

CHASE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Intangible assets subject to amortization consist of the following at February 29, 2008 and August 31, 2007:

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 29, 2008 and August 31, 2007.

Aggregate amortization expense related to intangible assets for the six months ended February 29, 2008 and February 28, 2007 was $587,484 and $431,483, respectively.  Estimated amortization expense for the remainder of fiscal year 2008 and for each of the five succeeding fiscal years is as follows:

Note 7 – Acquisitions

Chase Protective Coatings Ltd.

On September 1, 2007, Chase Corporation purchased certain product lines and manufacturing facility in Rye, East Sussex, England through its wholly owned subsidiary, Chase Protective Coatings Ltd.  For over 35 years, this business has been a leading manufacturer of waterproofing and corrosion protection systems for oil, gas and water pipelines and has been a major supplier to Europe, the Middle East and Southeast Asia.   The purchase price for this acquisition was £738,936 (US $1,489,769 at the time of the acquisition) and was financed out of cash flow from the Company’s operations.  The effective date for this acquisition was September 1, 2007 and the results of this acquisition have been included in the Company’s financial statements since then.

Management is still finalizing the purchase price allocation as it relates to the value of the intangible assets acquired.  All assets acquired, including goodwill, are included in the Company’s Specialized Manufacturing Segment.

10

CHASE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 8 – 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 has since been postponed and no new trial date has been set.  Since that time, the Ohio lawsuit has been inactive with respect to Chase.

Note 9 – Long Term Debt

The Company has a long-term unsecured revolving credit facility available up to a maximum amount of $10 million at the bank’s base lending rate or, at the option of the Company, at the effective 30-Day London Interbank Offered Rate (LIBOR) plus 1.25 percent.  The outstanding balance and weighted average interest rate of outstanding balances on this credit facility was $832,111 and 4.37%, respectively, at February 29, 2008.  The outstanding balance on this long-term unsecured credit facility is included in scheduled principal payments at its maturity.  On February 29, 2008, the Company executed an amendment to this credit facility, extending its maturity to March 31, 2011.  All other terms of the credit facility remain the same.

Note 10 - Pensions and Other Post Retirement Benefits

The components of net periodic benefit cost for the three and six months ended February 29, 2008 and February 28, 2007 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 29, 2008, the Company was not required to make any contributions nor did it make any voluntary contributions to the pension plan in the current fiscal year.

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CHASE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 11 – Income Taxes

Effective September 1, 2007, the Company adopted the provisions of Financial Accounting Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in the financial statements by prescribing a recognition threshold and measurement attribute for recognition and measurement of a tax position taken or expected to be taken in a tax return.  As a result of the implementation of FIN 48, the Company performed a comprehensive review of its uncertain tax positions and identified $230,198 in unrecognized tax benefits that were accounted for as a reduction to the September 1, 2007 balance of retained earnings, in accordance with the adoption provisions of FIN 48.  At September 1, 2007, the total amount of unrecognized tax benefits was $639,530.  If this amount were recognized, it would favorably impact the effective tax rate for the period of recognition.  The Company does not anticipate unrecognized tax benefits will significantly increase or decrease within the next twelve months.

The unrecognized tax benefits mentioned above include an aggregate $291,338 of interest and accrued penalties. Upon adoption of FIN 48, the Company has elected an accounting policy to classify interest expense on underpayments of income taxes and accrued penalties related to unrecognized tax benefits in the income tax provision. Prior to the adoption of FIN 48, the Company’s policy was to classify interest expense on underpayments of income taxes as interest expense and to classify penalties as an operating expense in arriving at earnings before income taxes.

The Company is subject to U.S. federal income tax as well as to income tax of multiple state jurisdictions and foreign tax jurisdictions.  The statute of limitations for all material federal, state, and local tax filings remains open for tax years subsequent to 2003.  All tax years in foreign jurisdictions currently remain open, as the company’s international operations did not commence until 2005.

Note 12 – Recent Accounting Pronouncements

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. The provisions of FAS 157 are effective for fiscal years beginning after November 15, 2007.  In February 2008, the FASB issued FASB Staff Position 157-2 (“FSP 157-2”) which defers the effective date of FAS 157 for non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually).  FSP 157-2 will apply to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years.  The Company is currently evaluating the impact of the provisions of FAS 157.

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 allows measurement at fair value of eligible financial assets and liabilities that are not otherwise measured at fair value. If the fair value option for an eligible item is elected, unrealized gains and losses on that item shall be reported in current earnings at each subsequent reporting date. FAS 159 also establishes presentation and disclosure requirements designed to draw comparison between the different measurements attributes the company elects for similar types of assets and liabilities. FAS 159 is effective for fiscal years beginning after November 15, 2007. The Company is assessing the impact, if any, the adoption of FAS 159 will have on its consolidated financial statements.

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CHASE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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 controlling interest; recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; 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 for which the acquisition date is on or after an entity’s fiscal year that begins after December 15, 2008. Earlier adoption is prohibited.  The Company expects that FAS 141R will have an impact on accounting for business combinations once adopted, but the effect is dependent upon acquisitions at that time.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements—an amendment of Accounting Research Bulletin No. 51 (“FAS 160”). FAS 160 establishes accounting and reporting standards that require the ownership interest in subsidiaries held by parties other than the parent be clearly identified and presented in the consolidated balance sheets within equity, but separate from the parent’s equity; the amount of consolidated net income attributable to the parent and the noncontrolling interest be clearly identified and presented on the face of the consolidated statement of earnings; and changes in a parent’s ownership interest while the parent retains its controlling financial interest in its subsidiary be accounted for consistently. This statement is effective for fiscal years beginning on or after December 15, 2008.  Earlier adoption is prohibited. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.

In September 2006, the FASB ratified Emerging Issues Task Force (“EITF”) Issue 06-4, “Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements.”  In accordance with EITF Issue 06-4, an agreement by the employer to share a portion of the proceeds of a life insurance policy with the employee during the post retirement period is a postretirement benefit arrangement that must be accounted for under FASB Statement No. 106, Employers’ Accounting for Postretirement Benefits Other Than Pensions (FAS 106), or APB Opinion No. 12, Omnibus Opinion—1967 (APB 12).  EITF Issue 06-4 becomes effective in the first quarter of fiscal 2009 (fiscal year beginning September 1, 2008).  The Company is currently evaluating the potential impact of EITF Issue 06-4.

In March 2007, the FASB ratified Emerging Issues Task Force (“EITF”) Issue 06-10, “Accounting for the Deferred Compensation and Postretirement Benefits Aspects of Collateral Assignment Split-Dollar Life Insurance Arrangements.”  In accordance with EITF Issue 06-10, an employer should recognize a liability for the postretirement benefit related to a collateral assignment split-dollar life insurance arrangement in accordance with either FASB Statement No. 106, Employers’ Accounting for Postretirement Benefits Other Than Pensions (FAS 106), or APB Opinion 12, Omnibus Opinion—1967 (APB 12).  EITF Issue 06-10 becomes effective in the first quarter of fiscal 2009 (fiscal year beginning September 1, 2008).  The Company is currently evaluating the potential impact of EITF Issue 06-10.

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

The following discussion provides an analysis of the Company’s financial condition and results of operations and should be read in conjunction with the 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, 2007.

Recent Developments

In September 2007, Chase Corporation purchased certain product lines and manufacturing facility in Rye, East Sussex, England through its wholly owned subsidiary, Chase Protective Coatings Ltd.  For over 35 years, this business has been a leading manufacturer of waterproofing and corrosion protection systems for oil, gas and water pipelines and has been a major supplier to Europe, the Middle East and Southeast Asia.  This new acquisition joins Chase’s North American based Tapecoat® and Royston® brands to broaden the protective coatings product line and better address increasing global demand.

Overview

The company’s overall performance in the first six months of fiscal year 2008 continues to exceed prior year results.  Revenue for the Specialized Manufacturing segment displayed a healthy increase over the same period last year, despite the challenging conditions of today’s marketplace due to the economic uncertainty that is affecting many manufacturing companies. The formation of Humiseal Europe SARL  in March 2007 and Chase Protective Coatings Ltd. in September 2007 contributed to the revenue growth along with  the organic sales growth seen from existing facilities and product lines.  In spite of the inflation that has impacted raw materials prices, favorable product mix coupled with management’s emphasis on making strategic purchases have helped maintain solid margins on most of the Company’s key product lines through the first half of fiscal 2008.  During the remainder of the fiscal year, management will closely monitor raw material purchasing efforts as additional pressure on profit margins is expected with increasing raw material and energy costs.

The Chase Electronic Manufacturing Services segment observed a decrease in customer orders in the first month of the quarter (December) which led to a reduction in revenues in the second quarter compared to the same period in the prior year.  Although sales fell short of prior year results, the related effect on profitability was minimized due to lower than anticipated raw material costs and customer mix.  Management’s continued focus on expanding its customer base led to an increase in customer orders over the later half of the second quarter.    For the remainder of fiscal 2008, management’s attention will be to maintain a healthy backlog of customer orders and proactively manage overhead costs to assist with profitability.

The Company continues to renovate its recently acquired manufacturing plant in the Pittsburgh area and anticipates that the majority of the building improvements will be completed over the remainder of the current calendar year. This facility will allow for additional production capacity and improved  efficiencies with existing product lines, and will also provide space to integrate future acquisitions.

During the upcoming quarter, management will continue to pay close attention to the overall economy, including the housing market, inflation, and cost of petroleum related goods and services and the impact that the global markets will have on the Company’s eight core product lines.  Brands such as HumiSeal®, Paper Tyger®, Chase & Sons® and Chase BlH2Ock® remain a primary focus in the Company’s effort to grow sales organically; however, management continues to seek strategic acquisitions to bolster future growth.

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The Company has two reportable segments summarized below:

Results of Operations

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

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Total Revenues

Total revenues increased $743,000 or 3% to $28,247,000 for the quarter ended February 29, 2008 compared to $27,504,000 in the same quarter of the prior year.  Total revenues increased $4,134,000 or 7% to $62,882,000 in the fiscal year to date period compared to $58,748,000 in the same period in fiscal 2007.

Revenues from the Company’s Specialized Manufacturing segment increased $1,480,000 and $4,187,000, in the current quarter and year to date periods, respectively.  The increase 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) increased sales from the Company’s European Operations due to the establishment of HumiSeal Europe SARL in March 2007 and Chase Protective Coatings in September 2007 accounted for $1,507,000 and $3,290,000, (b) increased sales from the Pipeline and Construction product lines of $379,000 and $1,454,000, and (c) increased sales of Electronic Coatings sold from the U.S. of $201,000 and $764,000.  These increases in revenues were partially offset by the following for the quarter and year to date periods, respectively (a) decreased sales of $268,000 and $961,000 in the Wire & Cable market primarily due to decreased demand and greater competition related to co-axial shielding tapes, and (b) decreased sales of $478,000 and $432,000 in the Transportation product line.

Compared to the prior year periods, revenues from the Company’s Electronic Manufacturing Services segment decreased $737,000 and $53,000 in the current quarter and year to date periods, respectively.  The decrease in revenues in the current quarter is a result of decreased orders seen in the first month of the quarter (December) as the Company’s key customers in this segment were assessing their inventory levels and closely monitoring their customer’s demand at the end of the calendar year.  The current backlog for Chase EMS is healthy at $9.0 million as of March 31, 2008.

Cost of Products and Services Sold

Cost of products and services sold decreased $324,000 or 2% to $19,708,000 for the quarter ended February 29, 2008 compared to $20,032,000 in the prior year quarter.  Cost of products and services sold increased $845,000 or 2% to $42,672,000 in the fiscal year to date period compared to $41,827,000 in the same period in fiscal 2007.

Cost of products and services sold in the Company’s Specialized Manufacturing segment were $16,436,000 and $35,242,000 in the current quarter and year to date periods compared to $16,065,000 and $34,234,000 in the comparable periods in the prior year.  Cost of products and services sold in the Company’s Electronic Manufacturing Services segment were $3,272,000 and $7,430,000 in the current quarter and year to date periods compared to $3,967,000 and $7,593,000 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: