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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended August 31, 2003

Commission File Number: 1-9852

CHASE CORPORATION
(Exact name of registrant as specified in its charter)

Securities registered pursuant to section 12(b) of the Act: None

Securities registered pursuant to section 12(g) of the Act: Common Stock, $.10 per share par value

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 ý    NO o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý

Indicate by checkmark whether the registrant is an accelerated filer (as defined in Rule 12-b-2 of the Exchange Act). YES o    NO ý

The aggregate market value of the voting stock (common stock) held by non-affiliates of the registrant, as of January 31, 2003 was approximately $41,404,000.

As of October 31, 2003, the Company had outstanding 4,047,317 shares of common stock, $.10 par value, which is its only class of common stock.

Documents incorporated by reference:

The registrant's definitive proxy statement (the "Definitive Proxy Statement") to be filed in connection with the Annual Meeting of Shareholders to be held on January 27, 2004, is incorporated by reference into items 10, 11, 12 and 13 hereof.

CHASE CORPORATION
INDEX TO ANNUAL REPORT ON FORM 10-K

For the Year Ended August 31, 2003

PART I

Item 1—Business

General Development and Industry Segment

        Chase Corporation (the "Company" or "Chase") is a multi-divisional advanced manufacturing company providing industrial products to a wide variety of industries including wire and cable, construction and electronics. The Company's strategy is to maximize its core businesses while seeking future opportunities through selective acquisitions. During 1992, a facility that manufactures tape and related products in Webster, Massachusetts became operational. In April 1992, the Company acquired certain tape product lines and associated assets for cash from the Stewart Group, Ltd. This division, Chase Canada, will be reorganized within our domestic operating facilities, effective during fiscal year 2004 as a result of the consolidation of its customer base, which is predominantly located in the United States. Effective May 25, 1994, the Company acquired the electrical cable insulation tape product lines and certain associated assets from Haartz Mason, Inc. and these products and assets were integrated into the Chase & Sons division. On June 5, 1995, the Company formed a joint venture with The Stewart Group, Ltd. which was called The Stewart Group, Inc. On February 1, 1996, the Company increased its original investment resulting in ownership of 42% of the joint venture. On May 16, 1997, the majority of the assets related to the original business were sold to Owens Corning. The joint venture continues to operate two manufacturing facilities selling polymers and specialty coatings primarily to the telecommunications industry.

        On August 7, 1996, the Company announced that it had purchased a 20% interest in DC Scientific and then purchased a controlling interest on January 16, 1997. On January 27, 1999 the Company acquired the remaining interest of DC Scientific Inc. and changed the name to Sunburst Electronic Manufacturing Solutions Inc., (Sunburst EMS). On May 26, 1999, the Company expanded its electronic manufacturing business with the acquisition of RWA, Inc. ("RWA") located in Melrose, MA. Subsequently, in February 2000, the Company acquired the assets of NETCO Automation, Inc. and integrated the majority of NETCO assets into RWA in fiscal 2002. On July 29, 1999, Northeast Quality Products, Co. Inc., a specialty printer producing custom pressure sensitive labels, located in Newburyport, MA, was acquired.

        Effective November 1, 2001, substantially all of the assets of Tapecoat, a division of T.C. Manufacturing Co., Inc., located in Evanston, Illinois, were acquired for cash and 40,000 shares of Chase common stock. Tapecoat is a manufacturer of protective coatings within several markets. On February 12, 2003, Chase Facile, Inc. ("Chase Facile"), a wholly-owned subsidiary of the Company acquired certain assets of Facile, Inc. ("Facile"), located in Patterson, New Jersey. Chase Facile is a manufacturer of flexible composites and laminates for the wire & cable, aerospace and industrial laminate markets.

        As of October 31, 2003, the Company employed approximately 362 people. The Company believes that its relationship with its employees is good.

Products and Markets

        The Company's principal products are protective coatings and tape products that are sold by Company salespeople and manufacturers' representatives. These products consist of: (i) insulating and conducting materials for the manufacture of electrical and telephone wire and cable, electrical splicing, and terminating and repair tapes which are marketed to wire and cable manufacturers and public utilities; (ii) protective pipe coating tapes and other protectants for valves, regulators, casings, joints, metals, concrete, and wood that are sold to oil companies, gas utilities, and pipeline companies;

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(iii) protectants for highway bridge deck metal supported surfaces sold to municipal transportation authorities; (iv) moisture protective coatings that are sold to the electronics industry; and (v) in addition, the Company's electronic manufacturing service group, Sunburst EMS and RWA, provides circuit board assembly services to electronic goods manufacturers. There are no material seasonal aspects to the Company's business and the Company has introduced no new products or segments requiring an investment of a material amount of the Company's assets.

Backlog, Customers and Competition

        As of October 31, 2003, the backlog of orders believed to be firm was approximately $11,288,000, of which $7,193,000 was related to our electronic manufacturing services group. This compared with a total of $7,179,000 as of October 31, 2002 with $5,056,000 associated with the electronic manufacturing services group. The backlog is not seasonal. During fiscal 2003 and 2002, no customer accounted for more than 10% of sales. In fiscal year 2001 one customer accounted for approximately 14% of total sales. No material portion of the Company's business is subject to renegotiation or termination of profits or contracts at the election of the government.

        There are other companies that manufacture or sell products and services similar to those made and sold by the Company. Many of those companies are larger and have greater financial resources than the Company. Competition is principally based on technical performance, service reliability, quality and price.

Raw Materials

        The Company obtains raw materials from a wide variety of suppliers with alternative sources of all essential materials available within reasonable lead times.

Patents, Trademarks, Licenses, Franchises and Concessions

        Other than HumiSeal®, a trademark for moisture protective coatings sold to the electronics industry, Chase BLH₂OCK®, a trademark for water blocking compound sold to the wire and cable industry, Rosphalt50®, a trademark for an asphalt additive used predominantly on bridge decks for waterproofing protection, and Insulfab®, a trademark for insulation material used in the aerospace industry there are no material trademarks, licenses, franchises, or concessions. The Company holds various patents, but believes that at this time they are not material to the success of the business.

Working Capital and Research and Development

        There are no special practices followed by the Company relating to working capital. Approximately $746,000, $781,000 and $612,000 was spent for Company-sponsored research and development during fiscal years 2003, 2002 and 2001, respectively.

Financial Information about Foreign and Domestic Operations and Export Sales

        Export sales from continuing domestic operations to unaffiliated third parties were $5,459,000, $4,504,000 and $5,941,000, for the years ended August 31, 2003, 2002 and 2001, respectively. The change in export sales was due to the general improvement of the global economy. A new license and royalty arrangement in 2002 with a manufacturer in the Far East caused a reduction in export sales in 2002 but increased royalty income. The Company does not anticipate any material change to export sales during fiscal 2004. The Company's products are sold worldwide with no foreign geographic area accounting for more than 10% of revenues. The Company's Canadian operations accounted for 2.0%, 3.4% and 5.3% of consolidated sales for the years ended August 31, 2003, 2002 and 2001,

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respectively, and 1.4%, 1.3% and 2.4% of total assets as of August 31, 2003, 2002 and 2001, respectively.

        The Company has very limited currency exposure since all invoices, except those from the Canadian operation to Canadian customers, are denominated in US dollars. The Company maintains minimal cash balances in Canada and, other than the currency conversion effects on the fixed assets in Canada which are deferred and recorded directly in equity per FAS52, and reported in the Statement of Changes in Equity per SFAS130, there are no significant assets held in foreign currencies. The Company does not engage in hedging activities. Foreign currency transaction gains or losses have not been material.

Available Information

        The Company maintains a website on the World Wide Web at www.chasecorp.com. The Company makes available, free of charge, on its website its Annual Report on Form 10-K, as soon as reasonably practicable after such report is electronically filed with, or furnished to, the SEC. Additionally, the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, an amendments to those reports filed or furnished pursuant to Section 13(a) of 15(d) of the Securities Exchange Act of 1934, as amended, are available at the SEC's website at www.sec.gov. Information contained on the Company's website is not part of, or incorporated by reference into, this Annual Report on Form 10-K.

Item 2—Properties

        During 1998 the Company purchased a building containing approximately 5,200 square feet located in Bridgewater, Massachusetts to which it relocated its principle executive office. The Company also rents a modern one-story building of approximately 5,000 square feet in Woodside, New York, which is used by the conformal coatings division.

        Chase & Sons, a division engaged in the manufacture and sale of electrical protective coatings and tape products, uses offices and plants owned by the Company that are located on seven acres in Randolph, Massachusetts, and consist of a three-story building containing approximately 10,500 square feet and ten one-story buildings, aggregating about 67,000 square feet. This division also owns a facility consisting of approximately 25,000 square feet in Webster, Massachusetts which manufactures tape and related products for the electronic and telecommunication industries.

        The Canadian division of the Company is engaged in the process of laminating and slitting film, foils and papers primarily for the wire and cable industry. This division leases about 18,000 square feet of manufacturing space in Winnipeg, Manitoba, Canada.

        The Royston and Fluid Polymers divisions use offices and a plant owned by the Company that is located on three acres in Pittsburgh, Pennsylvania. The facilities consist of thirteen buildings, three of which are used for offices, one of which is rented as a residence and the rest of which are used as manufacturing and warehouse facilities. These facilities, excluding the residence, contain approximately 44,000 square feet and are used in the manufacture and sale of protective coatings and tape products.

        Northeast Quality Products Co., Inc., a subsidiary of the Company, is a specialty printer producing custom pressure-sensitive labels and leases approximately 15,000 square feet of space in Newburyport, Massachusetts.

        Sunburst EMS and RWA provide electronic manufacturing services. During fiscal 2002, Sunburst EMS acquired the 35,700 square feet facility located in West Bridgewater, Massachusetts that it had previously leased. RWA rents approximately 21,000 square feet in Melrose, Massachusetts.

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        Tapecoat, a manufacturer of protective coatings uses offices and plant buildings that consist of approximately 100,000 square feet located in Evanston, Illinois.

        The acquisition of certain assets of Facile, Inc was completed on February 12, 2003. The Company's manufacturing plant consists of a 40,000 square foot leased facility located in Paterson, New Jersey.

        The above facilities range in age from new to about 100 years, are generally in good condition and, in the opinion of management, adequate and suitable for present operations. The Company also owns equipment and machinery that is in good repair and, in the opinion of management, adequate and suitable for present operations. The Company could significantly add to its capacity by increasing shift operations. Availability of machine hours through additional shifts would provide expansion of current product volume without significant additional capital investment.

Item 3—Legal Proceedings

        In 2003, the Company was a defendant in six personal injury lawsuits, all of which allege personal injury from exposure to asbestos contained in Chase products. Of these lawsuits, four were pending in Mississippi, one was pending in Texas and one was pending in Ohio. The Company has been dismissed without prejudice from two of the cases in Mississippi and the one in Texas. The case in Ohio has been stayed as to the Company for six months (until approximately 2004) and the Company is in discussions with respect to dismissal without prejudice from another one of the cases in Mississippi. This leaves only one active case against the Company, which was filed in Mississippi on August 14, 2003 on behalf of 50 plaintiffs. The Company's insurer had assumed defense of these claims subject to reservation of its rights as to coverage for any underlying liability assessed until that insurer was liquidated in May 2003. The Company is now working to confirm coverage under the appropriate state guaranty funds. Although the Company cannot predict whether or how any of these claims will be pursued, management believes that such claims will not have any material financial impact on the Company.

Item 4—Submission of Matters to a Vote of Security Holders

        There were no matters submitted to a vote of the Company's security holders during the fourth quarter of the Company's year ended August 31, 2003.

Item 4A—Executive Officers of the Registrant

        The following table sets forth information concerning the Company's Executive officers. Each officer is selected by the Company's Board of Directors and holds office until his successor is elected and qualified.

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PART II

Item 5—Market for the Registrant's Common Equity and Related Stockholder Matters

        The Company's common stock is traded on the American Stock Exchange (Symbol: CCF). The approximate number of shareholders of common stock on October 31, 2003 was 1,662, and the closing price of Chase Corporation's common stock was $12.59

        The following table sets forth the high and low sales prices for the Company's common stock as reported by the American Stock Exchange for each quarter in the years ended August 31, 2003 and 2002:

        The Company paid a cash dividend per common share of $0.31, $0.27 and $0.36 for the years ended August 31, 2003, 2002 and 2001, respectively.

Item 6—Selected Consolidated Financial Data

        The following selected financial data should be read in conjunction with "Item 7—Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Item 8—Financial Statements and Supplementary Data"

*

Single annual dividend payments declared and paid subsequent to fiscal year end.

Item 7—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 8 of this Annual Report on Form 10-K.

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Selected Relationships within the Consolidated Statements of Operations

Overview

        The Company has two reportable segments, the Specialized Manufacturing segment which produces protective coatings and tape products and the Electronic Manufacturing Services segment which provides assembly and turnkey contract manufacturing services to the electronics industry.

        Effective November 1, 2001, the Company purchased the assets of the Tapecoat Division of TC Manufacturing, Inc.

        Effective February 12, 2003, Chase Facile, Inc. ("Chase Facile"), a wholly owned subsidiary of the Company acquired certain assets of Facile, Inc. ("Facile") for $5,032,000 (including $150,000 of acquisition costs) from Facile and Facile's lender. The acquired assets consisted principally of equipment, inventory and receivables. The Company intends to use the acquired assets substantially in the same manner as they were used prior to the acquisition by Chase Facile.

        Chase Canada, the Company's only manufacturing plant located outside of the United States, in Winnipeg, Canada will be reorganized within our domestic operating facilities, effective during fiscal year 2004. This reorganization of plant facilities is a result of the continued consolidation of Chase Canada's customer base, predominantly to the United States.

Results of Operations

Total Revenues

        Total revenues for fiscal 2003 increased $5.3 million or 8% to $74.6 million from $69.3 million in the prior year. The increase in revenues is primarily a result of sales generated by the Company's recent acquisitions of Tapecoat (acquired in fiscal 2002) and Chase Facile (acquired in fiscal 2003).

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Fiscal 2003 Specialized Manufacturing revenues increased over the previous year as this segment continued to benefit from the asset purchase of the Tapecoat division as well as seven months of sales activity generated by the February 2003 acquisition of Chase Facile.

        In fiscal 2002 revenues decreased $1.1 million to $69.3 million, a decline of 2% compared to the prior year. Revenues in fiscal 2002 were adversely impacted by both price erosion from competitive pressure and the continued weakness in the telecommunications and electronics markets served by both the Company's Specialized Manufacturing and Electronic Manufacturing Services segments. Fiscal 2002 Specialized Manufacturing revenues increased over the previous year as the segment benefited from $7.0 million in additional sales over the final ten months of the fiscal year that resulted from the asset purchase of the Tapecoat division of TC Manufacturing, Inc. In addition, increased sales for products used in certain construction and housing markets supported the Specialized Manufacturing segment.

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

Cost of Products and Services Sold

        In fiscal 2003, cost of products and services sold increased $2.4 million to $51.6 million compared to $49.2 million in the prior year period. The dollar value increase was a direct result of increased revenues in fiscal 2003. As a percentage of revenues, cost of products and services sold decreased to 69% in fiscal 2003 compared to 71% in fiscal 2002, primarily due to increased revenues from the Company's Tapecoat and Chase Facile's divisions. Fiscal 2003 included a full year of Tapecoat and seven months of Chase Facile's operations compared to four months and no activity for Tapecoat and Chase Facile, respectively, in fiscal 2002. These two divisions, which are in the Specialized Manufacturing segment sell products with higher margins compared to the Company's

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Electronic Manufacturing Services segment. Accordingly, there are more sales of these higher margin products in fiscal 2003.

        The dollar value of cost of products and services sold was lower in fiscal 2002 when compared to fiscal 2001. The decrease in fiscal 2002 was related to the decline in volume for the Company's Electronic Manufacturing Services segment. As a percentage of revenues, cost of products and services sold increased to 71% in fiscal 2002 compared 70% in 2001. The increase in fiscal 2002 compared to 2001 relates primarily to insufficient fixed manufacturing cost coverage in the Company's Electronic Manufacturing Services segment.

Selling, General and Administrative Expenses

        Selling, general and administrative expenses increased $900,000 to $14.1 million in fiscal 2003 compared to $13.2 million in fiscal 2002. Selling, general and administrative expenses increased $1.2 million to $13.2 million during fiscal 2002 compared to $12.0 million in fiscal 2001. As a percent of revenues, selling, general and administrative expenses remained flat in fiscal 2003 compared to the prior year and increased to 19% when compared to 17% in fiscal 2001. The increase from fiscal 2001 to 2002 was the result of the Tapecoat asset purchase concluded on November 1, 2001. The Company will continue to be focused on expense reduction while maintaining and improving the quality of its products and services to the marketplace.

Other Costs and Expenses

        Bad debt expense, net of recoveries, increased $387,000 to $494,000 in fiscal 2003 compared to $107,000 in the fiscal 2002. The increase in 2003 is a result of the financial difficulties of a long standing customer in the Company's Specialized Manufacturing segment.

        Interest expense was $381,000 in fiscal 2003 compared to $517,000 and $799,000 in fiscal 2002 and 2001, respectively. The continued decrease is a direct result of a reduction in interest rates and the Company's ability to reduce overall debt balances through payments from operating cash. The Company continues to receive the benefits from low borrowing rates from its financial institutions.

        The effective tax rate for fiscal 2003 was 33.3% compared to 31.5% and 32.0% in fiscal 2002 and 2001, respectively. In all three years the Company has received the benefit of strong export sales.

        The income (loss) from unconsolidated joint venture relates to the Company's 42% equity position in the Stewart Group, Inc., Toronto, Canada. The business focus is geared toward the telecom market which has been impacted by the economic climate in this market

Net Income

        Fiscal 2003 earnings were primarily affected by increased revenues as a result of the Company's Tapecoat and Chase Facile divisions. Additionally, the margin on the increased revenues generated from the Specialized Manufacturing segment was higher when compared to the Company's Electronic Manufacturing Services segment.

        Fiscal 2002 earnings were primarily affected by the poor economic climate, which has been particularly severe in the manufacturing sector. Weak customer demand for the Company's products and services related to the telecommunications and electronics markets, combined with price erosion from competitive pressure negatively impacted the earnings of both of the Company's reporting segments. Fortunately, the asset purchase of Tapecoat and a strong construction market in fiscal 2002, lessened the decline in earnings from fiscal 2001.

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        Fiscal 2001 earnings benefited from growth in construction markets and improvements in certain areas of electronic manufacturing services, which offset weakness in telecommunications related product lines and services. Sales and profitability from the Company's traditional Specialized Manufacturing segment remained solid although somewhat affected by price erosion from competitive pressure.

Liquidity and Sources of Capital

        At August 31, 2003, the Company's cash and cash equivalents decreased $162,000 to $167,000 from $329,000 at August 31, 2002. The change in cash and cash equivalents was primarily a result of cash flow provided by operations offset by capital expenditures, payments for certain assets of Facile, Inc. and dividends paid.

        Cash flow generated from operations was $7,768,000 in fiscal 2003 as compared to $8,884,000 and $7,029,000 during fiscal 2002 and 2001, respectively. Cash provided by operations during fiscal 2003 was primarily due to operating income. Compared to prior year, the fiscal 2003 decrease in operating cash flow was primarily a result of increased accounts receivable.

        The ratio of current assets to current liabilities was 1.9 as of August 31, 2003 compared to 1.8 as of August 31, 2002 and 2001.

        Cash flow used in investing activities was primarily due to purchases of property, plant and equipment of $880,000 and Chase Facile's, the Company's wholly owned subsidiary, acquisition of certain assets of Facile, Inc. ("Facile") for $5,032,000 (including $150,000 of acquisition costs) from Facile and Facile's lender. The acquired assets consisted principally of equipment, inventory and receivables. Cash was provided through operating cash and borrowings under the Company's credit facility.

        Cash flow used in financing activities was primarily due to cash dividends of $1,093,000 paid on the Company's common stock. Long-term debt decreased by $382,000 (including the current portion) as of August 31, 2003 compared to the end of fiscal 2002. The decrease was associated with debt incurred to acquire certain assets of Facile, Inc. in February 2003 offset by debt payments made on that debt facility and other debt facilities. The Company anticipates continued debt reduction as a result of improved earnings and operational cash flow improvements related to a stronger business environment.

        The Company had $5.0 million in available credit at August 31, 2003 under its credit arrangements with its primary bank and plans to utilize this means to help finance its needs in fiscal 2004.

        The following table summarizes the Company's contractual cash obligations at August 31, 2003 and the effect such obligations are expected to have on its liquidity and cash flow in future periods.

        Current financial resources and anticipated funds from operations are expected to be adequate to meet planned operating, investing and financing activities for at least the next twelve months.

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Recently Issued Accounting Standards

        In October 2001, the Financial Accounting Standard Board (FASB) issued Statement of Financial Accounting Standard No. 144 (SFAS 144), "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS 144 supersedes SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be disposed of." The primary objectives of SFAS 144 are to develop one accounting model based on the framework established in SFAS 121 for long-lived assets to be disposed of by sale, and to address significant implementation issues identified after the issuance of SFAS 121. The Company adopted SFAS 144 in its fiscal year beginning September 1, 2002; however, the adoption did not have a significant impact on the Company's financial position and results of operations.

        In June 2002, the FASB issued SFAS 146, "Accounting for Costs Associated with Exit or Disposal Activities," which addresses accounting for restructuring and similar costs. SFAS 146 supersedes previous accounting guidance, principally Emerging Issues Task Force (EITF) Issue No. 94-3 "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." SFAS 146 requires recognition of the liability for costs associated with an exit or disposal activity when the Company exits the activity, whereas under EITF Issue No. 94-3, a liability for an exit cost is recognized at the date a company commits to an exit plan. In addition, SFAS 146 establishes that the liability should initially be measured and recorded at fair value. Accordingly, SFAS 146 may affect the timing of recognizing future restructuring costs, as well as the amounts recognized. The provisions of SFAS 146 are effective for exit or disposal activities that are initiated after December 31, 2002 and, have been adopted by the Company as of January 1, 2003.

        In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others—an Interpretation of FASB Statements No. 5, 57, and 107 and Rescission of FASB Interpretation No. 34." The interpretation elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. It also requires a guarantor to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. In general, the interpretation applies to contracts or indemnification agreements that contingently require the guarantor to make payments to the guaranteed party based on changes in an underlying obligation that is related to an asset, liability or an equity security of the guaranteed party. The initial recognition and measurement provisions of the interpretation apply to guarantees issued or modified after December 31, 2002.

        In December 2002, the FASB issued SFAS 148, "Accounting for Stock-Based Compensation-Transition and Disclosure." SFAS 148 amends SFAS 123, "Accounting for Stock-Based Compensation" to provide alternative methods of transition for those companies who voluntarily change to the fair value based method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of SFAS 123 to require prominent disclosures in both the annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The transition and annual disclosure provisions of SFAS 148 are effective for fiscal years ending after December 15, 2002. As permitted under SFAS 148, the Company adopted the disclosure only provisions of that accounting standard in the third quarter of fiscal 2003. Additionally, the Company is in the process of determining the impact of adopting the fair value accounting provisions of this standard. It is expected that upon the adoption of the fair value based method of accounting for stock-based employee compensation, as provided in SFAS 148, the Company will apply the prospective method.

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        In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities" (FIN 46). This interpretation of Accounting Research Bulletin No. 51, "Consolidated Financial Statements," addresses consolidation by business enterprises of variable interest entities (VIEs) that either: (1) do not have sufficient equity investment at risk to permit the entity to finance its activities without additional subordinated financial support, or (2) the equity investors lack an essential characteristic of a controlling financial interest. This interpretation applies immediately to VIEs created after January 31, 2003. It applies in the first fiscal year or interim period beginning after June 15, 2003, to VIEs in which an enterprise holds a variable interest that it acquired before February 1, 2003. FIN 46 requires disclosure of VIEs in financial statements issued after January 31, 2003, if it is reasonably possible that as of the transition date: (1) the company will be the primary beneficiary of an existing VIE that will require consolidation or, (2) the company will hold a significant variable interest in, or have significant involvement with, an existing VIE. In October 2003, the FASB deferred the effective date for applying the provision of FIN 46 until the first interim or annual period ending after December 15, 2003. The Company is still assessing the impact that FIN 46 will have on its financial position and results of operations.

        On May 15, 2003, the FASB issued Statement No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity" (SFAS 150). SFAS 150 establishes standards for classifying and measuring as liabilities certain financial instruments that embody obligations of the issuer and have characteristic of both liabilities and equity. SFAS 150 represents a significant change in practice in the accounting for a number of financial instruments; including mandatory redeemable equity instruments and certain equity derivatives that frequently are used in connection with share repurchase programs. SFAS 150 is effective for all financial instruments created or modified after May 31, 2003, and to other instruments as of September 1, 2003. The Company is still assessing the impact that SFAS 150 will have on its financial position and results of operations.

        In November 2002, the EITF reached a consensus on Issue No. 00-21, "Accounting for Revenue Arrangements with Multiple Deliverables." EITF Issue No. 00-21 addresses certain aspects of the accounting by a vendor for arrangements under which it will perform multiple revenue-generating activities. EITF Issue No. 00-21 establishes three principles: revenue should be recognized separately for separate units of accounting, revenue for a separate unit of accounting should be recognized only when the arrangement consideration is reliably measurable and the earnings process is substantially complete, and consideration should be allocated among the separate units of accounting in an arrangement based on their relative fair values. EITF Issue No. 00-21 is effective for all revenue arrangements entered into in fiscal periods beginning after June 15, 2003. The adoption of EITF No. 00-21 is not expected to have a significant impact on the Company's financial position and results of operations.

Critical Accounting Policies, Judgments, and Estimates

        The U.S. Securities and Exchange Commission ("SEC") has suggested companies provide additional disclosure and commentary on their most critical accounting policies. The SEC has defined the most critical accounting policies as the ones that are most important to the portrayal of a company's financial condition and operating results, and require management to make its most significant estimates and judgments in the preparation of its consolidated financial statements. The Company's critical accounting policies are described below.

Accounts Receivable

        The Company evaluates the collectibility of accounts receivable based on a combination of factors. In cases where the Company is aware of circumstances that may impair a specific customer's ability to

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meet its financial obligations to it, a specific allowance against amounts due to the Company is recorded, and thereby reduces the net recognized receivable to the amount the Company reasonably believes will be collected. For all other customers, the Company recognizes allowances for doubtful accounts based on the length of time the receivables are past due, industry and geographic concentrations, the current business environment and its historical experience. If the financial condition of the Company's customers deteriorates or if economic conditions worsen, additional allowances may be required in the future, which could have an adverse impact on the future operating results of the Company.

Inventories

        The Company values inventory at the lower of cost or market using the first-in, first-out (FIFO) method. Management assesses the recoverability of inventory based on types and levels of inventory held, forecasted demand and changes in technology. These assessments require management judgments and estimates, and valuation adjustments for excess and obsolete inventory may be recorded based on these assessments. The Company estimates excess and obsolescence exposures based upon assumptions about future demand, product transitions, and market conditions and records reserves to reduce inventories to their estimated net realizable value. The failure to accurately forecast demand may lead to additional excess an obsolete inventory and future charges.

Investment in Joint Venture

        The Company has an investment in a joint venture related to an area of the Company's strategic focus. The Company accounts for this investment using the equity method of accounting. In assessing the recoverability of this investment, the Company must make certain assumptions and judgments based on changes in the Company's overall business strategy, the financial condition of the joint venture, market conditions and the industry and economic environment in which the entity operates. Adverse changes in market conditions or poor operating results of the joint venture could result in losses or an inability to recover the carrying value of the investment, thereby requiring an impairment charge in the future.

Goodwill, Intangible Assets, and Other Long-Lived Assets

        Long-lived assets consist of goodwill, trademarks, patents and agreements and property, plant, and equipment. Intangible assets and property, plant, and equipment, excluding goodwill, are amortized using the straight-line method over their estimated useful life. The carrying value of goodwill and other intangible assets is reviewed on a quarterly basis for the existence of facts and circumstances both internally and externally that may suggest impairment. Factors which the Company considers important and that could trigger an impairment review include significant underperformance relative to expected historical or projected future operating results, and significant negative industry or economic trends. The Company determines whether an impairment has occurred based on gross expected future cash flows, and measures the amount of the impairment based on the related future discounted cash flows. The cash flow estimates used to determine impairment, if any, contain management's best estimates, using appropriate and customary assumptions and projections at the time.

Impact of Inflation

        Inflation has not had a significant long-term impact on earnings. In the event of significant inflation, the Company's efforts to recover cost increases would be hampered as a result of the competitive nature of its products.

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Forward-Looking Information

        From time to time, the Company may publish, verbally or in written form, forward-looking statements relating to such matters as anticipated financial performance, business prospects, technological developments, new products, research and development activities and similar matters. In fact, this Form 10-K (or any other periodic reporting documents required by the 1934 Act) may contain forward-looking statements reflecting the current views of the Company concerning potential future events or developments. The Private Securities Litigation Reform Act of 1995 (the "Act") provides a "safe harbor" for forward-looking statements. In order to comply with the terms of the "safe harbor," the Company cautions investors that any forward-looking statements made by the Company are not guarantees of future performance and that a variety of factors could cause the Company's actual results and experience to differ materially from the anticipated results or other expectations expressed in the Company's forward-looking statements. The risks and uncertainties which may affect the operations, performance, development and results of the Company's business include, but are not limited to, the following: uncertainties relating to economic conditions; uncertainties relating to government and regulatory policies; uncertainties relating to customer plans and commitments; the pricing and availability of equipment, materials and inventories; technological developments; performance issues with key suppliers and subcontractors; worldwide political stability and economic growth; regulatory uncertainties; delays in testing of new products; rapid technology changes and the highly competitive environment in which the Company operates. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made.

Risk Factors

        The Company currently operates in a mature market where increases or decreases in market share could be significant. The Company's sales and net income are dependent on recurring sales from a consistent and established customer base. Organic growth opportunities are minimal, however, the Company has and will continue to use strategic acquisitions as a means to build and grow the business.

        The Company's business strategy includes the pursuit of strategic acquisitions. From time to time, the Company engages in discussions with potential target companies concerning potential acquisitions. The Company currently does not have any commitments or agreements with respect to any acquisitions. In executing its acquisition strategy, the Company may be unable to identify suitable acquisition candidates. In addition, the Company may face competition from other companies for acquisition candidates, making it more difficult to acquire suitable companies on favorable terms

Item 7A—Quantitative and Qualitative Disclosures about Market Risk

        The Company faces limited exposure to financial market risks, including adverse movements in foreign currency exchange rates and changes in interest rates. These exposures may change over time as business practices evolve and could have a material adverse impact on the Company's financial results.

        The Company limits the amount of credit exposure to any one issuer. At August 31, 2003 all of the Company's funds were in demand deposit accounts. If the Company places its funds in other than demand deposit accounts it uses instruments that meet high credit quality standards such as money market funds, government securities, and commercial paper.

        The Company does not use derivative financial instruments for speculative or trading purposes.

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Item 8—Financial Statements and Supplementary Data

        The following Consolidated Financial Statements of Chase Corporation are filed as part of this Report on Form 10-K:

Index to Consolidated Financial Statements:

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INDEPENDENT AUDITORS' REPORT

To the Shareholders and Board of
Directors of Chase Corporation
Bridgewater, Massachusetts

        We have audited the consolidated balance sheets of Chase Corporation and subsidiaries as of August 31, 2003 and 2002, and the related consolidated statements of operations, shareholders' equity and cash flows for each year in the three year period ended August 31, 2003. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

        We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Chase Corporation and subsidiaries at August 31, 2003 and 2002, and the consolidated results of their operations and cash flows for each year in the three year period ended August 31, 2003, in conformity with accounting principles generally accepted in the United States of America.

/s/ LIVINGSTON & HAYNES, P.C.

Wellesley, Massachusetts
October 24, 2003

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CHASE CORPORATION

CONSOLIDATED BALANCE SHEETS

See accompanying notes to the consolidated financial statements.

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CHASE CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

See accompanying notes to the consolidated financial statements.

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CHASE CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

See accompanying notes to the consolidated financial statements.

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CHASE CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

See note 14 for supplemental cash flow information including non-cash financing and investing activities.

See accompanying notes to the consolidated financial statements.

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CHASE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1—Summary of Significant Accounting Policies

        The principal accounting policies of Chase Corporation ("the Company") and its subsidiaries are as follows:

Products and Markets

        The Company's principal products are protective coatings and tape products that are sold in national and international markets. These products consist of: (i) insulating and conducting materials for the manufacture of electrical and telephone wire and cable, and electrical splicing, terminating and repair tapes which are marketed to wire and cable manufacturers and public utilities; (ii) protective pipe coating tapes and other protectants for valves, regulators, casings, joints, metals, concrete, and wood that are sold to oil companies, gas utilities and pipeline companies; (iii) protectants for highway bridge deck metal supported surfaces which are sold to municipal transportation authorities; (iv) moisture protective coatings that are sold to the electronics industry. The Company's electronics manufacturing services group provides assembly and contract manufacturing services to the electronics industry.

Basis of Presentation

        The financial statements include the accounts of the Company and its wholly-owned subsidiaries. Investments in unconsolidated companies which are at least 20% owned are carried at cost plus equity in undistributed earnings since acquisition. All intercompany transactions and balances have been eliminated in consolidation. The Company uses the U.S. dollar as the functional currency for financial reporting.

        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.

Use of Estimates

        The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

        Cash and cash equivalents consist primarily of demand deposits. For the purpose of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. The Company's cash balances held in foreign currencies are in Canadian dollars and are immaterial as of August 31, 2003 and 2002.

Accounts Receivable

        The Company establishes reserves against its accounts receivable for potential credit losses when it determines receivables are at risk for collection based upon the length of time the receivables are

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outstanding, as well as various other criteria. Receivables are written off against these reserves in the period they are determined to be uncollectible.

Inventories

        Inventories are stated at the lower of cost or market. Cost is determined using standard costs, which approximates the first-in, first-out (FIFO) method. The Company estimates excess and obsolescence exposures based upon assumptions about future demand, product transitions, and market conditions and records reserves to reduce inventories to their net realizable value.

Goodwill

        As of September 1, 2001, the Company ceased the amortization of goodwill in accordance with Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets." During the quarter ended February 28, 2002, the second quarter of fiscal year 2002, the Company performed the transitional goodwill impairment test for each reporting unit. Both analyses resulted in a fair value of each reporting unit that exceeded its carrying value, and therefore, the goodwill in each reporting unit was determined not to be impaired. The Company evaluates the possible impairment of goodwill annually each fourth quarter, and whenever events or circumstances indicate the carrying value of the goodwill may not be recoverable. The Company evaluates the potential impairment of goodwill by comparing the fair value of the reporting unit to its carrying value, including goodwill. If the fair value is less than the carrying value, the Company measures the amount of such impairment by comparing the implied fair value of the goodwill to its carrying value.

Patents and Agreements

        The Company capitalizes costs related to patent applications and technology agreements. The costs of these assets are amortized using the straight-line method over the lesser of the useful life of the asset or its statutory life. Capitalized costs are periodically reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.

Property, Plant and Equipment

        Property, plant and equipment are stated at cost and depreciated using the straight-line method over the assets' estimated useful lives. Expenditures for maintenance repairs and minor renewals are charged to expense as incurred. Betterments and major renewals are capitalized. Upon retirement or other disposition of assets, related allowances for depreciation and amortization are eliminated from the accounts and any resulting gain or loss is included in the determination of income or loss. The estimated useful lives of property, plant and equipment are as follows:

        Leasehold improvements are depreciated over the lesser of the useful life or the term of the lease.

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Investment in Joint Venture

        The Company makes investments in closely held companies. These investments are recorded on the equity method reflecting the Company's original investment and a proportional interest in the net operations of these companies since no public quotations exist for these investments. The carrying values of these investments are periodically reviewed based upon estimated market values.

Restricted Investments and Deferred Compensation

        The company has a non-qualified deferred savings plan which covers its Board of Directors and selected employees. Participants may elect to defer a portion of their compensation for payment in a future tax year. The company's advisory firm specializing in retirement plans has guaranteed that the non qualified deferred compensation plan will pass its discrimination tests with the plan design. The plan is funded by trusteed assets that are restricted to the payment of deferred compensation or satisfaction of the company's general creditors. The company's restricted investments and corresponding deferred compensation liability under the plan were $1,037,118 and $882,518 at August 31, 2003 and 2002, respectively.

Revenue Recognition

        Sales are recognized when goods are shipped by common carrier against a customer purchase order. Commissions are recognized based on commission statements received from the manufacturers represented. Royalty revenue is recognized based on licensee production statements received from the authorized manufacturers.

Research and Product Development Costs

        Research and product development costs are expensed as incurred and include primarily engineering salaries, overhead and materials used in connection with research and development projects. Research and development expense amounted to approximately $746,000, $781,000 and $612,000 for the years ended August 31, 2003, 2002 and 2001, respectively.

Pension Plan

        The projected unit credit method is utilized for measuring net periodic pension cost over the employee's service life.

Stock Based Compensation

        The Company grants stock options to its employees and directors. Such grants are for a fixed number of shares with an exercise price equal to the fair value of the shares at the date of grant. The Company follows the disclosure requirements of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS 123) and SFAS No. 148, "Accounting for Stock-Based Compensation—Transition and Disclosure—an amendment of FASB Statement No. 123." (SFAS 148) The Company continues to recognize compensation costs using the intrinsic value based method described in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to

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Employees," and related interpretations. Other than grants to non employee directors, the Company has not granted stock options to non employees.

        Grants of restricted stock are recorded as compensation expense over the vesting period at the fair market value of the stock at the date of grant. No compensation expense is recorded for options granted in which the exercise price equals or exceeds the market price of the underlying stock on the date of grant.

        The following table illustrates the pro forma effect on net income and net income per share if the Company had applied the fair value recognition provisions of SFAS 123 and SFAS 148 to stock-based employee compensation:

The fair value of each option granted was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions for the years ended August 31, 2003, 2002 and 2001

Translation of Foreign Currency

        The financial position and results of operations of the Company's Canadian division are measured using the Canadian dollar as the functional currency. Revenues and expenses of the division have been translated at average exchange rates. Assets and liabilities have been translated at the year-end exchange rate. Translation gains and losses are being deferred as a separate component of shareholders' equity, unless there is a sale or liquidation of the underlying foreign investments. Aggregate foreign currency transaction, gains and losses, are included in determining net income. The amounts of gains and losses were immaterial in 2003, 2002 and 2001.

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Income Taxes

        The Company accounts for income taxes under the liability method. Under this method, a deferred tax asset or liability is determined based upon the differences between the financial statement and tax bases of assets and liabilities as measured by the enacted tax rates that will be in effect when these differences reverse. Tax credits are recorded as a reduction in income taxes. Valuation allowances are provided if, based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

Net Income Per Share

        Basic net income per share is computed using the weighted average number of common shares outstanding during the period. Diluted net income per share is computed using the weighted average number of common and diluted common equivalent shares outstanding during the period. Dilutive common equivalent shares consist of stock options and restricted stock.

Comprehensive Income

        Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources, including foreign currency translation adjustments and unrealized gains and losses on marketable securities.

Segments

        The Company operates in two business segments, a specialized manufacturing segment consisting of protective coatings and tapes 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 electronics industry.

Recently Issued Accounting Standards

        In October 2001, the Financial Accounting Standard Board (FASB) issued Statement of Financial Accounting Standard No. 144 (SFAS 144), "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS 144 supersedes SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be disposed of." The primary objectives of SFAS 144 are to develop one accounting model based on the framework established in SFAS 121 for long-lived assets to be disposed of by sale, and to address significant implementation issues identified after the issuance of SFAS 121. The Company adopted SFAS 144 in its fiscal year beginning September 1, 2002; however, the adoption did not have a significant impact on the Company's financial position and results of operations.

        In June 2002, the FASB issued SFAS 146, "Accounting for Costs Associated with Exit or Disposal Activities," which addresses accounting for restructuring and similar costs. SFAS 146 supersedes previous accounting guidance, principally Emerging Issues Task Force (EITF) Issue No. 94-3 "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including

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Certain Costs Incurred in a Restructuring)." SFAS 146 requires recognition of the liability for costs associated with an exit or disposal activity when the Company exits the activity, whereas under EITF Issue No. 94-3, a liability for an exit cost is recognized at the date a company commits to an exit plan. In addition, SFAS 146 establishes that the liability should initially be measured and recorded at fair value. Accordingly, SFAS 146 may affect the timing of recognizing future restructuring costs, as well as the amounts recognized. The provisions of SFAS 146 are effective for exit or disposal activities that are initiated after December 31, 2002 and, have been adopted by the Company as of January 1, 2003.

        In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others—an Interpretation of FASB Statements No. 5, 57, and 107 and Rescission of FASB Interpretation No. 34." The interpretation elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. It also requires a guarantor to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. In general, the interpretation applies to contracts or indemnification agreements that contingently require the guarantor to make payments to the guaranteed party based on changes in an underlying obligation that is related to an asset, liability or an equity security of the guaranteed party. The initial recognition and measurement provisions of the interpretation apply to guarantees issued or modified after December 31, 2002.

        In December 2002, the FASB issued SFAS 148, "Accounting for Stock-Based Compensation-Transition and Disclosure." SFAS 148 amends SFAS 123, "Accounting for Stock-Based Compensation" to provide alternative methods of transition for those companies who voluntarily change to the fair value based method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of SFAS 123 to require prominent disclosures in both the annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The transition and annual disclosure provisions of SFAS 148 are effective for fiscal years ending after December 15, 2002. As permitted under SFAS 148, the Company adopted the disclosure only provisions of that accounting standard in the third quarter of fiscal 2003. Additionally, the Company is in the process of determining the impact of adopting the fair value accounting provisions of this standard. It is expected that upon the adoption of the fair value based method of accounting for stock-based employee compensation, as provided in SFAS 148, the Company will apply the prospective method.

        In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities" (FIN 46). This interpretation of Accounting Research Bulletin No. 51, "Consolidated Financial Statements," addresses consolidation by business enterprises of variable interest entities (VIEs) that either: (1) do not have sufficient equity investment at risk to permit the entity to finance its activities without additional subordinated financial support, or (2) the equity investors lack an essential characteristic of a controlling financial interest. This interpretation applies immediately to VIEs created after January 31, 2003. It applies in the first fiscal year or interim period beginning after June 15, 2003, to VIEs in which an enterprise holds a variable interest that it acquired before February 1, 2003. FIN 46 requires disclosure of VIEs in financial statements issued after January 31, 2003, if it is reasonably possible that as of the transition date: (1) the company will be the primary

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beneficiary of an existing VIE that will require consolidation or, (2) the company will hold a significant variable interest in, or have significant involvement with, an existing VIE. In October 2003, the FASB deferred the effective date for applying the provision of FIN 46 until the first interim or annual period ending after December 15, 2003. The Company is still assessing the impact that FIN 46 will have on its financial position and results of operations.

        On May 15, 2003, the FASB issued Statement No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity" (SFAS 150). SFAS 150 establishes standards for classifying and measuring as liabilities certain financial instruments that embody obligations of the issuer and have characteristic of both liabilities and equity. SFAS 150 represents a significant change in practice in the accounting for a number of financial instruments; including mandatory redeemable equity instruments and certain equity derivatives that frequently are used in connection with share repurchase programs. SFAS 150 is effective for all financial instruments created or modified after May 31, 2003, and to other instruments as of September 1, 2003. The Company is still assessing the impact that SFAS 150 will have on its financial position and results of operations.

        In November 2002, the EITF reached a consensus on Issue No. 00-21, "Accounting for Revenue Arrangements with Multiple Deliverables." EITF Issue No. 00-21 addresses certain aspects of the accounting by a vendor for arrangements under which it will perform multiple revenue-generating activities. EITF Issue No. 00-21 establishes three principles: revenue should be recognized separately for separate units of accounting, revenue for a separate unit of accounting should be recognized only when the arrangement consideration is reliably measurable and the earnings process is substantially complete, and consideration should be allocated among the separate units of accounting in an arrangement based on their relative fair values. EITF Issue No. 00-21 is effective for all revenue arrangements entered into in fiscal periods beginning after June 15, 2003. The adoption of EITF No. 00-21 is not expected to have a significant impact on the Company's financial position and results of operations.

Note 2—Inventories

        Inventories consist of the following as of August 31, 2003 and 2002: