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

~~June 30, 2021~~ March 31, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission File Number 000-30205

CMC Materials, Inc.

(Exact name of registrant as specified in its charter)


Delaware						36-4324765
(State of Incorporation)						(I.R.S. Employer Identification No.)

870 North Commons Drive

60504

Aurora, Illinois

~~Illinois~~

(Zip Code)

(Address of principal executive offices)

Registrant’s telephone number, including area code: (630) 375-6631


Not Applicable
(Former name or former address, if changed since last report)

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	CCMP	NASDAQ

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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes

☒

☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes

☒

☐

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

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes

☐

☒

As of ~~July 31, 2021,~~April 29, 2022, the Company had ~~29,222,355~~28,610,976 shares of Common Stock, par value $0.001 per share, outstanding.

INDEX

CMC MATERIALS, INC.

FORM 10-Q

INDEX

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CMC MATERIALS, INC.

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(Unaudited and in thousands, except per share amounts)
Three Months Ended June 30, Nine Months Ended June 30,
2021 2020 2021 2020
Revenue $ 309,516 $ 274,727 $ 887,907 $ 842,063
Cost of sales 180,320 152,973 512,061 470,525
Gross profit 129,196 121,754 375,846 371,538
Operating expenses:
Research, development and technical 13,654 12,165 39,007 38,206
Selling, general and administrative 56,242 51,847 170,700 162,495
Impairment charges 3,090 0 218,658 0
Total operating expenses 72,986 64,012 428,365 200,701
Operating income (loss) 56,210 57,742 (52,519) 170,837
Interest expense 9,551 10,406 28,667 33,079
Interest income 11 131 47 589
Other (expense) income, net (427) (201) 541 (1,608)
Income (loss) before income taxes 46,243 47,266 (80,598) 136,739
Provision for income taxes 12,601 12,741 4,038 30,766
Net income (loss) $ 33,642 $ 34,525 $ (84,636) $ 105,973
Basic earnings (loss) per share $ 1.15 $ 1.19 $ (2.90) $ 3.63
Diluted earnings (loss) per share $ 1.13 $ 1.17 $ (2.90) $ 3.58
Weighted average basic shares outstanding 29,260 29,079 29,197 29,157
Weighted average diluted shares outstanding 29,682 29,456 29,197 29,603


	Three Months Ended March 31,				Six Months Ended March 31,
	2022		2021		2022		2021
Revenue	$	324,127	$	290,528	$	641,173	$	578,391
Cost of sales	195,904		166,782		387,114		331,741
Gross profit	128,223		123,746		254,059		246,650

Operating expenses:
Research, development and technical	12,337		12,925		25,665		25,353
Selling, general and administrative	47,111		58,538		103,594		114,458
Impairment charges	—		208,221		9,435		215,568
Entegris Transaction-related expenses	12,243		—		18,293		—
Total operating expenses	71,691		279,684		156,987		355,379

Operating income (loss)	56,532		(155,938)		97,072		(108,729)

Interest expense, net	9,537		9,495		19,280		19,080
Other (expense) income, net	(1,445)		(484)		(1,597)		968
Income (loss) before income taxes	45,550		(165,917)		76,195		(126,841)

Provision for (benefit from) income taxes	10,979		(16,109)		14,196		(8,563)

Net income (loss)	$	34,571	$	(149,808)	$	61,999	$	(118,278)

Basic earnings (loss) per share	$	1.21	$	(5.13)	$	2.17	$	(4.06)
Diluted earnings (loss) per share	$	1.19	$	(5.13)	$	2.14	$	(4.06)

Weighted average basic shares outstanding	28,609		29,210		28,526		29,164
Weighted average diluted shares outstanding	28,999		29,210		28,909		29,164

The accompanying notes are an integral part of these Consolidated Financial Statements.

INDEX

CMC MATERIALS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited and in thousands)
Three Months Ended June 30, Nine Months Ended June 30,
2021 2020 2021 2020
Net income (loss) $ 33,642 $ 34,525 $ (84,636) $ 105,973
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments 2,575 9,086 10,385 5,212
Net unrealized (loss) gain on cash flow hedges (2,104) (334) 13,326 (13,382)
Other comprehensive income (loss), net of tax 471 8,752 23,711 (8,170)
Comprehensive income (loss) $ 34,113 $ 43,277 $ (60,925) $ 97,803


	Three Months Ended March 31,				Six Months Ended March 31,
	2022		2021		2022		2021
Net income (loss)	$	34,571	$	(149,808)	$	61,999	$	(118,278)

Other comprehensive income:

Foreign currency translation adjustment	(11,112)		(13,763)		(13,741)		7,780
Income tax (expense) benefit	(305)		(52)		(268)		30
Total foreign currency translation adjustment, net of tax	(11,417)		(13,815)		(14,009)		7,810

Unrealized gain on cash flow hedges:
Change in fair value	26,508		19,361		31,979		12,912
Reclassification adjustment into earnings	3,578		3,595		7,155		6,969
Income tax expense	(6,869)		(5,140)		(8,935)		(4,451)
Total unrealized gain on cash flow hedges, net of tax	23,217		17,816		30,199		15,430





Other comprehensive income, net of tax	11,800		4,001		16,190		23,240

Comprehensive income (loss)	$	46,371	$	(145,807)	$	78,189	$	(95,038)

The accompanying notes are an integral part of these Consolidated Financial Statements.

INDEX

CMC MATERIALS, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited and in thousands, except per share amount)
June 30, 2021 September 30, 2020
ASSETS
Current assets:
Cash and cash equivalents $ 228,506 $ 257,354
Accounts receivable, less allowance for credit losses of $524 at June 30, 2021 and $583 at September 30, 2020 170,346 134,023
Inventories 169,147 159,134
Prepaid expenses and other current assets 25,901 26,558
Total current assets 593,900 577,069
Property, plant and equipment, net 357,304 362,067
Goodwill 590,806 718,647
Other intangible assets, net 648,006 670,964
Deferred income taxes 8,005 7,713
Other long-term assets 51,804 40,007
Total assets $ 2,249,825 $ 2,376,467
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 55,737 $ 49,254
Current portion of long-term debt 10,650 10,650
Accrued expenses, income taxes payable and other current liabilities 129,497 121,442
Total current liabilities 195,884 181,346
Long-term debt, net of current portion 904,967 910,764
Deferred income taxes 76,995 112,212
Other long-term liabilities 90,732 97,832
Total liabilities 1,268,578 1,302,154
Commitments and contingencies (Note 13) 0 0
Stockholders’ equity:
Common Stock Authorized: 200,000 shares, $0.001 par value; Issued: 40,217 shares at June 30, 2021, and 39,914 shares at September 30, 2020 40 40
Capital in excess of par value of common stock 1,048,329 1,019,803
Retained earnings 429,078 553,718
Accumulated other comprehensive income (loss) 9,607 (14,104)
Treasury stock at cost, 10,973 shares at June 30, 2021, and 10,834 shares at September 30, 2020 (505,807) (485,144)
Total stockholders’ equity 981,247 1,074,313
Total liabilities and stockholders’ equity $ 2,249,825 $ 2,376,467


	March 31, 2022		September 30, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	237,685	$	185,979
Accounts receivable, less allowance for credit losses of $460 at March 31, 2022 and $527 at September 30, 2021	169,345		150,099
Inventories	184,730		173,464
Prepaid expenses and other current assets	35,460		25,439
Total current assets	627,220		534,981

Property, plant and equipment, net	346,344		354,771
Goodwill	564,279		576,902
Other intangible assets, net	584,657		625,434
Deferred income taxes	6,256		6,813
Other long-term assets	71,850		51,984
Total assets	$	2,200,606	$	2,150,885

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	55,540	$	52,748

Current portion of long-term debt	10,650		13,313
Accrued expenses and other current liabilities	132,738		139,797
Total current liabilities	198,928		205,858

Long-term debt, net of current portion	899,153		903,031
Deferred income taxes	74,016		74,930
Other long-term liabilities	84,428		88,129
Total liabilities	1,256,525		1,271,948

Commitments and contingencies (Note 13)	0		0

Stockholders’ equity:
Common Stock Authorized: 200,000 shares, $0.001 par value; Issued: 40,512 shares at March 31, 2022, and 40,221 shares at September 30, 2021	41		40
Capital in excess of par value of common stock	1,080,599		1,052,869
Retained earnings	467,515		431,968
Accumulated other comprehensive income	20,981		4,791
Treasury stock at cost, 11,900 shares at March 31, 2022, and 11,795 shares at September 30, 2021	(625,055)		(610,731)
Total stockholders’ equity	944,081		878,937

Total liabilities and stockholders’ equity	$	2,200,606	$	2,150,885

The accompanying notes are an integral part of these Consolidated Financial Statements.

INDEX

CMC MATERIALS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited and amounts in thousands)
Nine Months Ended June 30,
2021 2020
Cash flows from operating activities:
Net (loss) income $ (84,636) $ 105,973
Adjustments to reconcile Net (loss) income to net cash provided by operating activities:
Impairment charges 218,658 0
Depreciation and amortization 98,107 95,516
Deferred income tax benefit (40,153) (9,469)
Share-based compensation expense 15,200 12,191
Amortization of terminated interest rate swap contract 6,501 0
Amortization of debt issuance costs 2,320 2,345
Loss (gain) on disposal of assets 581 (338)
Non-cash foreign exchange (gain) loss (443) 146
Accretion on Asset Retirement Obligations 439 406
Other (1,747) 303
Changes in operating assets and liabilities:
Accounts receivable (32,683) 8,130
Inventories (7,758) (16,442)
Prepaid expenses and other assets (6,182) 9,786
Accounts payable 8,723 (5,591)
Accrued expenses, income taxes payable and other liabilities 2,866 1,127
Net cash provided by operating activities 179,793 204,083
Cash flows from investing activities:
Acquisition of a business, net of cash acquired (126,129) 0
Additions to property, plant and equipment (31,574) (107,015)
Proceeds from the sale of assets 2,613 1,587
Net cash used in investing activities (155,090) (105,428)
Cash flows from financing activities:
Dividends paid (39,570) (37,527)
Repurchases of common stock under Share Repurchase Program (15,171) (35,009)
Proceeds from issuance of stock 13,326 10,960
Repayment of long-term debt (7,988) (17,988)
Repurchases of common stock withheld for taxes (5,492) (3,112)
Proceeds from revolving line of credit 0 150,000
Other financing activities (219) (123)
Net cash (used in) provided by financing activities (55,114) 67,201
Effect of exchange rate changes on cash 1,563 357
(Decrease) increase in cash and cash equivalents (28,848) 166,213
Cash and cash equivalents at beginning of period 257,354 188,495
Cash and cash equivalents at end of period $ 228,506 $ 354,708
Supplemental Cash Flow Information:
Purchases of property, plant and equipment in accrued liabilities and accounts payable at the end of the period $ 2,128 $ 9,609
Cash paid during the period for lease liabilities 6,183 5,647
Right of use asset obtained in exchange for lease liabilities 2,996 6,351
ITS purchase consideration in accrued liabilities at the end of the period 748 0


	Six Months Ended March 31,
	2022		2021
Cash flows from operating activities:
Net income (loss)	$	61,999	$	(118,278)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	65,464		64,180
Share-based compensation expense	10,897		11,170
Deferred income tax benefit	(9,546)		(32,771)
Impairment charges	9,435		215,568
Amortization of terminated interest rate swap contract	5,572		3,715
Amortization of debt issuance costs	1,699		1,549
Accretion on Asset Retirement Obligations	300		293
Non-cash foreign exchange loss (gain)	284		(1,392)
Loss on disposal of assets	21		560
Other	(608)		(1,933)
Changes in operating assets and liabilities:
Accounts receivable	(21,454)		(12,352)
Inventories	(12,752)		(1,423)
Prepaid expenses and other assets	(1,645)		(16,137)
Accounts payable	6,097		5,261
Accrued expenses and other liabilities	(5,556)		5,498
Net cash provided by operating activities	110,207		123,508

Cash flows from investing activities:

Additions to property, plant and equipment	(23,310)		(21,119)
Proceeds from the sale of assets	10		363
Net cash used in investing activities	(23,300)		(20,756)

Cash flows from financing activities:
Dividends paid	(26,524)		(26,115)
Proceeds from issuance of stock	16,834		10,279
Repurchases of common stock under Share Repurchase Program	(10,600)		(10,002)
Repayment of long-term debt	(7,987)		(5,325)
Repurchases of common stock withheld for taxes	(3,724)		(5,436)


Other financing activities	(264)		(72)
Net cash used in financing activities	(32,265)		(36,671)

Effect of exchange rate changes on cash	(2,936)		1,401
Increase in cash and cash equivalents	51,706		67,482
Cash and cash equivalents at beginning of period	185,979		257,354
Cash and cash equivalents at end of period	$	237,685	$	324,836

Supplemental Cash Flow Information:
Purchases of property, plant and equipment in accrued liabilities and accounts payable at the end of the period	$	2,177	$	4,180
Cash paid during the period for lease liabilities	3,730		4,079
Right of use asset obtained in exchange for lease liabilities	294		2,761

The accompanying notes are an integral part of these Consolidated Financial Statements.

INDEX

CMC MATERIALS, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited and in thousands, except per share amount)
Three Months Ended June 30, Nine Months Ended June 30,
2021 2020 2021 2020
Shares $ Shares $ Shares $ Shares $
Common Stock
Beginning balance 40,187 $ 40 39,855 $ 40 39,914 $ 40 39,592 $ 40
Issuance of common stock under stock plans 30 0 12 0 303 0 275 0
Ending balance 40,217 40 39,867 40 40,217 40 39,867 40
Capital in Excess of Par
Beginning balance 1,041,252 1,008,311 1,019,803 988,980
Share-based compensation expense 4,030 3,194 15,200 12,191
Exercise of stock options 396 626 7,089 8,274
Issuance of common stock under Employee Stock Purchase Plan 2,651 0 6,022 2,536
Issuance of restricted stock under Deposit Share Program 0 0 215 150
Ending balance 1,048,329 1,012,131 1,048,329 1,012,131
Retained Earnings
Beginning balance 408,983 508,126 553,718 461,501
Cumulative effect of accounting changes 0 0 0 488
Net income (loss) 33,642 34,525 (84,636) 105,973
Dividends (13,547) (12,865) (40,004) (38,176)
Ending balance 429,078 529,786 429,078 529,786
Accumulated Other Comprehensive Income (Loss)
Beginning balance 9,136 (40,648) (14,104) (23,238)
Cumulative effect of accounting changes 0 0 0 (488)
Foreign currency translation adjustment 2,575 9,086 10,385 5,212
Cash flow hedges (2,104) (334) 13,326 (13,382)
Ending balance 9,607 (31,896) 9,607 (31,896)
Treasury Stock
Beginning balance 10,938 (500,582) 10,673 (466,419) 10,834 (485,144) 10,491 (446,906)
Repurchases of common stock under Share Repurchase Program 35 (5,169) 160 (18,595) 102 (15,171) 317 (35,009)
Repurchases of common stock - other 0 (56) 0 (13) 37 (5,492) 25 (3,112)
Ending balance 10,973 (505,807) 10,833 (485,027) 10,973 (505,807) 10,833 (485,027)
Total Equity $ 981,247 $ 1,025,034 $ 981,247 $ 1,025,034
Dividends per share of common stock $ 0.46 $ 0.44 $ 1.36 $ 1.30


	Three Months Ended March 31,						Six Months Ended March 31,
	2022			2021			2022			2021
	Shares	$		Shares	$		Shares	$		Shares	$
Common Stock:
Beginning balance	40,466	$	40	40,092	$	40	40,221	$	40	39,914	$	40
Issuance of common stock under stock plans	46	1		95	—		291	1		273	—
Ending balance	40,512	41		40,187	40		40,512	41		40,187	40

Capital in Excess of Par:
Beginning balance		1,072,076			1,030,677			1,052,869			1,019,803
Share-based compensation expense		4,894			5,319			10,897			11,170
Exercise of stock options		3,629			5,256			13,122			6,693
Issuance of common stock under Employee Stock Purchase Plan		—			—			3,711			3,371
Issuance of restricted stock under Deposit Share Program		—			—			—			215
Ending balance		1,080,599			1,041,252			1,080,599			1,041,252

Retained Earnings:
Beginning balance		446,193			572,441			431,968			553,718

Net income (loss)		34,571			(149,808)			61,999			(118,278)
Dividends		(13,249)			(13,650)			(26,452)			(26,457)
Ending balance		467,515			408,983			467,515			408,983

Accumulated Other Comprehensive Income (Loss):
Beginning balance		9,181			5,135			4,791			(14,104)

Foreign currency translation adjustment		(11,417)			(13,815)			(14,009)			7,810
Cash flow hedges		23,217			17,816			30,199			15,430

Ending balance		20,981			9,136			20,981			9,136

Treasury Stock:
Beginning balance	11,898	(624,670)		10,931	(499,565)		11,795	(610,731)		10,834	(485,144)
Repurchases of common stock under Share Repurchase Program	—	—		5	(801)		79	(10,600)		67	(10,002)
Repurchases of common stock - other	2	(385)		2	(216)		26	(3,724)		37	(5,436)
Ending balance	11,900	(625,055)		10,938	(500,582)		11,900	(625,055)		10,938	(500,582)

Total Equity		$	944,081		$	958,829		$	944,081		$	958,829

Dividends per share of common stock		$	0.46		$	0.46		$	0.92		$	0.90

The accompanying notes are an integral part of these Consolidated Financial Statements.

INDEX

CMC MATERIALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited and in thousands, except per share amounts)

1. BACKGROUND AND BASIS OF PRESENTATION

CMC Materials, Inc. (“CMC”, “the Company”, “us”, “we”, or “our”) is a leading global supplier of consumable materials, primarily to semiconductor manufacturers. The Company's products play a critical role in the production of advanced semiconductor devices, helping to enable the manufacture of smaller, faster and more complex devices by its customers. On April 1, 2021 (“Acquisition Date”), the Company completed the acquisition of 100% of International Test Solutions, LLC (“ITS”) (“Acquisition”), which has expanded the Company’s portfolio of critical enabling solutions in the semiconductor manufacturing process. The Consolidated Financial Statements included in this Report on Form 10-Q include the financial results of ITS from the Acquisition Date. The Acquisition would not have materially affected the Company’s results of operations or financial position for the prior periods presented.

We operate our business within 2 reportable segments: Electronic Materials and Performance Materials. The Electronic Materials segment consists of our chemical mechanical planarization (“CMP”) slurries, ~~business,~~ CMP pads, ~~business,~~ electronic chemicals, ~~business,~~ and ~~the~~ materials technologies ~~business, which currently comprises the ITS business.~~businesses. The Performance Materials segment consists of our pipeline and industrial materials (“PIM”) ~~business,~~, wood treatment, ~~business,~~ and QED Technologies International, Inc. (“QED”) ~~business.~~businesses.

The unaudited Consolidated Financial Statements have been prepared by CMC pursuant to the rules of the Securities and Exchange Commission (“SEC”) and accounting principles generally accepted in the United States of America (“U.S. GAAP” or “GAAP”) for interim financial information. Accordingly, they do not include all the information and notes required by GAAP for complete financial statements. In the opinion of management, these unaudited Consolidated Financial Statements include all adjustments, consisting of normal recurring adjustments, necessary for the fair statement of CMC’s financial position, cash flows, and results of operations for the periods presented. The results may not be indicative of the results that may be expected for the fiscal year ending September 30, ~~2021.~~2022. This Report on Form 10-Q should be read in conjunction with the Consolidated Financial Statements and related notes thereto included in our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2020.~~2021.

The Consolidated Financial Statements include the accounts of CMC and its subsidiaries. All intercompany transactions and balances between the companies have been eliminated.

In the Consolidated Statements of ~~Cash Flows~~Income (Loss) of this Report on Form 10-Q, the presentation for ~~the Provision for credit losses and the presentation for Repurchases of common stock under Cash flows from financing activities have~~Interest income has been ~~updated~~changed for the ~~nine~~three and six months ended ~~June 30, 2020~~March 31, 2021 to conform to the current presentation. The amounts for ~~fiscal year 2020~~the three and six months ended March 31, 2021 related to ~~the Provision for credit losses~~Interest income are now presented under ~~“Other” and common shares withheld for taxes and included in Repurchases of common stock previously, are now presented separately under “Repurchases of common stock withheld for taxes.~~“Interest expense, net.”

~~Use Of Estimates~~USE OF ESTIMATES

The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make judgments, assumptions and estimates that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Actual results may differ from these estimates under different assumptions or conditions.

~~2. SUMMARY OF SIGNIFICANT~~RECENTLY ADOPTED ACCOUNTING ~~POLICIES AND RECENT ACCOUNTING~~ PRONOUNCEMENTS

~~Significant Accounting Policies and Estimates~~

There have been no material changes made to the Company’s significant accounting policies disclosed in Note 2 of “Notes to the Consolidated Financial Statements” included in Item 8 of Part II of our Annual Report on Form 10-K for the fiscal year ended September 30, 2020.

~~INDEX~~

~~Recently Adopted Accounting Pronouncements~~

Accounting Standards Update (“ASU”) No. 2016-13, “Measurement of Credit Losses on Financial Instruments” (Topic 326) and subsequent amendments, requires financial assets measured at amortized cost to be presented at the net amount expected to be collected using an allowance account and provides that credit losses relating to available-for-sale debt securities should be recorded through an allowance for credit losses. The Company adopted these standards effective October 1, 2020 using the modified retrospective approach, which did not impact our results of operations or financial condition. Upon adoption, no adjustment was made to retained earnings or the Allowance for credit losses at October 1, 2020.

The Company is exposed to credit losses primarily through trade receivables for the sales of the Company’s products. The Company’s expected credit loss allowance for trade receivables is developed using historical credit loss experience and current and future economic and market conditions. The Company assesses credit risks for these trade receivables and groups them based on similar risk to determine the expected credit loss allowance. Due to the short-term nature of the Company’s trade receivables, the estimate of the expected credit loss allowance is mainly based on historical experience, accounts receivable balances, and the financial condition of customers.

ASU No. 2018-13 “Fair Value Measurement” (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, provides specific guidance on various disclosure requirements in Topic 820, including removal, modification and addition to current disclosure requirements. The Company adopted this standard effective October 1, 2020, which did not have a material impact on our financial statement disclosures.

ASU No. 2018-15 “Intangibles—Goodwill and Other—Internal-Use Software” (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, requires a customer in a hosting arrangement that is a service contract to follow the guidance in Subtopic 350-40 to determine which implementation costs to capitalize as an asset or expense related to the service contract. The Company adopted this standard effective October 1, 2020, which did not have a material impact on our results of operations or financial condition.

~~Accounting Pronouncements Issued But Not Yet Adopted~~

ASU No. 2019-12 “Income Taxes” (Topic 740): Simplifying the Accounting for Income Taxes, was issued to simplify Topic 740 through improving consistency and removing certain exceptions to general principles. ~~ASU 2019-12 will be~~The Company adopted this standard effective ~~for us beginning~~ October 1, ~~2021. We are evaluating the impact of implementing this standard and currently do~~2021, which did not ~~expect it to~~ have a material ~~impact.~~impact on our results of operations or financial condition.

ACCOUNTING PRONOUNCEMENTS ISSUED BUT NOT YET ADOPTED

ASU No. 2020-04 “Reference Rate Reform” (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting, provides optional guidance for accounting for contracts, hedging relationships, and other transactions affected by the reference rate reform, if certain criteria are met. The provisions of this standard are available for election through December 31, 2022. We are currently evaluating the impact of the reference rate reform on our contracts and the resulting impact of adopting this standard on our financial statements.

INDEX

2. MERGER AGREEMENT

On December 14, 2021, the Company entered into an agreement and plan of merger (“Merger Agreement”) with Entegris, Inc. (“Entegris”) and Yosemite Merger Sub, Inc., a wholly owned subsidiary of Entegris (“Merger Sub”) under which Entegris will acquire the Company in a cash and stock transaction. The Merger Agreement provides that (1) Merger Sub will merge with and into the Company (the “Merger”), with the Company surviving the Merger as a wholly owned subsidiary of Entegris, and (2) at the effective time of the Merger, each issued and outstanding share of CMC common stock (other than (i) shares of CMC common stock owned by the Company, Entegris or any of their respective subsidiaries immediately prior to the effective time of the Merger and (ii) shares of CMC common stock as to which dissenters’ rights have been properly perfected) will be converted into the right to receive $133 in cash and 0.4506 shares of Entegris common stock, plus cash in lieu of any fractional shares (the “Entegris Transaction”). The Merger Agreement was approved by our stockholders at a special meeting held on March 3, 2022.

The Entegris Transaction, which is currently expected to close in the second half of calendar 2022, is subject to the satisfaction of certain customary closing conditions, including, among others, receipt of certain regulatory approvals. The Merger Agreement contains certain termination rights for both CMC and Entegris.

3. REVENUE FROM CONTRACTS WITH CUSTOMERS

The Company disaggregates revenue by product area and segment as it best depicts the nature and amount of the Company’s revenue. See Note 1716 of this Report on Form 10-Q for more information.

The following table provides information about contract liability balances:
Consolidated Balance Sheet Location June 30, 2021 September 30, 2020
Contract liabilities (current) Accrued expenses, income taxes payable and other current liabilities $ 9,495 $ 8,501
Contract liabilities (noncurrent) Other long-term liabilities 2,003 1,288

The amount of revenue recognized during the three and nine months ended June 30, 2021 that was included in the opening current contract liability balances in our Performance Materials segment was $1,012 and $4,721, respectively, and $400 and $3,427 for the three and nine months ended June 30, 2020, respectively. The amount of revenue recognized during the three and nine months ended June 30, 2021 and 2020 that was included in our opening contract liability balances in our Electronic Materials segment was not material.

~~INDEX~~

The table below discloses (1) the aggregate amount of the transaction price allocated to performance obligations that are partially or wholly unsatisfied as of the end of the reporting period for contracts with an original duration of greater than one year and (2) when the Company expects to recognize this revenue.
Less Than 1 Year 1-3 Years 3-5 Years Total
Revenue expected to be recognized on contract liability amounts as of June 30, 2021 $ 976 $ 1,968 $ 35 $ 2,979


	Consolidated Balance Sheet Location	March 31, 2022		September 30, 2021
Contract liabilities (current)	Accrued expenses and other current liabilities	$	10,254	$	8,883
Contract liabilities (noncurrent)	Other long-term liabilities	3,981		1,788

4. ~~BUSINESS COMBINATION~~SEVERANCE AND EXIT COSTS

~~The~~During the first quarter of fiscal 2022, the Company ~~completed~~initiated a strategic cost optimization program (“Future Forward”) designed to implement structural changes to enhance operational efficiencies. Future Forward includes targeted position eliminations and other actions to reduce expenses.

As a result of the ~~Acquisition for purchase consideration~~Future Forward program, the Company recorded the following expenses, which were not allocated to either of $129,071, inclusive of working capital adjustments, or $126,877 net of cash acquired, which it funded entirely from cash on hand. ITS designs and produces high-performance consumables used to optimize critical semiconductor testing processes, thus expanding CMC’s product offerings. ITS is part of our Electronic Materials business segment. The Acquisition was accounted for using the acquisition method of accounting, and ITS’s results of operations are included in our unaudited Consolidated Statements of Income and Consolidated Statements of Comprehensive Income (Loss) from the Acquisition Date. The Acquisition would not have materially affected the Company’s ~~results~~2 reportable segments:


Consolidated Statement of Income (Loss) Location	Three Months Ended March 31, 2022		Six Months Ended March 31, 2022
Employee severance expenses:
Cost of sales	$	2	$	971
Selling, general and administrative	43		2,053
Total	$	45	$	3,024

As of ~~operations or financial position~~March 31, 2022, liabilities related to Future Forward were classified as current and presented within Accrued expenses and other current liabilities within the Consolidated Balance Sheets. Liability activity for ~~any periods presented.~~

Based on the preliminary acquisition accounting, the Company allocated $81,960 and $37,200 of the purchase price to goodwill and intangible assets, respectively. The goodwill is primarily attributable to anticipated revenue growth from the combined company product portfolio and is expected to be deductible for income tax purposes.

~~The following table sets forth the components of identifiable intangible assets acquired, their estimated useful lives, and amortization method as of the Acquisition Date:~~
Fair Value Estimated Useful Life
(years) Amortization Method
Technology and know-how $ 25,400 10 Straight-line
Customer relationships 8,100 20 Accelerated
Trade name 3,700 10 Straight-line
Total intangible assets $ 37,200

~~The intangible assets subject to amortization have a weighted average useful life of 12.2 years.~~

~~The fair value of acquired identifiable intangible assets was determined using Level 3 inputs~~Future Forward for the ~~“income approach” on an individual asset basis. The key assumptions used~~six months ended March 31, 2022 is as follows:


Balance at September 30, 2021	$	—
Charge to earnings	3,024
Cash paid	(2,516)

Balance at March 31, 2022	$	508

Additional Future Forward initiatives may be implemented during fiscal 2022 that may result in the calculation of the discounted cash flows include projected revenue, operating expenses, and obsolescence rate. The valuations and the underlying assumptions have been deemed reasonable by the Company’s management. There are inherent uncertainties and management judgment required in these determinations.

The purchase price allocation to the assets acquired and the liabilities assumed is complete except for intangible asset valuations and the value allocated to income tax accounts. The allocation of purchase price will be completed as soon as practicable, but no later than one year from the Acquisition Date.

additional expense or charges.

109

INDEX

5. FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company is required to record certain assets and liabilities at fair value. The valuation methods used for determining the fair value of these financial instruments by hierarchy are as follows:


Level 1		Cash and cash equivalents consist of various bank accounts used to support our operations and investments in institutional money-market funds that are traded in active markets.
	Other long-term investments represent the fair value of investments under our supplemental employee retirement plan (“SERP”). The fair value of the investments is determined through quoted market prices within actively traded markets.
Level 2		Derivative financial instruments include foreign exchange contracts and an interest rate swap contract. The fair value of our derivative instruments is estimated using standard valuation models and market-based observable inputs over the contractual term, including one-month London Inter-bank Offered Rate (“LIBOR”) based yield curves for the interest rate swap, and forward rates and/or the Overnight Index Swap curve for forward foreign exchange contracts, among others.
Level 3		No Level 3 financial instruments

The following table presents financial instruments, other than debt, that we measure at fair value on a recurring basis. See Note 11 of this Report on Form 10-Q for a discussion of our debt. In instances where the inputs used to measure the fair value of an asset fall into more than one level of the hierarchy, we have classified it based on the lowest level input that is significant to the determination of the fair value.
Level 1 Level 2 Level 3 Total Fair Value
June 30, 2021 September 30, 2020 June 30, 2021 September 30, 2020 June 30, 2021 September 30, 2020 June 30, 2021 September 30, 2020
Assets:
Cash and cash equivalents $ 228,506 $ 257,354 $ 0 $ 0 $ 0 $ 0 $ 228,506 $ 257,354
Other long-term investments 1,438 1,214 0 0 0 0 1,438 1,214
Derivative financial instruments 0 0 10,995 27 0 0 10,995 27
Liabilities:
Derivative financial instruments 0 0 3,322 38,157 0 0 3,322 38,157


	Level 1				Level 2				Level 3				Total Fair Value
	March 31, 2022		September 30, 2021		March 31, 2022		September 30, 2021		March 31, 2022		September 30, 2021		March 31, 2022		September 30, 2021
Assets:
Cash and cash equivalents	$	237,685	$	185,979	$	—	$	—	$	—	$	—	$	237,685	$	185,979
Other long-term investments	1,541		1,439		—		—		—		—		1,541		1,439
Derivative financial instruments	—		—		43,027		12,335		—		—		43,027		12,335
Total assets	$	239,226	$	187,418	$	43,027	$	12,335	$	—	$	—	$	282,253	$	199,753

Liabilities:
Derivative financial instruments	—		—		489		3,383		—		—		489		3,383
Total liabilities	$	—	$	—	$	489	$	3,383	$	—	$	—	$	489	$	3,383

6. INVENTORIES

Inventories consisted of the following:
June 30, 2021 September 30, 2020
Raw materials $ 66,599 $ 66,591
Work in process 19,903 15,148
Finished goods 82,645 77,395
Total $ 169,147 $ 159,134


	March 31, 2022		September 30, 2021
Raw materials	$	72,092	$	67,969
Work in process	18,705		17,358
Finished goods	93,933		88,137
Total	$	184,730	$	173,464

1110

INDEX

7. GOODWILL

Goodwill activity for each of the Company’s reportable segments for the ~~nine months ended June 30, 2021 is as follows:~~

Electronic Materials Performance Materials Total
Balance at September 30, 2020 1
$ 360,425 $ 358,222 $ 718,647
Additions due to acquisition 81,960 0 81,960
Foreign currency translation impact 3,684 1,907 5,591
Impairment 0 (215,392) (215,392)
Balance at June 30, 2021 $ 446,069 $ 144,737 $ 590,806

1 ~~There are 0 accumulated impairment amounts at September 30, 2020.~~

~~During the quarter, the Company recorded goodwill within the Electronic Materials segment of $81,960 from the Acquisition discussed in Note 4.~~

During the second quarter, the Company recorded impairment charges related to the PIM and wood treatment reporting units within the Performance Materials segment. As a result of lower than anticipated recovery from a drop in demand for our PIM products due to the ongoing impact of the COVID-19 Pandemic (“Pandemic”), combined with a near-to-mid term increase in raw material cost for the PIM business, we determined that it was more likely than not that the fair value of the PIM reporting unit was below its carrying value, requiring the PIM reporting unit to be tested for impairment at March 31, 2021. Based on the results of the interim impairment test, the Company concluded that the carrying value of the PIM reporting unit exceeded the estimated fair value, and recognized a non-cash, pre-tax goodwill impairment charge of $201,550 for the threesix months ended March 31, ~~2021. The goodwill impairment charge~~2022 is included in the Performance Materials segment and presented within Impairment charges, and the related tax benefit of $23,539 for the nine months ended June 30, 2021 is included in the Provision for income taxes in the Consolidated Statements of Income (Loss). The remaining carrying value of the PIM reporting unit as ~~of June 30, 2021 of $581,716 includes $118,568 of goodwill and $46,000 of indefinite lived intangible assets.~~follows:

In performing the impairment test, the estimated fair value of the PIM reporting unit was determined based on an average of a discounted cash flow model and a market approach based on earnings before interest, taxes, and depreciation for a group of guideline comparable companies. Key assumptions in estimating the fair value of the reporting unit included projected future revenue and gross margin, a 10.75% discount rate and a terminal growth rate of 3%. The Company’s projections for revenue and gross margin are based on the Company’s multiyear forecast. Components of the discount rate are the cost of equity and the cost of debt, each of which requires judgment by management to estimate. The Company developed its cost of equity estimate based on perceived risks and predictability of future cash flows. As the inputs for testing, including estimates of future revenue and gross margin, are not generally observable in active markets, the Company considers such measurements to be Level 3 measurements in the fair value hierarchy. The reporting unit’s carrying value used in an impairment test represents the assignment of various assets and liabilities, excluding certain corporate assets and liabilities, such as cash, investments, and debt. The Company estimated the fair value of its indefinite-lived intangible tradename utilizing its best estimate of future cash flows and royalty rate assumptions as of the period ending March 31, 2021.


	Electronic Materials		Performance Materials		Total
Balance at September 30, 2021, net of accumulated impairment of $227,126	$	444,233	$	132,669	$	576,902

Foreign currency translation impact	(3,393)		205		(3,188)
Impairment (See Note 8)	—		(9,435)		(9,435)
Balance at March 31, 2022, net of accumulated impairment of $236,561	$	440,840	$	123,439	$	564,279

~~Additionally, the~~The Company recorded non-cash, pre-tax goodwill impairment charges of ~~$3,090~~$9,435 for the six months ended March 31, 2022 and ~~$13,842~~$6,671 and $10,752 for the three and ~~nine~~six months ended ~~June 30,~~March 31, 2021, ~~related to the wood treatment asset group and reporting unit~~respectively, due to the previously announced planned closure of the ~~facilities.~~wood treatment business, which the Company completed during the second quarter of fiscal 2022, included in the Performance Materials segment. See Note 8 of this Report on Form 10-Q for a discussion of the wood treatment ~~impairment.~~impairments.

During the second quarter of fiscal 2021, the Company recorded a non-cash, pre-tax goodwill impairment charge of $201,550 related to the PIM reporting unit, included in the Performance Materials segment, due to adverse impacts of the COVID-19 Pandemic (“Pandemic”) and higher raw material cost. The goodwill impairment charge and related tax benefit of $23,539 are presented within Impairment charges and the Provision for (benefit from) income taxes, respectively, in the Consolidated Statements of Income (Loss) for the three and six months ended March 31, 2021.

We continue to ~~actively~~ monitor the industries in which we operate and our businesses’ performance for indicators of potential impairment. We perform an impairment assessment of goodwill and other intangible assets at the reporting unit level annually, or more frequently if circumstances indicate that the carrying value may not be recoverable. ~~If current global macroeconomic conditions related~~As previously disclosed, the estimated fair value of the PIM reporting unit was determined to exceed the ~~Pandemic persist and continue to adversely impact our Company, we may have future additional impairments~~carrying value by approximately 5% as of ~~goodwill or other intangible assets.~~the most recent annual assessment date, July 1, 2021. Potential future impairments could be material to the Company’s Consolidated Balance Sheets and to the Consolidated Statements of Income (Loss), but we do not expect them to affect the Company’s reported Net cash provided by operating activities.

~~INDEX~~

8. ~~IMPAIRMENT -~~ WOOD TREATMENT

As a result of our previously announced planned closure of the Company's wood treatment business, the Matamoros, Mexico and the ~~finite~~Tuscaloosa, Alabama facilities ceased production during the first and second quarters of fiscal 2022, respectively, and the remaining ~~cash flow through~~inventory was sold to customers during the ~~closure dates, the Company concluded that it was more likely than not that the fair value~~second quarter of fiscal 2022. The exit of the wood treatment ~~reporting unit was below its carrying value, requiring~~business did not meet the ~~wood treatment asset group and reporting unit~~criteria to be ~~tested for impairment.~~classified as a discontinued operation in the Company’s financial statements.

~~Impairment~~During the first quarter of ~~Long-Lived Assets~~

~~As a result of the previously announced planned facilities closures due to the strategic decision to exit the wood treatment business,~~fiscal 2022, the Company previously adjusted the remaining assets’ useful lives such that they do not extend beyond the expected closure dates of the facilities. The Company tested the recoverability of its long-lived assets and determined the carrying amount of the assets exceeded the sum of the expected undiscounted future cash flows, and as a result, we compared the fair value of the wood treatment asset group, which was determined based on a discounted cash flow model, to its carrying value. We recognizedrecorded a non-cash, pre-tax goodwill impairment charge of ~~$3,266 for the quarter ended December 31, 2020,~~$9,435, resulting in 0no remaining carrying value of ~~definite-lived intangible~~goodwill or long-lived assets ~~or Property, plant and equipment as of that date. Key assumptions in testing the assets~~ for recoverability and development of the fair value of the asset group included projected future revenue and gross margin. As the inputs for testing recoverability, including estimates of future revenue and gross margin, are not generally observable in active markets, the Company considers such measurements to be Level 3 measurements in the fair value hierarchy. The duration of the future revenue and gross margin estimates are limited to the period through the closure dates.

~~Impairment of Goodwill~~

~~The fair value of~~ the wood treatment reporting unit, which was determined based on a discounted cash flow model, did not exceed the carrying value of the reporting unit. Key assumptions in our goodwill impairment test included projected future revenue and gross margin. As a result, thebusiness. The Company recorded ~~non-cash, pre-tax~~long-lived asset and goodwill impairment charges of ~~$3,090~~$6,671 and ~~$13,842~~$14,018 for the three and ~~nine~~six months ended ~~June 30,~~March 31, 2021, respectively.

As the Company approaches the closure dates of the facilities and there are finite estimated future cash flows, the carrying value of the wood treatment reporting unit will not be recoverable, resulting in future impairments of goodwill. The remaining carrying value of the wood treatment reporting unit as of June 30, 2021 includes $21.2 million of goodwill, which will be periodically impaired through the closure dates, resulting in no fair value ascribed to the wood treatment business by the dates of closure. The amount of the periodic impairments will vary depending on the timing of the remaining future cash flows of the business and carrying value of the reporting unit at each reporting period.

~~Presentation of Impairment Charges~~

~~The long-lived assets and goodwill~~ impairment charges, ~~both~~ included in the Performance Materials segment, are presented within Impairment charges ~~and the related tax benefit of $606 for the nine months ended June 30, 2021 is included in the Provision for income taxes~~ in the Consolidated Statements of Income (Loss). for the six months ended March 31, 2022 and the three and six months ended March 31, 2021. The goodwill impairment ~~charges related to goodwill are~~charge is not tax deductible, therefore there is no related tax benefit for the ~~three~~six months ended ~~June 30,~~March 31, 2022 or the three and six months ended March 31, 2021. ~~The impairment charges for wood treatment for the respective periods are as follows:~~
Three Months Ended June 30, 2021 Nine Months Ended June 30, 2021
Property, plant, and equipment, net $ 0 $ 91
Goodwill 3,090 13,842
Other intangible assets – Product technology 0 583
Other intangible assets – Acquired patents and licenses 0 173
Other intangible assets – Customer relationships, distribution rights, and other 0 2,419
Total wood treatment impairment charges $ 3,090 $ 17,108

Additionally, the Company recorded a non-cash, pre-tax goodwill impairment charge of $201,550 for the nine month period ended June 30, 2021, related to the PIM reporting unit. See Note 7 of this Report on Form 10-Q for a discussion of the PIM impairment.

9. OTHER LONG-TERM ASSETS


	March 31, 2022		September 30, 2021
Interest rate swap (See Note 12)	$	36,902	$	12,335
Right of use assets	25,738		29,302
Prepaid unamortized debt issuance cost - revolver	2,151		2,201
SERP investments	1,541		1,439
Vendor contract assets	732		1,329
Other long-term assets	4,786		5,378
Total	$	71,850	$	51,984

1311

INDEX

~~9. OTHER LONG-TERM ASSETS~~
June 30, 2021 September 30, 2020
Right of use asset $ 32,849 $ 30,999
Interest rate swap (See Note 12) 10,955 0
Vendor contract assets 1,713 2,889
SERP investment 1,438 1,214
Prepaid unamortized debt issuance cost - revolver 408 537
Other long-term assets 4,441 4,368
Total $ 51,804 $ 40,007

10. ACCRUED EXPENSES ~~INCOME TAXES PAYABLE~~ AND OTHER CURRENT LIABILITIES
June 30, 2021 September 30, 2020
Accrued compensation $ 42,233 $ 46,465
Income taxes payable 15,505 16,216
Dividends payable 14,103 13,669
Asset retirement obligation 12,097 0
Contract liabilities (current) 9,495 8,501
Current portion of operating lease liability 7,520 6,513
Current portion of terminated swap liability (See Note 12) 5,855 0
Taxes, other than income taxes 5,691 5,044
Goods and services received, not yet invoiced 3,031 3,957
Interest rate swap liability (See Note 12) 2,965 11,992
Accrued interest 108 29
Other 10,894 9,056
Total $ 129,497 $ 121,442


	March 31, 2022		September 30, 2021
Accrued compensation	$	34,501	$	47,360
Income taxes payable	15,585		16,836
Dividends payable	13,755		13,827
Asset retirement obligation (current)	12,163		11,933
Entegris Transaction-related liabilities	11,593		—
Contract liabilities (current)	10,254		8,883
Taxes, other than income taxes	7,577		6,620
Current portion of operating lease liability	7,328		7,646
Current portion of terminated swap liability (See Note 12)	5,855		5,855
Goods and services received, not yet invoiced	4,859		3,866
Accrued interest	197		1,846
Interest rate swap liability (See Note 12)	—		2,995
Other	9,071		12,130
Total	$	132,738	$	139,797

11. DEBT
June 30, 2021 September 30, 2020
Senior Secured Term Loan Facility, one-month LIBOR plus 2.00% $ 928,375 $ 936,363
Less: Unamortized debt issuance costs (12,758) (14,949)
Total debt 915,617 921,414
Less: Current maturities and short-term debt (10,650) (10,650)
Total long-term debt excluding current maturities $ 904,967 $ 910,764


	March 31, 2022		September 30, 2021
Senior Secured Term Loan Facility, one-month LIBOR plus 2.00%	$	920,388	$	928,375


Less: Unamortized debt issuance costs	(10,585)		(12,031)
Total debt	909,803		916,344
Less: Current maturities and short-term debt	(10,650)		(13,313)
Total long-term debt excluding current maturities	$	899,153	$	903,031

The Company’s credit agreement as amended (“Amended Credit Agreement”) includes a Senior Secured Term Loan Facility (“Term Loan Facility”) and a revolving credit facility (“Revolving Credit Facility”). As of ~~June 30, 2021,~~March 31, 2022, there were 0no borrowings outstanding under the Revolving Credit Facility and our available credit was ~~$200,000,~~$350,000, which includes our letter of credit sub-facility. On July 2, 2021, the Company amended the Amended Credit Agreement to increase the aggregate amount of the Revolving Credit Facility from $200,000 to $350,000 and to extend the maturity to July 2026. Interest rates and other material terms applicable to the Amended Credit Agreement are unchanged.

At ~~June 30, 2021~~March 31, 2022 and September 30, ~~2020,~~2021, the fair value of the Term Loan Facility, using level 2 inputs, approximated its carrying value as the loan bears a floating market rate of interest.

~~INDEX~~

As of ~~June 30, 2021,~~March 31, 2022, scheduled principal repayments of the Term Loan Facility ~~are as follows:~~
Fiscal Year Principal Repayments
Remainder of 2021 $ 2,662
2022 10,650
2023 10,650
2024 10,650
2025 10,650
Greater than 5 years 883,113
Total $ 928,375
were:


Fiscal Year	Principal Repayments
Remainder of 2022	$	5,326
2023	10,650
2024	10,650
2025	10,650
2026	883,112

Total	$	920,388

12. DERIVATIVE FINANCIAL INSTRUMENTS

We are exposed to various market risks, including risks associated with interest rates and foreign currency exchange rates. We enter into certain derivative transactions to mitigate the volatility associated with these exposures.

~~Cash Flow Hedges~~

INDEX

CASH FLOW HEDGES - ~~Interest Rate Swap Contract~~INTEREST RATE SWAP CONTRACT

During the first quarter of fiscal 2021, the Company entered into a new interest rate swap agreement to extend the duration of its existing swap arrangement and to take advantage of lower interest rates. ~~The~~At that time, the then existing interest rate swap, which was in a loss position of $35.3 million, was terminated, and the hedging relationship was de-designated. The liability for the terminated interest rate swap is not measured at fair value. The current and long-term portion of the liability for the terminated swap are recorded in Accrued expenses ~~income taxes payable~~ and other current liabilities and Other long-term liabilities, respectively, on the Consolidated Balance Sheet and will be paid over the remaining term of the new swap. The loss amount for the terminated swap is included in Accumulated other comprehensive ~~loss~~income and will be amortized on a straight-lined basis into interest expense through January 31, 2024, the remaining term of the original swap.

The new interest rate swap is a floating-to-fixed interest rate swap contract to hedge the variability in LIBOR-based interest payments on a portion of our outstanding variable rate debt. The notional amount is scheduled to decrease quarterly and will expire on January 29, 2027. The new interest rate swap was designated as a cash flow hedge based on certain quantitative and qualitative assessments and we have determined that the hedge is highly effective and qualifies for hedge accounting.

~~Foreign Currency Contracts Not Designated as Hedges~~FOREIGN CURRENCY CONTRACTS NOT DESIGNATED AS HEDGES

We enter into forward foreign exchange contracts in an effort to mitigate the risks associated with currency fluctuations on certain foreign currency balance sheet exposures. These foreign exchange contracts do not qualify for hedge accounting.

The notional amounts of our derivative instruments are as follows:
June 30, 2021 September 30, 2020
Derivatives designated as hedging instruments
Interest rate swap contract - new agreement $ 556,808 $ —
Interest rate swap contract - terminated agreement — 571,000
Derivatives not designated as hedging instruments
Foreign exchange contracts to purchase U.S. dollars $ 4,263 $ 8,054
Foreign exchange contracts to sell U.S. dollars 25,355 25,105


	March 31, 2022		September 30, 2021
Derivatives designated as hedging instruments:
Interest rate swap contract - new agreement	$	552,015	$	555,210


Derivatives not designated as hedging instruments:
Foreign exchange contracts to purchase U.S. dollars	$	4,250	$	4,225
Foreign exchange contracts to sell U.S. dollars	29,290		23,235

~~INDEX~~

The fair values of our derivative instruments included in the Consolidated Balance Sheets are as follows:
Derivative Assets Derivative Liabilities
Consolidated Balance Sheet Location June 30, 2021 September 30, 2020 June 30, 2021 September 30, 2020
Derivatives designated as hedging instruments
Interest rate swap contract Other long-term assets $ 10,955 $ 0 $ 0 $ 0
Accrued expenses, income taxes payable and other current liabilities 0 0 2,965 11,992
Other long-term liabilities 0 0 0 26,000
Derivatives not designated as hedging instruments
Foreign exchange contracts Prepaid expenses and other current assets $ 40 $ 27 $ 0 $ 0
Accrued expenses, income taxes payable and other current liabilities 0 0 357 165


		Derivative Assets				Derivative Liabilities
	Consolidated Balance Sheet Location	March 31, 2022		September 30, 2021		March 31, 2022		September 30, 2021
Derivatives designated as hedging instruments:
Interest rate swap contract	Prepaid expenses and other current assets	$	6,001	$	—	$	—	$	—
	Other long-term assets	36,902		12,335		—		—
	Accrued expenses and other current liabilities	—		—		—		2,995


Derivatives not designated as hedging instruments:
Foreign exchange contracts	Prepaid expenses and other current assets	$	124	$	—	$	—	$	—
	Accrued expenses and other current liabilities	—		—		489		388

INDEX

The following table summarizes the effects of our derivative instruments on our Consolidated Statements of Income ~~(loss)~~(Loss):
Gain (Loss) Recognized in Statement of Income
Three Months Ended June 30, Nine Months Ended June 30,
Consolidated Statement of Income Location 2021 2020 2021 2020
Derivatives designated as hedging instruments
Interest rate swap contract Interest expense $ (787) $ (3,262) $ (4,041) $ (5,799)
Terminated interest rate swap contract Interest expense (2,786) 0 (6,501) 0
Derivatives not designated as hedging instruments
Foreign exchange contracts Other income (expense), net $ (74) $ (128) $ (711) $ (390)


		Loss Recognized in Statement of Income (Loss)
	Consolidated Statement of Income (Loss) Location	Three Months Ended March 31,				Six Months Ended March 31,
		2022		2021		2022		2021
Derivatives designated as hedging instruments:
Interest rate swap contract	Interest expense, net	$	(792)	$	(809)	$	(1,583)	$	(3,254)
Terminated interest rate swap contract	Interest expense, net	(2,786)		(2,786)		(5,572)		(3,715)

Derivatives not designated as hedging instruments:
Foreign exchange contracts	Other (expense) income, net	$	(673)	$	(759)	$	(1,385)	$	(637)

The following table summarizes the effects of our derivative instruments on Accumulated other comprehensive ~~income (loss):~~
Amount of Gain (Loss) Recognized in Other Comprehensive Income (Loss)
Three Months Ended June 30, Nine Months Ended June 30,
2021 2020 2021 2020
Derivatives designated as hedging instruments
Interest rate swap contract $ (6,284) $ (3,694) $ 6,628 $ (23,034)
income:


	Gain Recognized in Other Comprehensive Income
	Three Months Ended March 31,				Six Months Ended March 31,
	2022		2021		2022		2021
Derivatives designated as hedging instruments:
Interest rate swap contract	$	26,508	$	19,361	$	31,979	$	12,912

We expect approximately ~~$14,109~~$5,143 to be reclassified from Accumulated other comprehensive income ~~(loss)~~ into Interest expense, net during the next twelve months related to our interest rate swap based on projected rates of the LIBOR forward curve as of ~~June 30, 2021.~~March 31, 2022. This amount includes the amortization of the loss associated with the terminated swap ~~arrangement.~~contract.

~~INDEX~~

13. COMMITMENTS AND CONTINGENCIES

In ~~fiscal 2019, a fire, which involved non-hazardous waste materials and caused no injuries, occurred at~~connection with the ~~warehouse~~acquisition of ~~the wood treatment facility of~~KMG, through our subsidiary KMG-Bernuth, ~~Inc~~Inc. (“KMG-Bernuth”), in Tuscaloosa, Alabama, which processes pentachlorophenol (“penta”) for sale to customers in the U.S. and Canada. KMG-Bernuth commenced and completed cleanup with oversight from certain local, state and federal authorities, and we recorded related expense and for disposal of affected inventory in Cost of sales. We recorded $26 of expense during the three and nine months ended June 30, 2021. We recorded $1,688 of expense during the nine months ended June 30, 2020. Although we believe we have completed cleanup efforts related to the fire incident, there are potential other related costs that cannot be reasonably estimated as of this time due to the nature of federally-regulated penta-related requirements. In addition, we continue to work with our insurance carriers on possible recovery of losses and costs related to the fire incident. During the nine months ended June 30, 2021, we received insurance recoveries of $1,076. At this point we cannot reasonably estimate whether we will receive any additional insurance recoveries, or if so, the amount of such recoveries.

~~Separately, in connection with our acquisition of KMG Chemicals, Inc. (“KMG”) in~~ November 15, 2018, ~~through KMG-Bernuth,~~ we assumed a contingency related to the Star Lake Canal Superfund Site near Beaumont, Texas (“Star Lake”). In 2014, prior to the acquisition of KMG, the United States Environmental Protection Agency (“EPA”) had notified KMG-Bernuth that the EPA considered it to be a potentially responsible party under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, in connection with Star Lake. ~~The~~Although KMG-Bernuth has not conceded liability with respect to Star Lake, and has asserted to the EPA ~~has estimated that related remediation will cost approximately $22.0 million.~~and other parties its defenses to any liability, KMG-Bernuth and 7seven other cooperating parties entered into an agreement with the EPA in September 2016 to complete a remedial design of the remediation actions for the ~~site. Although KMG-Bernuth has not conceded liability with respect to Star Lake,~~site and recorded a reserve ~~in connection with~~at that time. During the fourth quarter of fiscal 2021, an additional reserve for the anticipated remedial ~~design was established, and as of June 30, 2021, the reserve remaining was $204. The remediation work~~action phase, which will be performed under a separate future ~~agreement. For more information, refer~~agreement, was established for $2,508. As of March 31, 2022, the reserve related to ~~Note 20 of “Notes~~Star Lake was $2,711.

Separately, in fiscal 2019, a fire, which involved non-hazardous waste materials and caused no injuries, occurred at a warehouse at the KMG-Bernuth wood treatment facility in Tuscaloosa, Alabama. Although we believe we have completed cleanup efforts related to the ~~Consolidated Financial Statements” included in Item 8~~fire incident, there are potential other related costs that cannot be reasonably estimated as of ~~Part II~~this time due to the nature of ~~our Annual Report on Form 10-K~~federally-regulated requirements for the products produced there. During the second quarter of fiscal ~~year ended September 30, 2020.~~2022, the Company received a settlement of $3,500 related to the fire incident, and we continue to work with our insurance carriers on possible recovery of losses and costs related to it. At this point we cannot reasonably estimate whether we will receive any additional insurance recoveries, or if so, the amount of such recoveries.

~~Purchase Obligations~~PURCHASE OBLIGATIONS

We have ~~$12,918~~$6,818 of contractual commitments through December 2022 under an abrasive particle supply agreement and a contractual commitment of ~~$11,311 through December 2021~~$4,478 to purchase non-water based carrier fluid.

1714

INDEX

14. ~~ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)~~

~~The table below summarizes the components of Accumulated other comprehensive income (loss), net of income tax (expense) benefit:~~
Three Months Ended June 30, Nine Months Ended June 30,
2021 2020 2021 2020
Beginning Balance $ 9,136 $ (40,648) $ (14,104) $ (23,238)
Foreign currency translation adjustment 2,648 9,048 10,428 5,113
Income tax (expense) benefit (73) 38 (43) 99
Foreign currency translation adjustment, net of tax 2,575 9,086 10,385 5,212
Unrealized gain (loss) on cash flow hedges:
Change in fair value (6,284) (3,694) 6,628 (23,034)
Reclassification adjustment into earnings 3,573 3,262 10,542 5,799
Income tax benefit (expense) 607 98 (3,844) 3,853
Unrealized (loss) gain on cash flow hedges, net of tax (2,104) (334) 13,326 (13,382)
Effect of the adoption of the stranded tax effect accounting standard 0 0 0 (497)
Income tax benefit 0 0 0 9
Effect of the adoption of the stranded tax effect accounting standard, net of tax 0 0 0 (488)
Net Change 471 8,752 23,711 (8,658)
Ending Balance $ 9,607 $ (31,896) $ 9,607 $ (31,896)

During the first quarter of fiscal 2020, the Company adopted ASU No. 2018-02 regarding the reclassification of stranded tax effects resulting from the change in the U.S. federal corporate income tax rate under the Tax Cuts and Jobs Act (the “Tax Act”) and as a result, we reclassified $488 of stranded tax effects from Accumulated other comprehensive income to Retained earnings.

~~15.~~ INCOME TAXES

The U.S. enacted the Consolidated Appropriations Act (“CAA”) in December 2020 and the American Rescue Plan (“Rescue Plan”) in March 2021. Both the CAA and Rescue Plan extended certain provisions of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and provided additional Pandemic relief provisions. As with the CARES Act, the CAA and Rescue Plan did not have a material impact on our Provision for income taxes for the three and nine months ended June 30, 2021.

The Company recorded income tax expense of ~~$12,601~~$10,979 and $14,196 for the three and six months ended ~~June 30, 2021,~~March 31, 2022, respectively, compared to ~~$12,741~~income tax benefits of $16,109 and $8,563 for the three and six months ended ~~June 30, 2020. The Company recorded an income tax expense of $4,038 for the nine months ended June 30,~~March 31, 2021, ~~compared to $30,766 for the nine months ended June 30, 2020.~~respectively. The Company’s effective income tax rate was ~~27.2%~~24.1% and ~~(5.0)%~~18.6% for the three and ~~nine~~six months ended ~~June 30, 2021,~~March 31, 2022, respectively, compared to ~~an effective tax rate of 27.0%~~9.7% and ~~22.5%~~6.8% for the three and ~~nine~~six months ended ~~June 30, 2020,~~March 31, 2021, respectively. The ~~change~~changes in our effective tax rate for the ~~nine~~three and six months ended ~~June 30, 2021~~March 31, 2022 compared to the prior year iswere primarily ~~due~~attributable to ~~the~~a lower unfavorable impact offrom the goodwill impairment charges related to ~~the~~ PIM and wood treatment ~~reporting units, partially offset by~~and a higher tax benefit related to ~~foreign derived intangible income.~~

share-based compensation.

~~INDEX~~

~~16.~~15. EARNINGS (LOSS) PER SHARE
Three Months Ended June 30, Nine Months Ended June 30,
2021 2020 2021 2020
Numerator:
Net income (loss) available to common shares $ 33,642 $ 34,525 $ (84,636) $ 105,973
Denominator:
Weighted average common shares 29,260 29,079 29,197 29,157
Weighted average effect of dilutive securities 422 377 0 446
Diluted weighted average common shares 29,682 29,456 29,197 29,603
Earnings (loss) per share:
Basic $ 1.15 $ 1.19 $ (2.90) $ 3.63
Diluted $ 1.13 $ 1.17 $ (2.90) $ 3.58


	Three Months Ended March 31,				Six Months Ended March 31,
	2022		2021		2022		2021
Numerator:
Net income (loss) available to common shares	$	34,571	$	(149,808)	$	61,999	$	(118,278)

Denominator:
Weighted average common shares	28,609		29,210		28,526		29,164

Weighted average effect of dilutive securities	390		—		383		—
Diluted weighted average common shares	28,999		29,210		28,909		29,164


Earnings (loss) per share:

Basic	$	1.21	$	(5.13)	$	2.17	$	(4.06)

Diluted	$	1.19	$	(5.13)	$	2.14	$	(4.06)

For the ~~nine~~three and six months ended ~~June 30,~~March 31, 2021, no dilutive shares were calculated, as ~~the~~ dilutive potential common shares in a net loss situation would be anti-dilutive.

Shares excluded from the calculation of ~~diluted~~Diluted earnings per share as their inclusion would have been anti-dilutive under the treasury stock method are as follows:
Three Months Ended June 30, Nine Months Ended June 30,
2021 2020 2021 2020
Outstanding stock options 13 124 0 96


	Three Months Ended March 31,		Six Months Ended March 31,
	2022	2021	2022	2021
Outstanding stock options	4	—	27	—

~~17.~~16. SEGMENT REPORTING

We identify our segments based on our management structure and the financial information used by our chief executive officer, who is our chief operating decision maker, to assess segment performance and allocate resources among our operating units. We have the following 2 reportable segments:

~~Electronic Materials~~ELECTRONIC MATERIALS

Electronic Materials includes products and solutions for the semiconductor industry and consists of our CMP slurries, ~~business,~~ CMP pads, ~~business,~~ electronic chemicals, ~~business,~~ and materials technologies ~~business, which comprises the ITS business.~~businesses.

~~Performance Materials~~PERFORMANCE MATERIALS

Performance Materials consists of our PIM, ~~business,~~ wood treatment, ~~business,~~ and QED ~~business.~~businesses.

INDEX

Our chief operating decision maker evaluates segment performance based upon revenue and segment adjusted EBITDA. Segment adjusted EBITDA is defined as earnings before interest, income taxes, depreciation and amortization, adjusted for certain items that affect comparability from period to period. These adjustments include impairment charges, Entegris Transaction-related expenses, Future Forward-related expenses, acquisition and integration-related expenses, ~~certain~~net costs related to restructuring of the wood treatment business, costs related to the Pandemic, net of grants received, and costs related to the KMG-Bernuth warehouse fire, net of ~~insurance recovery, impairment charges, net restructuring charges related to the wood treatment business, and costs related to the Pandemic, net of grants received.~~recoveries. We exclude these items from earnings when presenting adjusted EBITDA because we believe they are not indicative of a segment’s regular, ongoing operating performance. Adjusted EBITDA is also ~~the basis of~~ a performance metric for our fiscal ~~2021~~2022 Short-Term Incentive Program (“STIP”). ~~In addition, our~~Our chief operating decision maker does not use assets by segment to evaluate performance or allocate resources, and therefore, we do not disclose assets by segment.

~~INDEX~~

The two segments operate independently and serve different markets and customers, as a result there are no sales between segments. Revenue from external customers by segment are as follows:
Three Months Ended June 30, Nine Months Ended June 30,
2021 2020 2021 2020
Segment Revenue:
Electronic Materials:
CMP slurries $ 135,972 $ 117,680 $ 410,887 $ 359,828
Electronic chemicals 84,140 78,614 244,244 234,693
CMP pads 25,561 24,073 69,887 65,476
Materials technologies 5,396 — 5,396 —
Total Electronic Materials 251,069 220,367 730,414 659,997
Performance Materials:
PIM 29,605 27,111 81,499 116,732
Wood treatment 19,104 18,801 51,973 44,449
QED 9,738 8,448 24,021 20,885
Total Performance Materials 58,447 54,360 157,493 182,066
Total $ 309,516 $ 274,727 $ 887,907 $ 842,063


	Three Months Ended March 31,				Six Months Ended March 31,
	2022		2021		2022		2021

Electronic Materials:
CMP slurries	$	146,540	$	140,194	$	292,681	$	274,915
Electronic chemicals	95,111		80,098		186,250		160,104
CMP pads	26,815		22,255		50,854		44,326
Materials technologies	6,045		—		12,377		—
Total Electronic Materials	274,511		242,547		542,162		479,345

Performance Materials:
PIM	30,394		25,987		57,029		51,894
Wood treatment	10,907		15,546		25,865		32,869
QED	8,315		6,448		16,117		14,283
Total Performance Materials	49,616		47,981		99,011		99,046

Total	$	324,127	$	290,528	$	641,173	$	578,391

Capital expenditures by segment are as follows:
Three Months Ended June 30, Nine Months Ended June 30,
2021 2020 2021 2020
Capital Expenditures:
Electronic Materials $ 6,274 $ 6,141 $ 17,966 $ 19,720
Performance Materials 560 33,550 2,827 79,247
Corporate 1,569 3,900 7,544 8,967
Total $ 8,403 $ 43,591 $ 28,337 $ 107,934


	Three Months Ended March 31,				Six Months Ended March 31,
	2022		2021		2022		2021

Electronic Materials	$	6,229	$	6,258	$	13,365	$	11,692
Performance Materials	419		957		2,029		2,267
Corporate	3,289		2,500		5,083		5,975
Total	$	9,938	$	9,715	$	20,478	$	19,934

INDEX

Adjusted EBITDA by segment is as follows:
Three Months Ended June 30, Nine Months Ended June 30,
2021 2020 2021 2020
Net income (loss) $ 33,642 $ 34,525 $ (84,636) $ 105,973
Interest expense 9,551 10,406 28,667 33,079
Interest income (11) (131) (47) (589)
Income taxes 12,601 12,741 4,038 30,766
Depreciation and amortization 33,927 31,324 98,107 95,516
EBITDA 89,710 88,865 46,129 264,745
Impairment charges 3,090 0 218,658 0
Acquisition and integration-related expenses 3,353 2,735 7,889 7,785
Costs related to the Pandemic, net of grants received (200) 112 641 349
Net costs related to restructuring of the wood treatment business 24 (293) 96 (293)
Costs related to KMG-Bernuth warehouse fire, net of insurance recovery 26 622 (1,050) 1,220
Consolidated adjusted EBITDA $ 96,003 $ 92,041 $ 272,363 $ 273,806
Segment adjusted EBITDA:
Electronic Materials $ 82,521 $ 76,855 $ 244,592 $ 227,662
Performance Materials 25,465 26,959 67,190 84,370
Unallocated corporate expenses (11,983) (11,773) (39,419) (38,226)
Consolidated Adjusted EBITDA $ 96,003 $ 92,041 $ 272,363 $ 273,806


	Three Months Ended March 31,				Six Months Ended March 31,
	2022		2021		2022		2021
Net income (loss)	$	34,571	$	(149,808)	$	61,999	$	(118,278)
Interest expense, net	9,537		9,495		19,280		19,080
Provision for (benefit from) income taxes	10,979		(16,109)		14,196		(8,563)
Depreciation and amortization	32,762		32,289		65,464		64,180
EBITDA	87,849		(124,133)		160,939		(43,581)
Entegris Transaction-related expenses	12,243		—		18,293		—
Impairment charges	—		208,221		9,435		215,568
Future Forward-related expenses	45		—		3,024		—
Net costs related to restructuring of the wood treatment business	219		46		245		72
Costs related to the Pandemic, net of grants received	—		(421)		—		841
Acquisition and integration-related expenses	(540)		2,167		(233)		4,536
Costs related to KMG-Bernuth warehouse fire, net of recoveries	(3,500)		(1,076)		(3,500)		(1,076)
Consolidated adjusted EBITDA	$	96,316	$	84,804	$	188,203	$	176,360

Segment adjusted EBITDA:
Electronic Materials	$	93,957	$	81,315	$	182,039	$	162,071
Performance Materials	13,901		18,750		28,902		41,725
Unallocated corporate expenses	(11,542)		(15,261)		(22,738)		(27,436)
Consolidated adjusted EBITDA	$	96,316	$	84,804	$	188,203	$	176,360

The unallocated portions of corporate functions, including finance, legal, human resources, information technology, and corporate development, are not directly attributable to a reportable segment.

2017

INDEX

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as disclosures included elsewhere in this Report on Form 10-Q, include “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (“the Act”). The Act provides a safe harbor for forward-looking statements to encourage companies to provide prospective information about themselves so long as they identify these statements as forward-looking and provide meaningful cautionary statements identifying important factors that could cause actual results to differ from the projected results. All statements other than statements of historical fact we make in this Report on Form 10-Q are forward-looking and address a variety of subjects including, for example, the proposed Entegris Transaction, including expected timing, completion and effects of the proposed transaction; expected savings from our strategic cost optimization program (“Future Forward”); future sales and operating results; growth or contraction, and trends in the industries and markets in which the Company participates, such as the semiconductor, and oil and gas industries; the acquisition of, investment in, or collaboration with other entities, and the expected benefits and synergies of such transactions; divestment or disposition, or cessation of investment in certain of the Company’s businesses; new product introductions; development of new products, technologies and markets; product performance; the financial conditions of the Company’s customers; the competitive landscape that relates to the Company’s business; the Company’s supply chain; natural disasters; various economic or political factors and international or national events, including related to global public health crises such as the ~~Pandemic,~~COVID-19 pandemic (“Pandemic”), the ongoing conflict between the Russian Federation and Ukraine and sanctions imposed in connection therewith, and the enactment of trade sanctions, tariffs, or other similar matters; the generation, protection and acquisition of intellectual property, and litigation related to such intellectual property or third party intellectual property; environmental, health and safety laws and regulations, and related compliance and costs of compliance; the operation of facilities by the Company; the Company’s management; foreign exchange fluctuation; the Company’s current or future tax rate, including the effects of changes to tax laws in the jurisdictions in which the Company operates; cybersecurity threats and vulnerabilities; and, financing facilities and related debt, pay off or payment of principal and interest, and compliance with covenants and other ~~terms; and,~~terms, uses and investment of the ~~Company’s~~Company's cash ~~balance, including dividends and share repurchases, which may be suspended, terminated or modified at any time for any reason by the Company, based on a variety of factors.~~balance. Statements that are not historical facts, including statements about CMC’s beliefs, plans and expectations, are forward-looking statements. Such statements are based on current expectations of CMC’s management and are subject to a number of factors and uncertainties, which could cause actual results to differ materially from those described in the forward-looking statements. For information about factors that could cause actual results to differ materially from those described in the forward-looking statements, please refer to CMC’s filings with the SEC, including the risk factors contained in our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2020~~2021 and this Report on Form 10-Q. Except as required by law, CMC undertakes no obligation to update forward-looking statements made by it to reflect new information, subsequent events or circumstances. The section entitled “Risk Factors” describes some, but not all, the factors that could cause these differences.

The following discussion and analysis should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2020,~~2021, including the Consolidated Financial Statements and related notes thereto.

RECENT EVENTS

~~On April 1, 2021,~~During the second quarter of fiscal 2022, the Company continued its Future Forward cost optimization program to enhance operational efficiencies. The Company recorded employee severance expense of $3.0 million for the six months ended March 31, 2022. Additional Future Forward initiatives may be implemented during fiscal 2022 that may result in additional expense or charges.

At a special meeting of the Company’s stockholders held on March 3, 2022, our stockholders approved the agreement and plan of merger (“Merger Agreement”) with Entegris, Inc. (“Entegris”) and Yosemite Merger Sub, Inc., a wholly owned subsidiary of Entegris (“Merger Sub”) under which Entegris will acquire the Company in a cash and stock transaction, which the Company had entered into on December 14, 2021. The Merger Agreement provides that (1) Merger Sub will merge with and into the Company (the “Merger”), with the Company surviving the Merger as a wholly owned subsidiary of Entegris, and (2) at the effective time of the Merger, each issued and outstanding share of CMC ~~acquired ITS,~~common stock (other than (i) shares of CMC common stock owned by the Company, Entegris or any of their respective subsidiaries immediately prior to the effective time of the Merger and (ii) shares of CMC common stock as to which ~~designs~~dissenters’ rights have been properly perfected) will be converted into the right to receive $133 in cash and ~~produces high-performance consumables used~~0.4506 shares of Entegris common stock, plus cash in lieu of any fractional shares (the “Entegris Transaction”).

The Entegris Transaction is subject to ~~optimize critical semiconductor testing processes, thus expanding~~ the ~~product offerings that are part~~satisfaction of certain customary closing conditions, including, among others, receipt of certain regulatory approvals. The Merger Agreement contains certain termination rights for both the Company and Entegris.

See the section titled “Risk Factors—Risks Relating to the Entegris Transaction” for more information regarding the risks associated with the Entegris Transaction.

INDEX

The foregoing summary of the Merger Agreement and the transactions contemplated thereby does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Merger Agreement, which is filed as Exhibit 2.1 of our ~~Electronic Materials business segment. The Consolidated Financial Statements included in this~~Current Report on Form ~~10-Q include the financial results of ITS from the Acquisition Date. See Note 4 of “Notes to the Consolidated Financial Statements” of this Report~~8-K filed on ~~Form 10-Q for a discussion of the Acquisition.~~

December 16, 2021.

~~THIRD~~SECOND QUARTER OF FISCAL ~~2021~~2022 OVERVIEW

While ~~the Pandemic continues to cause~~ global macroeconomic uncertainty continues worldwide and in the countries and locations in which we and our customers and suppliers operate, our business in our fiscal ~~third~~second quarter of ~~2021~~2022 showed continued resiliency ~~overall, as well as increased demand in each of our business segments over the prior fiscal quarter.~~overall. In our Electronic Materials business segment, which represents ~~approximately~~more than 80% of our revenue, we ~~continue to experience solid demand from~~experienced growth in each of our ~~semiconductor customers, as certain sectors such as cloud, PCs and servers continued to show strength,~~businesses over the prior year driven by ~~the ongoing economic recovery from the Pandemic, particularly in the industrial~~customer technology advancement and ~~automotive sectors. In addition, during the third fiscal quarter~~increased demand for our products. Our Performance Materials business segment ~~showed improved demand~~experienced an increase in revenue over the prior year, despite the decline in revenue in the wood treatment business related to the completion of final sales to customers in the second quarter of fiscal 2022 as planned due to the previously announced exit of this business. Our PIM business ~~unit,~~achieved its highest revenue quarter since the second quarter of fiscal year 2020 as the ~~oil and gas sectors showed recovery, as well as resilience in our wood treatment and QED~~ business ~~units. Throughout~~recovers from the impacts of the Pandemic ~~our primary focus has been~~ and ~~continues to be on~~benefits from the ~~health~~ramp of domestic and ~~well-being of our employees and the ongoing operation of our facilities worldwide according to our business continuity plans, which we refine on an ongoing basis.~~

~~INDEX~~

international demand.

To date, we have not seen a ~~meaningful~~significant impact from the ~~Pandemic~~global macroeconomic uncertainty on our ability to manufacture and deliver products to our customers, but ~~although improving,~~we have continued to experience a rise in certain raw material costs and broad constraints in the ~~Pandemic has negatively impacted some of the industries we serve, primarily the oil~~global supply chain, including in logistics, and ~~gas industry,~~higher freight and as a result we took an impairment charge in our PIM business unit in our second fiscal quarter. However, as the industry recovers, we expect to drive growth in our PIM business, as we saw in our third fiscal quarter.logistics costs.

The extent to which the Pandemic may further impact our business, operations, results of operations and financial condition going forward is uncertain and difficult to estimate, and depends on numerous evolving and potentially unknown factors.KEY FINANCIAL RESULTS

~~Third Quarter Key Financial Results~~

Our consolidated results of operations are as follows:
Dollars in thousands Three Months Ended June 30,
2021 2020
Revenue $ 309,516 $ 274,727
Net income $ 33,642 $ 34,525
Adjusted EBITDA $ 96,003 $ 92,041
Adjusted EBITDA Margin 31.0 % 33.5 %


(Dollars in thousands)	Three Months Ended March 31,
	2022			2021
Revenue	$	324,127		$	290,528
Net income (loss)	34,571			(149,808)
Adjusted EBITDA	96,316			84,804
Adjusted EBITDA Margin	29.7		%	29.2		%

Our ~~third~~second quarter of ~~2021~~fiscal 2022 consolidated revenue benefited from 13.2% growth in the company’s Electronic Materials segment and 3.4% growth in the Performance Materials segment with stronger demand ~~for the Company’s CMP slurry~~across all our Electronic Materials businesses and PIM and QED products, ~~selected~~global price increases, ~~for~~and the ~~Company’s electronic chemicals products, and revenue from~~addition of the ~~Acquisition,~~materials technologies business, which ~~closed on April 1, 2021.~~represents the acquisition of ITS. Consolidated net income ~~declined in~~increased driven by the ~~current year~~absence of the fiscal 2021 impairment charges recorded for the wood treatment and PIM businesses. Adjusted EBITDA margin increased primarily due to ~~the wood treatment impairment charge~~higher revenue and higher Selling, general and administrative expenses, offset by higher gross profit as a result of increased revenue. Adjusted EBITDA margin decreased due to inflationary pressure on raw materials, and higher freight and fixed costs.

lower operating expenses.

2219

INDEX

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, the changes in balances on the Consolidated Statement of Income (Loss):
Three Months Ended June 30, Nine Months Ended June 30,
(Dollars In thousands) 2021 2020 $ Change % Change 2021 2020 $ Change % Change
Revenue $ 309,516 $ 274,727 $ 34,789 12.7 % $ 887,907 $ 842,063 $ 45,844 5.4 %
Cost of sales 180,320 152,973 27,347 17.9 % 512,061 470,525 41,536 8.8 %
Gross profit 129,196 121,754 7,442 6.1 % 375,846 371,538 4,308 1.2 %
Research, development and technical 13,654 12,165 1,489 12.2 % 39,007 38,206 801 2.1 %
Selling, general and administrative 56,242 51,847 4,395 8.5 % 170,700 162,495 8,205 5.0 %
Impairment charges 3,090 — 3,090 218,658 — 218,658
Total operating expenses 72,986 64,012 8,974 14.0 % 428,365 200,701 227,664 113.4 %
Operating income (loss) 56,210 57,742 (1,532) (2.7 %) (52,519) 170,837 (223,356) (130.7 %)
Interest expense 9,551 10,406 (855) (8.2 %) 28,667 33,079 (4,412) (13.3 %)
Interest income 11 131 (120) (91.6 %) 47 589 (542) (92.0 %)
Other (expense) income, net (427) (201) (226) (112.4 %) 541 (1,608) 2,149 133.6 %
Income (loss) before income taxes 46,243 47,266 (1,023) (2.2 %) (80,598) 136,739 (217,337) (158.9 %)
Provision for income taxes 12,601 12,741 (140) (1.1 %) 4,038 30,766 (26,728) (86.9 %)
Net income (loss) $ 33,642 $ 34,525 $ (883) (2.6 %) $ (84,636) $ 105,973 $ (190,609) (179.9 %)


(Dollars in thousands)	Three Months Ended March 31,								Six Months Ended March 31,
	2022		2021		$ Change		% Change		2022		2021		$ Change		% Change
Revenue	$	324,127	$	290,528	$	33,599	11.6	%	$	641,173	$	578,391	$	62,782	10.9	%
Cost of sales	195,904		166,782		29,122		17.5	%	387,114		331,741		55,373		16.7	%
Gross profit	128,223		123,746		4,477		3.6	%	254,059		246,650		7,409		3.0	%

Operating expenses:
Research, development and technical	12,337		12,925		(588)		(4.5	%)	25,665		25,353		312		1.2	%
Selling, general and administrative	47,111		58,538		(11,427)		(19.5	%)	103,594		114,458		(10,864)		(9.5	%)
Impairment charges	—		208,221		(208,221)		(100.0	%)	9,435		215,568		(206,133)		(95.6	%)
Entegris Transaction-related expenses	12,243		—		12,243		N/M		18,293		—		18,293		N/M
Total operating expenses	71,691		279,684		(207,993)		(74.4	%)	156,987		355,379		(198,392)		(55.8	%)

Operating income (loss)	56,532		(155,938)		212,470		136.3	%	97,072		(108,729)		205,801		189.3	%

Interest expense, net	9,537		9,495		42		0.4	%	19,280		19,080		200		1.0	%
Other (expense) income, net	(1,445)		(484)		(961)		(198.6	%)	(1,597)		968		(2,565)		(265.0	%)
Income (loss) before income taxes	45,550		(165,917)		211,467		127.5	%	76,195		(126,841)		203,036		160.1	%

Provision for (benefit from) income taxes	10,979		(16,109)		27,088		168.2	%	14,196		(8,563)		22,759		265.8	%

Net income (loss)	$	34,571	$	(149,808)	$	184,379	123.1	%	$	61,999	$	(118,278)	$	180,277	152.4	%

Most of CMC’s foreign operations maintain their accounting records in their local currencies. As a result, period to period comparability of results of operations is affected by fluctuations in exchange rates. The impact on comparability is not material in any given period.

REVENUE

The increases in Revenue ~~was $309.5 million~~for the three and six months ended March 31, 2022 compared to the three and six months ended March 31, 2021 were primarily driven by 13.2% and 13.1% growth in the Electronic Materials segment, respectively, due to increased demand for our products, global price increases, and the addition of the materials technologies business. Consolidated revenue also increased for the three months ended ~~June 30, 2021, which represented an increase of 12.7%, or $34.8 million, from~~March 31, 2022 compared to the three months ended ~~June 30, 2020, primarily~~March 31, 2021 due to ~~stronger~~increased demand for ~~the Company’s CMP slurry~~PIM and QED products, ~~selected price increases for the Company’s electronic chemicals products, and revenue from the Acquisition, which closed on April 1, 2021.~~

Revenue was $887.9 million for the nine months ended June 30, 2021, which represented an increase of 5.4%, or $45.8 million, from the nine months ended June 30, 2020, primarily due to stronger demand for the Company’s CMP slurry products, selected price increases for the Company’s electronic chemicals products and wood treatment products, and revenue from the Acquisition, which closed on April 1, 2021. This was partially offset by ~~lower demand for PIM products due to~~ the ~~impact~~exit of the ~~Pandemic.~~wood treatment business.

COST OF SALES

The increases in Cost of ~~sales was $180.3 million~~Sales for the three and six months ended ~~June 30, 2021, which represented an increase of 17.9%, or $27.3 million, from~~March 31, 2022 compared to the three and six months ended ~~June 30, 2020. Cost of sales was $512.1 million for the nine months ended June 30,~~March 31, 2021 ~~which represented an increase of 8.8%, or $41.5 million, from the nine months ended June 30, 2020. The increases~~ were primarily due to increases in ~~revenue, inflationary~~sales volume and higher manufacturing, raw material, ~~costs, and higher~~ freight and ~~manufacturing fixed~~logistics costs.

~~INDEX~~

GROSS MARGIN

Our gross margin was ~~41.7%~~39.6% for both the three and six months ended ~~June 30, 2021,~~March 31, 2022 compared to ~~44.3%~~42.6% for both the three and six months ended ~~June 30, 2020. Our gross margin was 42.3% for the nine months ended June 30, 2021, compared to 44.1% for the nine months ended June 30, 2020.~~March 31, 2021. The decrease was primarily due to ~~inflationary~~higher manufacturing, raw material, ~~costs, and higher~~ freight and ~~manufacturing fixed costs.~~logistics costs across both segments, partially offset by global price increases.

INDEX

SELLING, GENERAL AND ADMINISTRATIVE

The decrease in Selling, general and administrative expenses ~~were $56.2 million~~ for the three months ended ~~June 30, 2021, which represented an increase of 8.5%, or $4.4 million, from~~March 31, 2022 compared to the three months ended ~~June 30, 2020. This~~March 31, 2021 was primarily due to a ~~$1.3~~$4.2 million ~~increase~~decrease in ~~staffing~~professional fees, a $3.5 million settlement related ~~expenses.~~to the 2019 KMG-Bernuth warehouse fire, a $2.7 million decrease in acquisition and integration related expenses and a $1.4 million decrease in Short-Term Incentive Program (“STIP”) expense.

The decrease in Selling, general and administrative expenses ~~were $170.7 million~~ for the ~~nine~~six months ended ~~June 30, 2021, which represented an increase of 5.0%, or $8.2 million, from~~March 31, 2022 compared to the ~~nine~~six months ended ~~June 30, 2020. This~~March 31, 2021 was primarily due to a ~~$4.9~~$6.9 million ~~increase~~decrease in professional fees, a ~~$3.3~~$4.8 million ~~increase~~decrease in ~~share-based compensation expense, a $2.2 million increase in staffing~~acquisition and integration related expenses ~~a $1.7 million increase in depreciation expense,~~ and a ~~$0.9~~$3.5 million settlement related to the 2019 KMG-Bernuth warehouse fire. These decreases were partially offset by $2.1 million of Future Forward-related expenses and a $1.8 million increase in IT ~~expense. This was partially offset by a $3.7 million decrease in amortization expense, a $2.0 million decrease in STIP expense, and a $2.0 million decrease in travel~~ expenses.

IMPAIRMENT CHARGES

The Impairment charge for the six months ended March 31, 2022 related to the remaining goodwill balance of the wood treatment business. Impairment charges ~~were $3.1 million~~ for the three and six months ended ~~June 30,~~March 31, 2021 ~~due~~related to the impairment of goodwill ~~in the wood treatment business as a result of the previously announced strategic decision to exit this business. Impairment charges were $218.7 million~~ for ~~the nine months ended June 30, 2021 due to impairment of goodwill in~~ the PIM reporting unit, as well as the impairment of long-lived assets ~~intangible assets~~ and goodwill for the wood treatment business as a result of the planned closure of the wood treatment ~~business. There were no impairment charges during the three and nine months ended June 30, 2020.~~facilities. See Notes 7 and 8 of “Notes to the Consolidated Financial Statements” of this Report on Form 10-Q for ~~additional discussion.~~more information.

~~INTEREST EXPENSE~~ENTEGRIS TRANSACTION-RELATED EXPENSES

~~Interest expense was $9.6 million for~~These expenses, which were incurred during the three and six months ended ~~June 30, 2021, which represented a decrease~~March 31, 2022, relate to the Entegris Transaction. See Note 2 of ~~$0.9 million from~~“Notes to the ~~three months ended June 30, 2020. Interest expense was $28.7 million~~Consolidated Financial Statements” of this Report on Form 10-Q for more information regarding the nine months ended June 30, 2021, which represented a decrease of $4.4 million from the nine months ended June 30, 2020. The decreases were primarily due to a decline in the LIBOR rate for the unhedged portion of the Term Loan Facility and a lower outstanding term loan balance due to repayments.

~~OTHER (EXPENSE) INCOME, NET~~

Other expense was $0.4 million for the three months ended June 30, 2021, compared to Other expense of $0.2 million for the three months ended June 30, 2020. Other income was $0.5 million for the nine months ended June 30, 2021, compared to Other expense of $1.6 million for the nine months ended June 30, 2020. The changes were primarily due to foreign currency transaction gains and losses.Entegris Transaction.

PROVISION FOR INCOME TAXES

The ~~Company recorded income tax expense of $12.6 million for the three months ended June 30, 2021, compared to $12.7 million for the three months ended June 30, 2020. The Company’s~~ effective income tax rate for the ~~third quarter of fiscal 2021~~three and six months ended March 31, 2022 was ~~27.2%~~24.1% and 18.6%, respectively, compared to ~~27.0% in~~9.7% and 6.8% for the ~~same quarter last year.~~three and six months ended March 31, 2021, respectively. The ~~change~~changes in our effective tax rate isfor the three and six months ended March 31, 2022 compared to the prior year was primarily ~~driven by the~~attributable to a lower unfavorable impact offrom the goodwill impairment charges related to PIM and wood treatment ~~impairment~~ and ~~foreign tax law changes, partially offset by~~a higher tax benefit related to ~~foreign derived intangible income.~~

The Company recorded income tax expense of $4.0 million for the nine months ended June 30, 2021, compared to $30.8 million for the nine months ended June 30, 2020. The Company’s effective income tax rate was (5.0)% for the nine months ended June 30, 2021, compared to 22.5% for the nine months ended June 30, 2020. The change in our effective income tax rate is primarily driven by the unfavorable impact of the impairment related to the PIM and wood treatment reporting units, partially offset by higher tax benefit related to foreign derived intangible income.share-based compensation.

~~INDEX~~

~~NET INCOME (LOSS)~~

Net income was $33.6 million for the three months ended June 30, 2021, which represented a decrease of 2.6%, or $0.9 million from the three months ended June 30, 2020. The change was primarily due to the wood treatment impairment charge and higher Selling, general and administrative expenses, offset by higher gross profit as a result of increased revenue.

Net loss was $84.6 million for the nine months ended June 30, 2021, compared to Net income of $106.0 million for the nine months ended June 30, 2020. The change was primarily due to the PIM and wood treatment impairment charges and higher Selling, general and administrative expenses, offset by higher gross profit as a result of increased revenue.

2521

INDEX

SEGMENT ANALYSIS

The segment data should be read in conjunction with our unaudited Consolidated Financial Statements and related notes included in Part 1, Item 1 of this Report on Form 10-Q.
Dollars in thousands Three Months Ended June 30, Nine Months Ended June 30,
2021 2020 $ Change % Change 2021 2020 $ Change % Change
Segment Revenue:
Electronic Materials $ 251,069 $ 220,367 $ 30,702 13.9 % $ 730,414 $ 659,997 $ 70,417 10.7 %
Performance Materials 58,447 54,360 4,087 7.5 % 157,493 182,066 (24,573) (13.5 %)
Total Revenue $ 309,516 $ 274,727 $ 34,789 12.7 % $ 887,907 $ 842,063 $ 45,844 5.4 %
Adjusted EBITDA:
Electronic Materials $ 82,521 $ 76,855 $ 5,666 7.4 % $ 244,592 $ 227,662 $ 16,930 7.4 %
Performance Materials 25,465 26,959 (1,494) (5.5 %) 67,190 84,370 (17,180) (20.4 %)
Unallocated corporate expenses (11,983) (11,773) (210) (1.8 %) (39,419) (38,226) (1,193) (3.1 %)
Consolidated Adjusted EBITDA $ 96,003 $ 92,041 $ 3,962 4.3 % $ 272,363 $ 273,806 $ (1,443) (0.5 %)
Adjusted EBITDA margin:
Electronic Materials 32.9 % 34.9 % -200 bpts 33.5 % 34.5 % -100 bpts
Performance Materials 43.6 % 49.6 % -600 bpts 42.7 % 46.3 % -360 bpts


(Dollars in thousands)	Three Months Ended March 31,										Six Months Ended March 31,
	2022			2021			$ Change		% Change		2022			2021			$ Change		% Change
Segment Revenue:
Electronic Materials	$	274,511		$	242,547		$	31,964	13.2	%	$	542,162		$	479,345		$	62,817	13.1	%
Performance Materials	49,616			47,981			1,635		3.4	%	99,011			99,046			(35)		—	%
Total Revenue	$	324,127		$	290,528		$	33,599	11.6	%	$	641,173		$	578,391		$	62,782	10.9	%

Adjusted EBITDA:
Electronic Materials	$	93,957		$	81,315		$	12,642	15.5	%	$	182,039		$	162,071		$	19,968	12.3	%
Performance Materials	13,901			18,750			(4,849)		(25.9	%)	28,902			41,725			(12,823)		(30.7	%)
Unallocated corporate expenses	(11,542)			(15,261)			3,719		24.4	%	(22,738)			(27,436)			4,698		17.1	%
Consolidated adjusted EBITDA	$	96,316		$	84,804		$	11,512	13.6	%	$	188,203		$	176,360		$	11,843	6.7	%

Adjusted EBITDA margin:
Electronic Materials	34.2		%	33.5		%	70 bpts				33.6		%	33.8		%	-20 bpts
Performance Materials	28.0		%	39.1		%	-1,110 bpts				29.2		%	42.1		%	-1,290 bpts

ELECTRONIC MATERIALS

~~For~~The increases in revenue for the three and six months ended March 31, 2022 compared to the three and six months ended March 31, 2021 were driven by growth across all segment businesses and the addition of the materials technologies business. CMP slurries increased 4.5% and 6.5%, respectively, driven by customer technology advancement and increased demand for the Company’s products. CMP pads increased 20.5% and 14.7%, respectively, due to increased demand and new position wins. Electronic chemicals increased 18.7% and 16.3%, respectively, driven by price increases, increased customer demand, and new position wins.

The increases in adjusted EBITDA for the three and six months ended March 31, 2022 compared to the three and six months ended March 31, 2021 were primarily driven by the revenue growth across all segment businesses, partially offset by higher manufacturing, raw material, freight and logistics costs.

The increase in adjusted EBITDA margin for the three months ended ~~June 30, 2021~~March 31, 2022 compared to the three months ended June 30, 2020, the $30.7 million increase in Electronic Materials revenue was primarily due to stronger demand for the Company’s CMP slurry products, selected price increases for the Company’s electronic chemicals products, and revenue from the Acquisition, which closed on April 1, 2021. The $5.7 million increase in Electronic Materials adjusted EBITDAMarch 31, 2021 was primarily driven by ~~the EBITDA associated with the increase in~~ revenue ~~partially offset by higher fixed costs.~~growth across all segment businesses. The ~~200 bpts~~ decrease in ~~Electronic Materials~~ adjusted EBITDA margin for the six months ended March 31, 2022 compared to the six months ended March 31, 2021 was primarily driven by ~~inflationary~~higher manufacturing, raw material, ~~costs, higher~~ freight and ~~fixed costs, and higher expenses to support current operations and future growth opportunities.~~logistics costs.

For the nine months ended June 30, 2021 compared to the nine months ended June 30, 2020, the $70.4 million increase in Electronic Materials revenue was driven by increased demand for the Company’s CMP slurry and CMP pads products, selected price increases for the Company’s electronic chemicals products, and revenue from the Acquisition, which closed on April 1, 2021. PERFORMANCE MATERIALS

The ~~$16.9 million increase in Electronic Materials adjusted EBITDA was driven by the EBITDA associated with the~~ increase in revenue partially offset by higher fixed manufacturing costs. The 100 bpts decrease in Electronic Materials adjusted EBITDA margin was primarily due to inflationary raw material costs, higher freight and fixed costs, and higher expenses to support current operations and future growth opportunities, partially offset by favorable product mix.

~~PERFORMANCE MATERIALS~~

~~For~~for the three months ended ~~June 30, 2021~~March 31, 2022 compared to the three months ended ~~June 30, 2020, the $4.1 million increase in Performance Materials revenue~~March 31, 2021 was primarily driven by 17.0% and 29.0% increases in PIM and QED revenue, respectively, due to increased demand for ~~the Company’s PIM and QED~~these products. The ~~$1.5 million decrease in adjusted EBITDA was primarily driven by inflationary raw material costs and higher fixed costs,~~increases were partially offset by the ~~EBITDA associated with~~exit of the ~~increase in revenue.~~ wood treatment business, which was completed during the second fiscal quarter of 2022.

Revenue for the six months ended March 31, 2022 was essentially flat compared to the six months ended March 31, 2021, as increased demand for PIM and QED products was offset by the exit of the wood treatment business.

The ~~600 bpts decrease~~decreases in adjusted EBITDA and adjusted EBITDA margin ~~was~~for the three and six months ended March 31, 2022 compared to the three and six months ended March 31, 2021 were primarily driven by ~~inflationary~~the exit of the wood treatment business and higher raw material costs ~~and higher costs~~ in the PIM ~~related to underutilization~~ ~~of the previously completed plant expansion~~.business.

~~INDEX~~

For the nine months ended June 30, 2021 compared to the nine months ended June 30, 2020, Performance Materials revenue decreased $24.6 million and adjusted EBITDA decreased $17.2 million. These decreases were driven by lower demand for the Company’s PIM products due to the Pandemic, partially offset by higher selling prices for wood treatment products. The 360 bpts decrease in adjusted EBITDA margin was primarily driven by inflationary raw material costs and higher costs in PIM related to underutilization ~~of the previously completed plant expansion, partially offset by higher selling prices for wood treatment products.~~

2722

INDEX

USE OF CERTAIN GAAP AND NON-GAAP FINANCIAL INFORMATION

We provide certain non-GAAP financial measures, such as adjusted EBITDA and adjusted EBITDA margin, in addition to reported GAAP results because we believe that analysis of our financial performance is enhanced by an understanding of these non-GAAP financial measures. We exclude certain items from earnings when presenting adjusted EBITDA because we believe they will be incurred infrequently and/or are otherwise not indicative of the Company’s regular, ongoing operating performance. Accordingly, we believe that they aid in evaluating the underlying operational performance of our business, and facilitate comparisons between periods. In addition, adjusted EBITDA is used as one of the performance goals of our fiscal ~~2021~~2022 STIP. A similar adjusted EBITDA calculation is also used by our lenders for a key debt compliance ratio.

Adjusted EBITDA margin is defined as adjusted EBITDA as a percentage of revenue. Adjusted EBITDA is defined as earnings before interest, income taxes, depreciation and amortization, adjusted for certain items that affect comparability from period to period. These adjustments include ~~items related to acquisitions, such as Acquisition~~impairment charges, Entegris Transaction-related expenses, Future Forward-related expenses, acquisition and integration-related expenses, ~~impairment charges,~~net costs related to restructuring of ~~restructuring and related adjustments~~the wood treatment business, costs related to the ~~wood treatment business,~~Pandemic, net of grants received, and costs related to the KMG-Bernuth warehouse fire, net of ~~insurance recovery, and costs related to the Pandemic net of grants received.~~recoveries.

The non-GAAP financial measures provided are a supplement to, and not a substitute for, the Company’s financial results presented in accordance with U.S. GAAP. Management strongly encourages investors to review the Company’s Consolidated Financial Statements in their entirety and to not rely on any single financial measure. A reconciliation table of GAAP to non-GAAP financial measures is below.

Adjusted EBITDA for the Electronic Materials and Performance Materials segments is presented in conformity with Accounting Standards Codification Topic 280, Segment Reporting. This measure is reported to the chief operating decision maker for purposes of making decisions about allocating resources to the segments and assessing their performance. For these reasons, this measure is excluded from the definition of non-GAAP financial measures under SEC Regulation G and Item 10(e) of Regulation S-K.

RECONCILIATION OF NET INCOME ~~(LOSS)~~ TO ADJUSTED EBITDA
In thousands Three Months Ended June 30, Nine Months Ended June 30,
2021 2020 2021 2020
Net income (loss) $ 33,642 $ 34,525 $ (84,636) $ 105,973
Interest expense 9,551 10,406 28,667 33,079
Interest income (11) (131) (47) (589)
Income taxes 12,601 12,741 4,038 30,766
Depreciation and amortization 33,927 31,324 98,107 95,516
EBITDA 89,710 88,865 46,129 264,745
Impairment charges 3,090 — 218,658 —
Acquisition and integration-related expenses 3,353 2,735 7,889 7,785
Costs related to the Pandemic, net of grants received (200) 112 641 349
Net costs related to restructuring of the wood treatment business 24 (293) 96 (293)
Costs related to KMG-Bernuth warehouse fire, net of insurance recovery 26 622 (1,050) 1,220
Adjusted EBITDA $ 96,003 $ 92,041 $ 272,363 $ 273,806

In thousands Three Months Ended June 30, Nine Months Ended June 30,
2021 2020 2021 2020
Adjusted EBITDA:
Electronic Materials $ 82,521 $ 76,855 $ 244,592 $ 227,662
Performance Materials 25,465 26,959 67,190 84,370
Unallocated corporate expenses (11,983) (11,773) (39,419) (38,226)
Consolidated Adjusted EBITDA $ 96,003 $ 92,041 $ 272,363 $ 273,806


	Three Months Ended March 31,				Six Months Ended March 31,
(In thousands)	2022		2021		2022		2021
Net income (loss)	$	34,571	$	(149,808)	$	61,999	$	(118,278)
Interest expense, net	9,537		9,495		19,280		19,080
Provision for (benefit from) income taxes	10,979		(16,109)		14,196		(8,563)
Depreciation and amortization	32,762		32,289		65,464		64,180
EBITDA	87,849		(124,133)		160,939		(43,581)
Entegris Transaction-related expenses	12,243		—		18,293		—
Impairment charges	—		208,221		9,435		215,568
Future Forward-related expenses	45		—		3,024		—
Net costs related to restructuring of the wood treatment business	219		46		245		72
Costs related to the Pandemic, net of grants received	—		(421)		—		841
Acquisition and integration-related expenses	(540)		2,167		(233)		4,536
Costs related to KMG-Bernuth warehouse fire, net of recoveries	(3,500)		(1,076)		(3,500)		(1,076)
Adjusted EBITDA	$	96,316	$	84,804	$	188,203	$	176,360


	Three Months Ended March 31,				Six Months Ended March 31,
(In thousands)	2022		2021		2022		2021
Adjusted EBITDA:
Electronic Materials	$	93,957	$	81,315	$	182,039	$	162,071
Performance Materials	13,901		18,750		28,902		41,725
Unallocated corporate expenses	(11,542)		(15,261)		(22,738)		(27,436)
Consolidated adjusted EBITDA	$	96,316	$	84,804	$	188,203	$	176,360

2823

INDEX

LIQUIDITY AND CAPITAL RESOURCES

As of ~~June 30, 2021,~~March 31, 2022, we had ~~$228.5~~$237.7 million of cash and cash equivalents compared with ~~$257.4~~$186.0 million as of September 30, ~~2020.~~2021. On ~~June 30, 2021, $133.7~~March 31, 2022, $155.0 million of cash and cash equivalents was held in foreign subsidiaries. Our total liquidity as of ~~June 30, 2021~~March 31, 2022 was ~~$428.5~~$587.7 million compared to ~~$457.4~~$536.0 million as of September 30, ~~2020~~2021 (including ~~$200.0~~$350.0 million of borrowing availability under our revolving credit facility (“Revolving Credit ~~Facility~~Facility”) in both periods, which includes our letter of credit sub-facility). The ~~decrease~~increase in liquidity reflects ~~the $126.1 million cash used for the Acquisition, additions of property, plant and equipment, the repurchases of our common stock and payments of quarterly cash dividends, partially offset by~~ the cash flow provided by ~~operating activities. On July 2, 2021,~~operations, partially offset by cash used for the ~~Company amended the Amended Credit Agreement to increase the aggregate amount~~payment of ~~the Revolving Credit Facility from $200.0 million to $350.0 million~~dividends, capital expenditures, and ~~to extend the maturity to July 2026. The interest rates and other material terms applicable to the Amended Credit Agreement are unchanged.~~repurchases of our common stock.

Total debt, consisting of principal outstanding on our Senior Secured Term Loan Facility (“Term Loan Facility”), amounted to ~~$915.6~~$909.8 million ($920.4 million in aggregate principal amount less $10.6 million of debt issuance costs) as of March 31, 2022 and $916.3 million ($928.4 million in aggregate principal amount less ~~$12.8 million of debt issuance costs) as of June 30, 2021 and $921.4 million ($936.4 million in aggregate principal amount less $14.9~~$12.0 million of debt issuance costs) as of September 30, ~~2020.~~2021. During the three months ended ~~June 30, 2021~~March 31, 2022 there were no borrowings under our Revolving Credit Facility and no balance was outstanding as of ~~June 30, 2021.~~March 31, 2022.

The Revolving Credit Facility requires that the Company maintain a maximum first lien secured net leverage ratio, as defined in the credit agreement as amended (“Amended Credit ~~Agreement,~~Agreement”), of 4.00 to 1.00 as of the last day of each fiscal quarter. As of ~~June 30, 2021,~~March 31, 2022, our maximum first lien secured net leverage ratio was ~~1.85~~1.70 to 1.00. Additionally, the Amended Credit Agreement contains certain affirmative and negative covenants that limit the ability of the Company, among other things and subject to certain significant exceptions, to incur debt or liens, make investments, enter into certain mergers, consolidations, asset sales and acquisitions, pay dividends and make other restricted payments and enter into transactions with affiliates. We believe we are in compliance with these covenants as of ~~June 30, 2021~~March 31, 2022 and we expect to remain in compliance with our debt covenants ~~during fiscal 2021 and beyond.~~

~~In March 2021, our Board of Directors authorized an increase~~ in the ~~amount available~~future.

Under the Merger Agreement, we are prohibited from incurring any additional indebtedness or issuing or selling any debt securities or rights to acquire debt securities, subject to certain exceptions.

The Merger Agreement limits our ability to repurchase shares of our common stock, subject to certain exceptions. As a result, we did not repurchase any shares under our share repurchase program ~~to $150.0 million. During~~during the ~~third~~second quarter of fiscal 2021, we repurchased 35 thousand shares under this program, and $144.8 million authorization remained at the end of the quarter. The timing, manner, price and amounts of repurchases are determined at the Company's discretion, and the share repurchase program may be suspended, terminated or modified at any time for any reason. The repurchase program does not obligate the Company to acquire any specific number of shares. To date, we have funded share purchases under our share repurchase program from our available cash on hand, and anticipate we will continue to do so.2022.

Our Board of Directors authorized the initiation of our ~~regular~~ quarterly cash dividend program in January 2016, and since that time has increased the dividend to its current level of $0.46 per share. The ~~declaration and payment of future dividends is subject to the discretion and determination~~terms of the ~~Board of Directors~~Merger Agreement limit the Company’s ability to declare and ~~management, based on~~pay future quarterly cash dividends, except the Company may declare quarterly cash dividends in an amount not to exceed $0.46 per share, in a ~~variety of factors, and~~manner consistent with the ~~program may be suspended, terminated or modified at any time for any reason.~~Company's past practices, in the event the Entegris Transaction has not closed by December 14, 2022.

We believe that cash on hand, cash available from future operations, and available borrowing capacity under our Amended Credit Agreement will be sufficient to fund our operations, expected capital expenditures, and dividend payments ~~and share repurchases~~ for at least the next twelve months. However, ongoing Pandemic-created uncertainty in worldwide economic conditions and in those of the industries in which we participate remains, and whether with respect to the impact of the Pandemic or in pursuit of corporate development or other initiatives, we may need to raise additional funds in the future through equity or debt financing, or other arrangements. Depending on future conditions in the capital and credit markets, we could encounter difficulty securing additional financing in the type or amount necessary to pursue these objectives.

~~Operating Activities~~OPERATING ACTIVITIES

We generated ~~$179.8~~$110.2 million in cash flows from operating activities in the first ~~nine~~six months of fiscal ~~2021,~~2022, compared to ~~$204.1~~$123.5 million in the first ~~nine~~six months of fiscal ~~2020.~~2021. The decrease ~~in operating cash flows~~ was ~~due to $32.0~~driven by $16.1 million of changes in operating assets and liabilities, partially offset by a ~~$7.7~~$2.8 million increase ofin Net income adjusted for non-cash reconciling items.

~~Investing Activities~~INVESTING ACTIVITIES

In the first ~~nine~~six months of fiscal ~~2021,~~2022, net cash used in investing activities was ~~$155.1~~$23.3 million, compared to ~~$105.4~~$20.8 million in the first ~~nine~~six months of fiscal ~~2020. The increase in net cash used for investing activities~~2021. This was primarily driven by ~~the $126.1 million net cash used for the Acquisition, partially offset by a decrease~~an increase in capital expenditures of ~~$75.4 million, which was driven by the plant expansion in the first nine months of fiscal 2020 in our Performance Materials segment.~~$2.2 million.

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~~Financing Activities~~FINANCING ACTIVITIES

In the first ~~nine~~six months of fiscal ~~2021,~~2022, cash flows used in financing activities were ~~$55.1~~$32.3 million, compared to ~~cash flows provided by financing activities of $67.2~~$36.7 million in the first ~~nine~~six months of fiscal ~~2020.~~2021. This was ~~mainly~~primarily driven by an increase in proceeds from the ~~temporary draw on the Company’s revolving credit facility for $150.0 million~~issuance of stock, related to higher stock option exercises during the first ~~nine~~six months of fiscal ~~2020 as a precautionary measure to preserve financial flexibility at the onset of the Pandemic, which we then repaid before the end of fiscal 2020. This was~~2022, partially offset by ~~cash paid for repurchases~~an increase in repayment of common stock under the Share Repurchase Program of $15.2 million in the first nine months of fiscal 2021 compared to $35.0 million in the first nine months of fiscal 2020, as well as repayments under the Term Loan Facility of $8.0 million in the first nine months of fiscal 2021 compared to $18.0 million in the first nine months of fiscal 2020.

~~OFF-BALANCE SHEET ARRANGEMENTS~~

~~At June 30, 2021 and September 30, 2020, we did not have any unconsolidated entities or financial partnerships.~~

long-term debt.

CONTRACTUAL OBLIGATIONS

There have been no material changes to the Company’s significant contractual obligations during fiscal ~~2021,~~2022, except as discussed below.

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We have been operating under a multi-year supply agreement for the purchase of certain raw materials, which runs through December 2022. As of ~~June 30, 2021,~~March 31, 2022, purchase obligations include an aggregate amount of ~~$12.9~~$6.8 million of contractual commitments related to this agreement. In addition, we have a purchase commitment of ~~$11.3~~$4.5 million through December ~~2021~~2022 for non-water based carrier fluid.

Refer to Item 7 of Part II of our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2020,~~2021 for additional information regarding our contractual obligations.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES AND EFFECTS OF RECENT ACCOUNTING PRONOUNCEMENTS

We discuss our critical accounting estimates and effects of recent accounting pronouncements in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Item 7 of Part II of our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2020.~~2021. See Note 21 of “Notes to the Consolidated Financial Statements” of this Report on Form 10-Q for updates.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There were no material changes from the “Quantitative and Qualitative Disclosures about Market Risk” disclosed in Part II Item 7A of our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2020.~~

2021.

ITEM 4. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Our management, with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), has conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (“the Exchange Act”), as of ~~June 30, 2021.~~March 31, 2022. Based on that evaluation, our CEO and CFO have concluded that our disclosure controls and procedures were effective to provide that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and to provide that such information is accumulated and communicated to management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There has been no change in our internal control over financial reporting that has occurred during the period covered by this Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

The Company acquired ITS on April 1, 2021. ITS is not significant to the Company’s financial statements. The Company is in the process of integrating ITS into the Company’s internal control over financial reporting, and the foregoing evaluation of the effectiveness of the Company’s internal control over financial reporting does not include an assessment of those internal controls over financial reporting of ITS.

INHERENT LIMITATIONS ON EFFECTIVENESS OF CONTROLS

Because of inherent limitations, our disclosure controls or our internal control over financial reporting may not prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We periodically become a party to legal proceedings, arbitrations, regulatory proceedings, inquiries and investigations (“contingencies”) arising in the ordinary course of our business operations. The ultimate resolution of these contingencies is subject to significant uncertainty, and should we fail to prevail in any of them or should several of them be resolved against us in the same reporting period, these matters could, individually or in the aggregate, be material to our Consolidated Financial Statements. One of these contingencies, related to Star Lake Canal, which we assumed in connection with the acquisition of KMG, is discussed in Note 13 of “Notes to the Consolidated Financial Statements” included in Item 1 of Part I of this Report on Form 10-Q. The ultimate outcome of these matters, however, cannot be determined at this time, nor can the amount of any potential loss be reasonably estimated, and as a result except where indicated no amounts have been recorded in our Consolidated Financial Statements.

We also may face other governmental or third-party claims, or otherwise incur costs, relating to cleanup of, or for injuries resulting from, contamination at sites associated with Star Lake Canal or other past and present operations. We accrue for environmental liabilities when a determination can be made that they are probable and reasonably estimable. Other than as described herein, we are not involved in any legal proceedings that we believe could have a material impact on our consolidated financial position, results of operations or cash flows. The information set forth in Item ~~1.A.~~1A. Risk Factors, and Note 13 of “Notes to the Consolidated Financial Statements” included in Item 1 of Part I of this Report on Form 10-Q, is incorporated herein by reference.

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ITEM 1A. RISK FACTORS

RISKS RELATING TO THE ENTEGRIS TRANSACTION

BECAUSE THE EXCHANGE RATIO IS FIXED AND WILL NOT BE ADJUSTED IN THE EVENT OF ANY CHANGE IN EITHER ENTEGRIS’ OR OUR STOCK PRICE, THE VALUE OF THE SHARES OF ENTEGRIS FOLLOWING THE CLOSING IS UNCERTAIN.

Upon completion of the Entegris Transaction, each share of CMC common stock outstanding immediately before the Entegris Transaction will be converted into and become exchangeable for $133 in cash and 0.4506 shares of Entegris common stock. This exchange ratio is fixed in the Merger Agreement and will not be adjusted for changes in the market price of either Entegris common stock or CMC common stock. The market prices of Entegris common stock and CMC common stock have fluctuated before and after the date of the announcement of the Merger Agreement and will continue to fluctuate.

Because part of the value of the merger consideration will depend on the market price of Entegris common stock at the time the Entegris Transaction is completed, CMC stockholders will not know or be able to determine the market value of the merger consideration they would receive upon completion of the Entegris Transaction.

Stock price changes may result from a variety of factors, including, among others, changes in CMC’s or Entegris’ respective businesses, operations and prospects, reductions or changes in U.S. and foreign government spending or budgetary policies, market assessments of the likelihood that the Entegris Transaction will be completed, interest rates, general market, industry, geopolitical and economic conditions and other factors generally affecting the respective prices of CMC’s or Entegris’ common stock, federal, state and local legislation, governmental regulation and legal developments in the industry segments in which CMC or Entegris operate, and the timing of the Entegris Transaction and receipt of required regulatory approvals.

Many of these factors are beyond CMC’s control, and CMC is not permitted to terminate the Merger Agreement solely due to a decline in the market price of Entegris common stock.

THE ENTEGRIS TRANSACTION MAY NOT BE COMPLETED WITHIN THE EXPECTED TIMEFRAME, OR AT ALL, AND FAILURE TO COMPLETE IT COULD ADVERSELY AFFECT OUR BUSINESS, RESULTS OF OPERATIONS, FINANCIAL CONDITIONS, AND THE MARKET PRICE OF OUR COMMON STOCK

There can be no assurance that the Entegris Transaction will be completed in the expected timeframe, or at all. The Merger Agreement contains a number of conditions that must be satisfied or waived prior to the completion of the Entegris Transaction, including (i) the receipt of all consents, approvals or authorizations of, declarations or filings under other applicable competition laws and foreign investment laws; (ii) the absence of certain legal impediments preventing the completion of the Merger; (iii) the authorization for listing of Entegris common stock to be issued in connection with the merger on the NASDAQ and (iv) the accuracy of the representations and warranties of the parties and the compliance by the parties with their respective covenants in the Merger Agreement.

There can be no assurance that all required consents and approvals will be obtained or that all closing conditions will otherwise be satisfied (or waived, if applicable), and, if all required consents and approvals are obtained and all closing conditions

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are satisfied (or waived, if applicable), we can provide no assurance as to the terms, conditions and timing of such consents and approvals or that the Entegris Transaction will be completed in a timely manner or at all. Many of the conditions to completion of the Entegris Transaction are not within either our or Entegris’ control, and we cannot predict when or if these conditions will be satisfied (or waived, as applicable). Even if regulatory approval is obtained, it is possible conditions will be imposed that could result in a material delay in, or the abandonment of, the Entegris Transaction or otherwise have an adverse effect on us.

If the Entegris Transaction is not completed within the expected timeframe or at all, we may be subject to a number of material risks. The price of our common stock may decline to the extent that current market prices reflect a market assumption that the Entegris Transaction will be completed. In addition, some costs related to the Entegris Transaction must be paid whether or not the Entegris Transaction is completed, and we have incurred, and will continue to incur, significant costs, expenses and fees for professional services and other transaction costs in connection with the proposed transaction, as well as the diversion of management and resources towards the Entegris Transaction, for which we will have received little or no benefit if completion of the Entegris Transaction does not occur. We may also experience negative reactions from our investors, employees, customers, suppliers, vendors, strategic partners or others that deal with us.

THE ANNOUNCEMENT AND PENDENCY OF THE ENTEGRIS TRANSACTION COULD ADVERSELY AFFECT OUR BUSINESS, RESULTS OF OPERATIONS, FINANCIAL CONDITION, AND THE MARKET PRICE OF OUR COMMON STOCK

The announcement and pendency of the Entegris Transaction could cause disruptions in and create uncertainty surrounding our business, which could have an adverse effect on our business, results of operations, financial condition and the market price of our common stock. These risks to our business include the following, all of which could be exacerbated by a delay in the completion of the Entegris Transaction: (i) the effect of restrictions placed on us and our subsidiaries’ ability to operate our businesses under the Merger Agreement, including our ability to pursue alternatives to the proposed transaction as further described below; (ii) the risk of disruption resulting from the proposed transaction, including the diversion of our management’s attention from ongoing business operations; (iii) the effect of the announcement of the proposed transaction on our ability to retain and hire employees; (iv) the effect of the announcement of the proposed transaction on our business relationships, operating results and businesses generally; (v) the occurrence of any event giving rise to the right of a party to terminate the Merger Agreement; and (vi) the effect of any legal proceedings that may be instituted against us related to the Entegris Transaction as further described below.

THE MERGER AGREEMENT CONTAINS PROVISIONS THAT COULD DISCOURAGE OR DETER A POTENTIAL COMPETING ACQUIRER THAT MIGHT BE WILLING TO PAY MORE TO EFFECT A BUSINESS COMBINATION WITH US

Unless and until the Merger Agreement is terminated in accordance with its terms, subject to certain specified exceptions, we are not permitted to solicit, seek, initiate or knowingly facilitate or knowingly encourage any inquiries regarding, or the making of, or any submission or announcement of a proposal or offer that constitutes, or would reasonably be expected to lead to, any acquisition proposal or engage in, continue or otherwise participate in any discussions or negotiations regarding, or furnish to any other person any non-public information in connection with or for the purpose of encouraging or facilitating, any acquisition proposal or any inquiry or proposal that could reasonably be expected to lead to an acquisition proposal.

These provisions could discourage a potential competing acquirer from considering or proposing an acquisition or merger, even if it were prepared to pay consideration with a higher value than that implied by the merger consideration.

CMC WILL INCUR SIGNIFICANT TRANSACTION-RELATED AND INTEGRATION COSTS IN CONNECTION WITH THE ENTEGRIS TRANSACTION

We have incurred and expect to incur a number of non-recurring costs associated with combining our operations with that of Entegris, as well as transaction fees and other costs related to the Entegris Transaction. These costs and expenses include fees paid to financial, legal and accounting advisors, facilities and systems consolidation costs, severance and other potential employment-related costs, including retention and severance payments that may be made to certain CMC employees, filing fees, printing expenses and other related charges. Some of these costs are payable by us regardless of whether the Entegris Transaction is completed.

The combined company will also incur integration costs in connection with the merger. There are a large number of processes, policies, procedures, operations, technologies and systems that must be integrated in connection with the merger and the integration of the two companies’ businesses. Although we expect that the elimination of duplicative costs, strategic benefits, additional income as well as the realization of other efficiencies related to the integration of the businesses may offset incremental transaction-related and integration costs over time, any net benefit may not be achieved in the near term or at all. Many of these costs will be borne by us even if the merger is not completed. While we have assumed that certain expenses would be incurred in connection with the Entegris Transaction and the other transactions contemplated by the Merger Agreement, there are many factors beyond our control that could affect the total amount or the timing of the integration and implementation expenses.

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LITIGATION RELATING TO THE ENTEGRIS TRANSACTION HAS BEEN FILED AGAINST US AND OUR BOARD OF DIRECTORS, AND ADDITIONAL LITIGATION MAY BE FILED AGAINST US AND OUR BOARD OF DIRECTORS IN THE FUTURE, WHICH COULD PREVENT OR DELAY THE COMPLETION OF THE ENTEGRIS TRANSACTION OR RESULT IN THE PAYMENT OF DAMAGES

Litigation relating to the Entegris Transaction has been filed against us and our board of directors, and though we believe we have mooted all claims that were filed it is possible that additional litigation by our stockholders may be filed against us and our board of directors in the future. The outcome of any litigation is uncertain and any such lawsuits could prevent or delay the completion of the Entegris Transaction and may be costly and distracting to our management.

RISKS RELATING TO OUR BUSINESS, STRATEGY AND OPERATIONS

OUR BUSINESS AND RESULTS OF OPERATIONS MAY CONTINUE TO BE ADVERSELY AFFECTED BY THE ONGOING CORONAVIRUS (COVID-19) PANDEMIC AND RELATED ADVERSE IMPACT TO WORLDWIDE ECONOMIC AND INDUSTRY CONDITIONS

The global impact of the Pandemic, which has created significant volatility, uncertainty and economic disruption across the world and in the countries and locations in which we and our customers and suppliers operate, ~~which~~ continues in varying degrees and locations, especially in places experiencing low vaccination rates and/or the spread of ~~variants~~variants of the COVID-19 ~~virus. In the second half of our fiscal year 2020, businesses in~~virus. Overall, our Electronic Materials segment has remained generally stable throughout the Pandemic, and ~~showed some strengthening~~strengthened through ~~the~~fiscal 2020 and 2021 and into our first ~~three~~and second quarters of fiscal ~~2021,~~2022, with increased demand conditions from the prior year in each of our Electronic Materials businesses, despite the ongoing nature of the Pandemic. With respect to our Performance Materials segment, while the Pandemic has had a significant adverse impact on our Performance Materials’ PIM business, which ~~was most pronounced~~first appeared during the second half of our fiscal ~~year~~ 2020 ~~continuing into the~~and continued through our first ~~half~~quarter of ~~our~~ fiscal ~~year 2021,~~2022, as the demand for drag reducing agents (“DRAs”) declined significantly due to the ongoing dislocation in the energy sector caused by the ~~Pandemic. Although this business has returned to sequential growth~~Pandemic, demand for our PIM products strengthened significantly in our ~~third~~second quarter of fiscal ~~2020,~~2022. Despite the improvement in demand conditions to date in fiscal 2022 year over year and sequentially, recovery has been lower than anticipated, and ~~as described in Note 7 of this Report on Form 10-Q,~~ certain factors such as inflationary costs related to itraw materials continue to adversely affect the PIM reporting unit. The extent to which the ongoing Pandemic may further impact our business, operations, results of operations and financial condition is uncertain and difficult to estimate, and depends on numerous evolving factors that we may not be able to accurately predict, which may include: ~~An additional decrease in short-term and long-term demand and pricing for our products and services, and~~ an ongoing adverse global economic ~~recession~~environment with respect to inflationary pressures and supply chain dislocations that could further reduce demand and/or pricing for our products and services; Disruptions to our supply chain in connection with the sourcing of or pricing for materials, equipment and logistics or other services and support necessary to our business as a longer term result of the Pandemic and efforts to contain the spread of the Pandemic; Adverse impacts on our business and those of our customers resulting from renewed actions taken by governments, businesses, or the general public in an effort to limit exposure to and spread of such infectious diseases, such as ~~ongoing or~~ renewed travel restrictions, quarantines, and business shutdowns or slowdowns; Negative impacts to our operations, including reductions in production levels, research and development (“R&D”) activities, and qualification activities with our ~~customers,~~customers; and, increased costs resulting from our efforts to mitigate the impact of the Pandemic through additional or continued social-distancing measures we have enacted at our locations around the world in an effort to protect our employees’ health and well-being (including working from home, reducing the number of employees or others in our sites at any one time and how such individuals perform work while at our sites, redesigning or adjusting our manufacturing, R&D and office facilities, and suspending or limiting employee travel); Deteriorationdeterioration of worldwide credit and financial markets that could limit our ability to obtain external financing to fund our operations and capital expenditures, result in losses on our holdings of cash and investments due to failures of financial institutions and other parties, and result in losses on our accounts receivables due to credit defaults or our customers’ inability to pay; and, Disruptions to our supply chain in connection with the sourcing of or pricing for materials, equipment and logistics or other services and support necessary to our business as a result of the Pandemic and efforts to contain the spread of the Pandemic. Although the rollout of vaccination programs in the U.S., Europe, parts of Asia and other places in which we operate is encouraging with respect to the containment and abatement of the Pandemic, limited availability of vaccines in certain places and/or low vaccination rates, contributes to ongoing uncertainty with respect to the Pandemic’s impact on our business and operations, and the resumption of what was previously considered normal business operations after such interruption also remains uncertain, and may be further delayed or constrained by lingering effects of the Pandemic on our Company and our customers, suppliers, and third-party service providers.pay. These effects, alone or taken together, could have a material adverse effect on our business, results of operations, legal exposure, or financial ~~condition; an example of such effect is the impairment charge related to our PIM business described in Note 7 of this Report on Form 10-Q.~~condition. A further sustained or prolonged outbreak or return of the Pandemic in the places in which we do business, such as that seen in the spread of variants of the COVID-19 virus ~~in Europe~~through our first and ~~parts of Asia, as well as the U.S., during the first three~~second quarters of ~~our~~ fiscal ~~2021,~~2022, could exacerbate the adverse impact of such measures on our Company.

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DEMAND FOR OUR PRODUCTS FLUCTUATES AND OUR BUSINESS MAY BE ADVERSELY AFFECTED BY WORLDWIDE ECONOMIC, INDUSTRY AND OTHER CONDITIONS

Our business is affected by economic and industry conditions, such as those still being adversely affected by the Pandemic, and the majority of our revenue derives from our Electronic Materials segment, which is primarily dependent upon semiconductor industry demand. With respect to our Electronic Materials segment, historically, semiconductor industry demand has fluctuated due to economic and industry cycles and seasonal shifts in demand, which can affect our business, causing demand for our electronic materials products to fluctuate. For example, prior to the Pandemic, the relatively soft demand conditions in the semiconductor industry that had commenced in our second fiscal quarter of 2019 and continued into our first fiscal quarter of 2020 had begun to ameliorate in the beginning of the second fiscal quarter of 2020. While our Electronic Materials segment experienced relatively stable conditions during the second half of fiscal 2020 and ~~has showed strengthening~~strengthened through ~~the~~fiscal 2021 and our first ~~three~~and second quarters of fiscal ~~2021,~~2022, uncertainty remains as to ~~the second half of calendar 2021~~our fiscal 2022 demand conditions for the semiconductor industry given the ~~ongoing nature~~continued impact of the Pandemic, albeit ameliorating, and related macroeconomic and geopolitical challenges such as those occasioned by Russia’s invasion of Ukraine and the resulting ongoing conflict, including inflationary pressures, supply chain and logistics challenges, as well as related including supply constraints at some of our customers serving certain areas, such as the automotive and industrial sectors. Furthermore, competitive dynamics within the semiconductor industry may impact our

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business. Our limited visibility to future customer orders makes it difficult for us to predict industry trends, especially during unusual adverse circumstances, such as the ~~Pandemic.~~Pandemic and related macroeconomic and geopolitical factors. If the global economy or the semiconductor industry does not continue to improve or weakens again, whether in general or as a result of the Pandemic or other specific factors, such as macroeconomic factors, or unpredictable events such as natural disasters, geopolitical conditions such as those related to Russia’s invasion of Ukraine and the ongoing conflict, and international trade tensions, civil unrest, or additional global health crises, we could experience material adverse impacts on our results of operations and financial condition. Some additional factors that may affect demand for our electronic materials products include: demand trends for different types of electronic devices such as logic versus memory integrated circuit (“IC”) devices, or digital versus analog IC devices; the various technology nodes at which those products are manufactured; customers' efficiencies in the use of CMP consumables and/or high-purity process chemicals (“electronic chemicals”); customers’ device architectures and specific manufacturing processes; the short order to delivery time for our products; quarter-to-quarter changes in customer order patterns; market share and competitive gains and losses; and pricing changes by us and our competitors.

As to our Performance Materials segment, although demand for our PIM products increased in the first and second quarters of fiscal 2022, our PIM business ~~saw sequential and year-over-year revenue growth in our third quarter of fiscal 2021, it~~ may ~~continue to~~ be further impacted by changes in the ~~utilities and/or~~ oil and gas industries, such as ~~we have seen since~~ the ~~second half of our fiscal 2020 and through our first three quarters of fiscal 2021 resulting from~~ ongoing significant dislocation in these industries caused by the ~~Pandemic.~~Pandemic and supply chain related challenges. Expectations about future prices and price volatility in the sector, which affect our customers’ activity levels, are important in determining future spending levels for customers of our PIM products and services. The ongoing volatility in worldwide oil and natural gas prices and markets are an example of historical volatility in this sector, and such volatility is likely to continue in the future. As is currently the case, prices for oil and natural gas are subject to wide fluctuations in response to relatively minor or major changes in the supply of and demand for oil and natural gas, market uncertainty and a variety of additional factors that are beyond our control. These factors include, but are not limited to, decreases or increases in supplies from U.S. shale production or other oil production, geopolitical conditions, including ~~uprisings, civil unrest,~~armed conflict such as Russia’s invasion of Ukraine and international trade tensions, sovereign debt crises, the domestic and foreign supply of oil and natural gas, the level of consumer demand due to economic growth or contraction such as seen related to the Pandemic, and related factors in countries such as China, weather conditions, domestic and foreign governmental regulations and taxes, the price and availability of alternative fuels, the health of international economic and credit markets, the ability of the members of the Organization of the Petroleum Exporting Countries and other state-controlled oil companies to agree upon and maintain oil price and production controls, and general economic conditions, such as those currently seen ~~related to~~arising from the Pandemic.

Further, adverse global economic, industry and other conditions ~~such as those related to the Pandemic~~ could have other negative effects on our Company. For instance, we could experience negative impacts on cash flows due to the inability of our customers to pay their obligations to us, or our production processes and profitability could be harmed if our suppliers significantly raise their prices, or cannot fulfill their obligations, to us. As a result of these or other conditions, and as experienced in the second quarter of our ~~second~~ fiscal ~~quarter~~year 2021 with the impairment charge we took in our PIM business unit, further described in Note 79 of ~~this~~“Notes to the Consolidated Financial Statements” included in Item 8 of Part II of our Annual Report on Form ~~10-Q,~~10-K for the fiscal year ended September 30, 2021, we also might have to further reduce the carrying value of goodwill and other intangible assets, which could harm our financial position and results of operations.

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WE MAY PURSUE ACQUISITIONS OF, INVESTMENTS IN, AND MERGERS OR STRATEGIC ALLIANCES WITH OTHER ENTITIES, WHICH COULD DISRUPT OUR OPERATIONS AND HARM OUR OPERATING RESULTS IF THEY ARE UNSUCCESSFUL, OR WE MAY ENCOUNTER UNANTICIPATED ISSUES IN IMPLEMENTING THEM

We expect to continue to make investments in technologies, assets and companies, either through acquisitions, mergers, investments or alliances, in order to supplement our organic growth and development efforts. Acquisitions, mergers, and investments, including the acquisition of KMG, which we completed in November 2018, and the Acquisition, which we completed in April 2021, involve numerous risks, including the following: difficulties and risks in integrating the operations, technologies, digital and physical security, compliance programs, products and personnel of acquired companies; difficulties and risks from unanticipated issues arising subsequent to a transaction related to the other entity; potential disruption of relationships with third parties such as customers or suppliers; diversion of management's attention from normal daily operations of the business; increased risk associated with foreign operations including exposure to new rules, regulations, customs and workforce

expectations; potential difficulties and risks in entering markets or industries in which we have limited or no direct prior experience and/or where competitors have stronger positions; potential difficulties and unexpected situations arising in operating new businesses with different business models, facilities and operations; potential difficulties with regulatory or contract compliance in areas in which we have limited or no experience; initial dependence on unfamiliar supply chains or relatively small supply partners; insufficient revenue to offset increased expenses associated with acquisitions; potential loss of key employees of the acquired companies; or inability to effectively cooperate and collaborate with our alliance partners.

Further, we may never realize the perceived or anticipated benefits of a business combination or merger with, or asset or other acquisition of, or investments in, other entities. Transactions such as the acquisitions of KMG and ITS could and in some cases have had negative effects on our results of operations, in areas such as contingent liabilities, gross margins, amortization charges related to intangible assets and other effects of accounting for the purchases of other business entities. Investments in and acquisitions of technology-related or early-stage companies or assets are inherently risky because these businesses or assets may never develop, and we may incur losses related to these investments.

In addition, we may be required to impair the carrying value of these acquisitions or investments to reflect other than temporary declines in their value. The carrying value of goodwill represents the fair value of acquired businesses in excess of identifiable assets and liabilities as of the acquisition date. The carrying value of other intangible assets represents the fair value of customer relationships, tradenames and other acquired intangible assets as of the acquisition date. Goodwill and other acquired intangible assets expected to contribute indefinitely to our cash flows are not amortized, but must be evaluated for impairment by management at least annually. If the carrying value exceeds the implied fair value of goodwill, the goodwill is considered impaired and is reduced to fair value via a non-cash charge to earnings. If the carrying value of an indefinite-lived intangible asset is greater than its fair value, the intangible asset is considered impaired and is reduced to fair value via a non-cash charge to earnings. If the value of goodwill or other acquired intangible assets is impaired, our results of operations and financial condition could be adversely affected. Examples of asset impairment charges we recently incurred include the charge we took in the second quarter of fiscal 2021 related to the PIM business unit and the charge we took in each the fourth quarter of fiscal 2019, the fourth quarter of fiscal 2020, and the first three quarters of fiscal 2021 related to the KMG wood treatment business. We expect that the carrying value of the wood treatment reporting unit will not be recoverable, resulting in future impairments of goodwill. The amount of such impairments could be material and could adversely affect our results of operations and financial condition. See Notes 7 and 8 of “Notes to the Consolidated Financial Statements” of this Report on Form 10-Q for additional discussion.

Furthermore, the integration of the acquired businesses into our operations is a complex and time-consuming process that may not be successful. Our Company has a limited history of integrating significant acquisitions, and the process of integration may produce unforeseen operating difficulties and expenditures. As demonstrated in the acquisitions of KMG and ITS, the primary areas of focus for successfully combining those businesses with our operations may include and have included, among others: retaining and integrating key employees; realizing synergies; aligning customer and supplier interfaces, and operations across the combined business; integrating enterprise resource planning and other information technology systems; and, managing the growth of the combined company. Even if we successfully integrate an acquired business into our operations, there can be no assurance that we will realize the anticipated benefits of such acquisition.

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WE HAVE A CONCENTRATED PRODUCT RANGE WITHIN EACH OF OUR SEGMENTS AND OUR PRODUCTS MAY BECOME OBSOLETE, OR TECHNOLOGICAL CHANGES MAY REDUCE OR LIMIT INCREASES IN THE CONSUMPTION OF OUR PRODUCTS

Although our product offerings have expanded over the past several years, including as a result of the acquisitions of KMG and ITS, our business remains substantially dependent on products in our Electronic Materials segment, such as CMP slurries, pads and electronic chemicals, and materials technologies, which account for the majority of our revenue. The product offerings in our Performance Materials segment are similarly concentrated. As such, our business would suffer if these products became obsolete or if consumption of these products decreased. Our success depends on our ability to keep pace with technological changes and advances in the industries in which we operate, particularly the semiconductor industry, to adapt, improve and customize our products in response to evolving customer needs and industry trends, and to differentiate our products

from those of our competitors. Since its inception, the semiconductor industry, which is the largest industry in which we operate, has experienced technological changes and advances in the design, manufacture, performance and application of IC devices. Our customers continually pursue lower cost of ownership and higher quality and performance of materials consumed in their manufacturing processes, including products in our Electronic Materials business segment, as a means to reduce costs, increase the yield in their manufacturing facilities, and achieve desired performance of the IC devices they produce. We expect these technological changes, and this drive toward lower costs, higher quality and performance and higher yields, will continue in the future. Potential technology developments in the semiconductor industry, as well as our customers' efforts to reduce consumption of CMP consumables, including through use of smaller quantities, could render our products less important to the IC device manufacturing process.

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A SIGNIFICANT AMOUNT OF OUR BUSINESS COMES FROM A LIMITED NUMBER OF LARGE CUSTOMERS AND OUR REVENUE AND PROFITS COULD DECREASE SIGNIFICANTLY IF WE LOST ONE OR MORE OF THESE CUSTOMERS OR BUSINESS FROM THEM

Our customer base is concentrated among a limited number of large customers in each of our segments. Currently, our principal business supplies electronic materials primarily to the semiconductor industry. The semiconductor industry has been consolidating as the larger semiconductor manufacturers have generally grown faster than the smaller ones, through business gains, mergers and acquisitions, and strategic alliances. Industry analysts predict that this trend will continue, which means the semiconductor industry will continue to be comprised of fewer and larger participants in the future if their prediction is correct. In addition, our customer base in our PIM business is also somewhat concentrated, with large entities predominant, and outside of the U.S., these entities frequently are state-owned or sponsored, and limited in number per country. One or more of these principal customers could stop buying products from us or could substantially reduce the quantity of products purchased from us. Our principal customers in both our segments also hold considerable purchasing power, which can impact the pricing and terms of sale of our products. Any deferral or significant reduction in the quantity or price of products sold to these principal customers, an inability to raise prices to address cost pressures or otherwise, or a

weakening of the financial condition of or failure to perform contractual obligations by one of these principal customers, could significantly harm our business, financial condition and results of operations.

ANY PROBLEM OR DISRUPTION IN OUR SUPPLY CHAIN, INCLUDING SUPPLY OF OUR MOST IMPORTANT RAW MATERIALS, OR IN OUR ABILITY TO MANUFACTURE OR DELIVER OUR PRODUCTS TO OUR CUSTOMERS, COULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS

We depend on our supply chain to enable us to meet the demands of our customers. Our supply chain includes the raw materials we use to manufacture our products, our production operations and the means by which we deliver our products to our customers. Our business could be adversely affected by any problem or interruption in the supply of the key raw materials we use in our products, including raw materials that do not meet the stringent quality and consistency requirements of our customers, any problem or interruption that may occur during production or delivery of our products, such as weather-related problems, natural disasters, logistics challenges, global public health crises such as the ongoing Pandemic, geopolitical issues such as those related to Russia’s invasion of Ukraine and the ongoing conflict, trade or labor-related issues, civil unrest, or any difficulty in producing sufficient quantities of our products to meet growing demand from our customers. In particular, natural disasters and severe weather conditions have the potential to adversely affect our operations, damage facilities and increase our costs, and those conditions may also have an indirect effect on our operations by disrupting services provided by service companies or suppliers with whom we have a business relationship. Additionally, some of our full-time employees are represented by labor unions, works councils or comparable organizations, particularly in ~~Mexico and~~ Europe. An extended work stoppage, slowdown or other action by our employees could significantly disrupt our business. As our current agreements with labor unions and works councils expire, we cannot provide assurance that new agreements will be reached at the end of each period without union action, or that a new agreement will be reached on terms satisfactory to us. Future labor contracts may be on terms that result in higher labor costs to us, which also could adversely affect our results of operations. ~~Our~~As experienced in the second half of our fiscal 2021 and ongoing through the first half of our fiscal 2022, our supply chain may also be negatively impacted by unanticipated price increases due to factors such as inflation or to supply restrictions beyond the control of our Company or our raw materials suppliers, such as those related to or arising from the Pandemic.

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We believe it would be difficult to promptly secure alternative sources of key raw materials in the event one of our suppliers becomes unable to supply us with sufficient quantities of raw materials that meet the quality and technical specifications required by us and our customers, or the costs of such raw materials increase in an untenable manner. Requalifying and/or transferring our sourcing to a new supplier would likely result in manufacturing delays and additional costs. In addition, new contract terms, forced production or manufacturing changes, contractual amendments to existing agreements with, or non-performance by, our suppliers, including any significant financial distress our suppliers may suffer, could adversely affect us. Also, if we change the supplier or type of key raw materials we use to make our products, in particular our electronic materials products, or are required to purchase them from a different manufacturer or manufacturing facility or otherwise modify our products, in certain circumstances our customers might have to requalify our products for their manufacturing processes and products. The requalification process could take a significant amount of time and expense to complete and could occupy technical resources of our customers that might otherwise be used to evaluate our new products, thus delaying potential revenue growth, or motivate our customers to consider purchasing products from our competitors, possibly interrupting or reducing our sales of products to these customers, especially sales of our electronic materials products to our semiconductor industry customers, but also with respect to our PIM products to our pipeline and adjacent industry customers. In addition, government authorities in the foreign countries in which we operate may require or incentivize the use of local suppliers that are our competitors, which could adversely impact our business, including our results of operations.

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OUR BUSINESS COULD BE ADVERSELY IMPACTED IF WE ARE NOT SUCCESSFUL IN ACHIEVING TARGETED SAVINGS AND EFFICIENCIES FROM COST REDUCTION INITIATIVES

To mitigate cost challenges and improve our business and financial performance, we have initiated an enterprise-wide cost optimization program, called “Future Forward,” designed to reduce expenses and enhance operational efficiencies. The Future Forward Program has and may include position eliminations, location rationalization, and reductions in outside services and discretionary spending, as well as other actions to reduce costs. We may not realize anticipated cost savings or other benefits from such initiatives, whether at all or according to timetables we have established. If we are unable to realize the anticipated benefits, our ability to fund other initiatives may be adversely affected, and failure to implement these initiatives in accordance with our plans could adversely affect our business.

OUR BUSINESS COULD BE SERIOUSLY HARMED IF OUR COMPETITORS DEVELOP COMPETITIVE PRODUCTS, OFFER BETTER PRICING, SERVICE OR OTHER TERMS, OR OBTAIN OR ASSERT CERTAIN INTELLECTUAL PROPERTY RIGHTS

Competition from other electronic materials or performance materials providers or any new entrants could seriously harm our business and results of operations, and this competition could continue to increase. Competition has and will likely continue to impact the prices we are able to charge for our products, as well as our overall business. In addition, our competitors could have, obtain or assert intellectual property rights that could affect or restrict our ability to market our existing products and/or to innovate and develop new products, thus increasing our costs of doing business, could attempt to introduce products similar to ours following the expiration of our patents, or could attempt to introduce products that do not fall within the scope of our intellectual property rights.

WE ARE SUBJECT TO RISKS ASSOCIATED WITH OUR INTERNATIONAL OPERATIONS

We currently have operations and a large customer base outside the U.S. Approximately ~~65%~~68% of our revenue was generated by sales to customers outside the U.S. for the fiscal year ended September 30, ~~2020.~~2021. We may encounter risks in doing business in certain countries other than the U.S., including, but not limited to, adverse changes in economic and political conditions, both in foreign locations and in the U.S. with respect to non-U.S. operations of U.S. businesses like ours, geopolitical ~~and/or~~issues such as those related to Russia’s invasion of Ukraine and the ongoing conflict, trade tensions, global health crises such as the ongoing Pandemic, civil unrest, fluctuation in exchange rates, changes in international trade requirements and sanctions and/or tariffs that affect our business and that of our customers and suppliers, compliance with a variety of foreign laws and regulations and related audits and investigations, as well as difficulty in enforcing business and customer contracts and agreements, including protection of intellectual property rights. We also may encounter risks that we may not be able to repatriate additional earnings from our operations outside of the U.S., derive anticipated tax benefits of these operations or recover the investments made in them, whether due to regulatory or policy changes in the U.S. or in the countries outside of the U.S. in which we do business, or other factors.

In particular, China continues to be an important market for the semiconductor industry, and an area of continued potential growth for us. As business between China and the rest of the world has continued to grow, there is risk that geopolitical, political, diplomatic and national security factors, changes in U.S. and foreign laws and regulations, the imposition of trade restrictions, tariffs and taxes, and global public health crises such as the Pandemic could adversely affect business for companies like ~~ours based on~~ours. This is due in significant part to the complex relationships among China, the U.S., and other countries, especially those in the Asia Pacific region, ~~or elsewhere,~~such as Taiwan, which also is important to our Company with respect to our customers as well as our operations, which could have a material adverse impact on our business. In addition, there are risks that the Chinese government may, among other things, require the use of local suppliers, compel companies that do business in China to partner with local companies to conduct business, or, provide incentives to government-backed local customers to buy from local suppliers rather than companies like ours, all of which could adversely impact our business, including our results of operations. Also, as ~~has been~~ seen ~~over our last fiscal year and through~~in the ~~first three quarters of fiscal 2021,~~past several years, there are risks that the U.S. government may impose additional export restrictions on technology and products that companies that operate in the semiconductor industry supply to or use in China, which could adversely impact our business and our results of operations.

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In addition, we have operations and customers located in the United Kingdom, which ~~recently has~~ exited the European Union (“EU”). As the transitional provisions under which the United Kingdom and the EU had agreed to operate expired at the end of December 2020, and the parties are still in the process of implementing new trade agreements, the related impacts on our business remain unclear.

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LEGAL, COMPLIANCE AND REGULATORY RISKS

WE ARE SUBJECT TO EXTENSIVE ENVIRONMENTAL LAWS AND REGULATIONS AND MAY INCUR COSTS THAT HAVE AN ADVERSE EFFECT ON OUR FINANCIAL CONDITION AS A RESULT OF VIOLATIONS OF OR LIABILITIES UNDER THEM

Like other companies involved in environmentally sensitive businesses, our operations and properties are subject to extensive and stringent federal, state, local and foreign Environmental, Health and Safety (“EHS”) laws and regulations, including those concerning, among other things:

•the marketing, sale, use and registration of our chemical products, such as ~~penta,~~pentachlorophenol (“penta”), which is part of the wood treatment business in our Performance Materials segment;

•the treatment, storage and disposal of wastes;

•the investigation and remediation of contaminated media including but not limited to soil and groundwater;

•the discharge of effluents into waterways;

•the emission of substances into the air; and

•other matters relating to environmental protection and various health and safety matters.

The United States EPA and other federal and state agencies in the U.S., as well as comparable agencies in other countries where we have facilities or sell our products, ~~such as Canada or Mexico,~~ have the authority to promulgate regulations that could have a material adverse impact on our operations. These EHS laws and regulations may require permits for certain types of operations, require the installation of expensive pollution control equipment, place restrictions upon operations or impose substantial liability for pollution and other EHS concerns resulting from our operations. Compliance with EHS laws and regulations has resulted in ongoing costs for us and could restrict our ability to modify or expand our facilities, continue production, require us to install costly ~~pollution~~emission control equipment, or incur significant other expenses, including environmental compliance costs. We continue to manage environmental compliance activities at certain sites, such as at KMG-Bernuth’s Tuscaloosa, Alabama facility as described in Note 2019 of “Notes to the Consolidated Financial Statements” included in Item 8 of Part II of our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2020.~~2021 and in Note 13 of Part 1 of this Report on Form 10-Q. We have incurred, and expect to continue to incur, significant costs to comply with EHS laws or to address liabilities for contamination resulting from past or present operations. Federal, state and foreign governmental authorities may seek fines and penalties, as well as injunctive relief, for violation of EHS laws and regulations, and could, among other things, impose liability on us to cleanup or ~~mitigate environmental,~~to respond to potential damages to the environment or natural resources ~~or other damages~~ resulting from a release of pesticides, hazardous materials or other chemicals into the environment. We maintain insurance coverage for sudden and accidental environmental pollution or damages. We do not believe that insurance coverage for environmental pollution or damage that occurs over time is available at a reasonable cost. Also, we do not believe that insurance coverage for the full potential liability that could be caused by sudden and accidental ~~incidences~~pollution incidents is available at a reasonable cost. Accordingly, we may be subject to an uninsured or under-insured loss in such cases; the KMG-Bernuth warehouse fire, as described in Note 13 of Part 1 of this Report on Form 10-Q, may be such an instance.

The distribution, sale and use of our products is subject to prior governmental approvals and thereafter ongoing governmental regulation: Our products are subject to laws administered by federal, state and foreign governments, including regulations requiring registration, approval and labeling. The labeling requirements restrict the use and type of application for our products. More stringent restrictions could make our products less desirable which would adversely affect our sales and profitability. All venues where our penta products are used also require registration prior to marketing or use.

Governmental regulatory authorities have required, and may require in the future, that certain scientific testing and data production be provided on our products. Under the Federal Insecticide, Fungicide and Rodenticide Act (“FIFRA”), the EPA requires registrants to submit a wide range of scientific data to support U.S. registrations. This requirement significantly increases our Operating expenses, and we expect those expenses will continue in the future while we operate the wood treatment business. Because scientific analyses are constantly improving, we cannot determine with certainty whether or not new or additional tests may be required by regulatory authorities. While good laboratory practice standards specify the minimum ~~practices~~protocols and procedures that must be followed in order to ensure the quality and integrity of data related to these tests submitted to the EPA, there can be no assurance that the EPA will not request certain tests or studies be repeated. In addition, more stringent legislation or requirements may be imposed in the ~~future. Amendments~~future and proposed amendments to the Toxic Substances Control Act could result in increased ~~regulation and required~~regulatory controls , additional testing of chemicals we manufacture and could increase the costs of compliance for our operations. We can provide no assurance that the cost of such compliance will not adversely affect our profitability. Our products could also be subject to other future regulatory action that may result in restricting or completely banning their use which could have an adverse effect on our performance and results of operations.

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1. The Registration, Evaluation and Authorization of Chemicals (“REACH”) legislation may affect our ability to manufacture and sell certain products in the EU: REACH requires chemical manufacturers and importers in the EU to prove the safety of their products. We were required to pre-register certain products and file comprehensive reports, including testing data, on each chemical substance, and perform chemical safety assessments. Additionally, substances of high concern are subject to an authorization process. Authorization may result in restrictions on certain uses of products or even prohibitions on the manufacture or importation of products. The full registration requirements of REACH have been phased in over several years, and we have incurred additional expense to cause the registration of our products under these regulations. REACH may also affect our ability to import, manufacture and sell certain products in the EU. In addition, other countries and regions of the world already have or may adopt legislation similar to REACH that affect our business, affect our ability to import, manufacture or sell certain products in these jurisdictions, and have required or will require us to incur increased costs.

2. The classification of penta as a Persistent Organic Pollutant (“POP”) under the Stockholm Convention ~~may~~ adversely ~~affect~~affected our ability to manufacture or sell our penta ~~products: The Conference~~products and completed our exit of this business in the ~~Parties (“COP”) accepted the recommendation~~second quarter of the United Nations Persistent Organic Pollutant Review Committee that the use of penta should be banned except that its use for the treatment of utility poles and crossarms could continue for an extended period of five to ten years. KMG-Bernuth supplies penta to industrial customers who use it primarily to treat utility poles and crossarms. The U.S. is not bound by the determination of the COP because it did not ratify the Stockholm Convention treaty. Canada and Mexico are governed by the treaty. KMG-Bernuth’s sole penta manufacturing facility is located in Matamoros, Mexico, and its processing facility is located in Tuscaloosa, Alabama. As a result of the classification of penta as a POP, the Mexican government requires KMG-Bernuth to cease producing penta in Mexico by the end of calendar year 2021. In July 2020, the Canadian government released a proposed order that sales and use of penta in Canada be ceased, but such proposed order is subject to a comment period and is not final, and no timing for any such order, if implemented, has been proposed. In March 2021, the EPA issued a preliminary interim registration review decision(“PID”) proposing the cancellation of penta registration and implementation of a five-year phase-out period for production and sell-through of penta stocks. We do not believe the PID or the Canadian government proposed order have a significant adverse effect on our business since in July 2019, KMG-Bernuth had communicated that we did not intend to continue the wood treatment business past approximately the end of calendar year 2021.fiscal 2022. We took a restructuring charge in our fourth fiscal quarter of 2019, and asset impairment charges in each the fourth quarter of fiscal 2019, the fourth quarter of fiscal 2020, each of our ~~fourth fiscal quarters of 2020 and 2019, as well as our first three fiscal~~ quarters of fiscal 2021, and the first quarter of fiscal 2022, related to the decisions to close ~~the Matamoros and Tuscaloosa~~our wood treatment facilities and to ~~not build a new plant,~~exit the wood treatment business, as described further in Note 8 of Part 1 of this Report on Form ~~10-Q. We expect to take additional impairment charges related~~10-Q and in Note 10 of “Notes to the ~~wood treatment business periodically as we approach~~Consolidated Financial Statements” included in Item 8 of Part II of our Annual Report on Form 10-K for the ~~closure dates of the facilities.~~fiscal year ended September 30, 2021. No assurance can be given that we will not incur significant expenditures in connection with ~~closing the facilities, or that the ultimate action~~completing closure of the ~~COP and our related decisions will not adversely impact on our financial condition and results of operation.~~wood treatment facilities.

3. Our use of hazardous materials exposes us to potential liabilities: Our manufacturing and distribution of chemical products, such as our electronic chemicals, involves the controlled use of hazardous materials. Our operations, therefore, are subject to various associated risks, including chemical spills, discharges or releases of toxic or hazardous substances or gases, fires, mechanical failure, storage facility leaks and similar events. Our suppliers are subject to similar risks that may adversely impact the availability of raw materials. While we adapt our manufacturing and distribution processes to the environmental control standards of regulatory authorities, we cannot completely eliminate the risk of accidental contamination or injury from hazardous or regulated materials, including injury of our employees, individuals who handle our products or goods treated with our products, or others who claim to have been exposed to our products, nor can we completely eliminate the unanticipated interruption or suspension of operations at our facilities due to such events. We may be held liable for significant damages or fines in the event of contamination or injury, and such assessed damages or fines could have an adverse effect on our financial performance and results of operations.

CURRENT OR FUTURE CLIMATE CHANGE REGULATIONS COULD RESULT IN INCREASED OPERATING COSTS AND REDUCED DEMAND FOR OUR PRODUCTS

The U.S. has ~~recently~~ rejoined the Paris Climate Accord but to date, has not ratified the Kyoto Protocol. The Clean Air Act has been interpreted to regulate greenhouse gas (“GHG”) emissions and the EPA is using its existing regulatory authority to develop regulations requiring reduction in GHG emissions from various categories of sources, such as when a permit is required due to emissions of other pollutants. Because of the lack of any comprehensive legislation program addressing GHGs, a number of U.S. federal laws related to GHG emissions have been considered by the U.S. Congress from time to time and various state, local and regional regulations and initiatives have been enacted or are being considered related to GHGs.

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Member States of the EU each have an overall cap on emissions, which are approved by the European Commission, and implement the EU Emissions Trading Directive as a commitment to the Kyoto Protocol. GHG emissions are regulated by Member States through the EU Emission Trading System and the EU Effort Sharing Decision/Regulation depending upon the industry sector. Organizations apply to the Member State for an allowance of GHG emissions. These allowances are tradable so as to enable companies that manage to reduce their GHG emissions to sell their excess allowances to companies that are not reaching their emissions objectives. Failure to purchase sufficient allowances will require the purchase of allowances at a current market price.

Any laws or regulations that may be adopted to restrict or reduce emissions of GHGs could cause an increase to our raw material costs, require us to incur increased operating costs, and have an adverse effect on demand for our products and our financial performance and results for our business.

In addition to GHG and climate change regulatory developments and legislation, we are continuing to evaluate and assess the potential impact on our business of the ongoing transition worldwide to a low carbon, resilient economy as well as physical effects resulting from climate change.

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OUR PRODUCTS MAY BE RENDERED OBSOLETE OR LESS ATTRACTIVE BY CHANGES IN INDUSTRY REQUIREMENTS OR BY SUPPLY-CHAIN DRIVEN PRESSURES TO SHIFT TO ENVIRONMENTALLY PREFERABLE ALTERNATIVES

Changes in regulatory, legislative and industry requirements, or changes driven by supply-chain pressures, may shift current customers away from products using penta, products containing hazardous materials, or certain of our other products and toward alternative products that are believed to have fewer environmental effects. The EPA, foreign and state regulators, local governments, private environmental advocacy organizations, investors and investor advisory firms, and a number of large industrial companies have proposed or adopted policies designed to decrease the use of a variety of chemicals, including penta and others included in certain of our products, such as those containing hazardous materials, or to counteract the growth of certain industries such as those in which customers served by our PIM products operate. Our ability to anticipate changes in regulatory, legislative, investor, and industry requirements, or changes driven by supply-chain pressures, may affect our ability to remain competitive. Further, we may not be able to comply with changed or new regulatory or industrial standards that may be necessary for us to remain competitive.

We cannot ~~assure you~~provide assurance that the EPA, foreign and state regulators or local governments will not restrict the uses of ~~penta or~~ certain of our ~~other~~ products, like penta, or ban the use of one or more of these products or the raw materials in them. Similarly, companies who use our products may voluntarily decide to reduce significantly or cease the use of our products. As a result, our products may become obsolete or less attractive to our customers.

GENERAL COMMERCIAL, OPERATIONAL, FINANCIAL AND REGULATORY RISKS

BECAUSE WE RELY ON OUR INTELLECTUAL PROPERTY, OUR FAILURE TO ADEQUATELY OBTAIN OR PROTECT IT COULD SIGNIFICANTLY HARM OUR BUSINESS

Protection of intellectual property is particularly important in the semiconductor industry, which is the primary industry in which we participate, because we develop complex technical formulas and processes for products that are proprietary in nature and differentiate our products from those of our competitors. Our intellectual property is important to our success and ability to compete. We attempt to protect our intellectual property rights through a combination of patent, trademark, copyright and trade secret laws, as well as employee and third-party nondisclosure and assignment agreements. In addition, we protect our product differentiation through various other means, such as proprietary supply arrangements for certain raw materials, and use of certain manufacturing technologies. Due to our international operations, we pursue protection in different jurisdictions, which may provide varying degrees of protection, and we cannot provide assurance that we can obtain adequate protection in each such jurisdiction. Our failure to obtain or maintain adequate protection of our intellectual property rights for any reason, including through the patent prosecution process or in the event of litigation related to such intellectual property, which we pursue when necessary to protect our rights against others who are found to be misusing our intellectual property, could seriously harm our business. In addition, certain types of intellectual property, such as patents, expire after a certain period of time, and products protected by our patents then lose such protection, so we refresh our intellectual property portfolio on an ongoing basis through continued innovation, and failure to do so could adversely affect our business. Also, the costs of obtaining or protecting our intellectual property could negatively affect our operating results.

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OUR INABILITY TO ATTRACT AND RETAIN KEY PERSONNEL COULD CAUSE OUR BUSINESS TO SUFFER

We utilize and rely upon a global workforce. If we fail to attract and retain the necessary managerial, technical and customer support personnel, our business and our ability to maintain existing and obtain new customers, develop new products and provide acceptable levels of customer service could suffer. We compete worldwide with other participants in the industries in which we conduct business for qualified personnel, particularly those with significant experience in the semiconductor and pipeline industries. The loss of services of key employees, or our inability to obtain or maintain visas or other travel or residency documents on their behalf with respect to our business needs, could harm our business and results of operations.

~~BECAUSE WE HAVE LIMITED EXPERIENCE IN BUSINESS AREAS OUTSIDE OF ELECTRONIC MATERIALS AND PERFORMANCE MATERIALS, EXPANSION OF OUR BUSINESS INTO OTHER PRODUCTS AND APPLICATIONS MAY NOT BE SUCCESSFUL~~

An element of our strategy has been to leverage our customer relationships, technological expertise and other capabilities and competencies to expand our business. For example, we have made acquisitions to expand beyond CMP consumables into other electronic materials product areas, as well as into performance materials product areas in which we have limited experience. Expanding our business into new product areas could involve technologies, production processes and business models in which we have limited experience, and we may not be able to develop and produce products or provide services that satisfy customers' needs, or we may be unable to keep pace with technological or other developments. Or, we may decide that we no longer wish to pursue these new business initiatives. Also, our competitors may have or obtain intellectual property rights that could restrict our ability to market our existing products and/or to innovate and develop new products.

~~TAX INCREASES OR CHANGES IN TAX RULES MAY ADVERSELY AFFECT OUR FINANCIAL RESULTS~~

As a company conducting business on a global basis, we are exposed, both directly and indirectly, to effects of changes in U.S., state, local and foreign tax rules. In December 2017, comprehensive tax legislation was enacted in the U.S. under the Tax Act. Known and certain estimated effects based upon current interpretation of the Tax Act have been incorporated into our financial results. Adjustments to income tax amounts could be material to our results of operations and cash flows. In addition, there is a risk that the U.S. state or foreign jurisdictions may amend their tax laws, including the Tax Act or otherwise, which could have a material impact on our future results of operations and cash flows.

CERTAIN CRITICAL INFORMATION SYSTEMS COULD BE SUSCEPTIBLE TO CYBERSECURITY AND OTHER THREATS OR VULNERABILITIES

We maintain and rely upon certain critical information systems for the effective operation of our business. These information systems include, but are not limited to, telecommunications, the Internet, our corporate intranet, various computer hardware and software applications, production control systems, enterprise resource planning systems, network communications, and email. These information systems may be owned and maintained by us, our outsourced providers, or third parties such as vendors, contractors, and Cloud providers. All these information systems are subject to disruption, breach or failure from various sources including, but not limited to, attacks, degradation, and failures resulting from potential sources, including viruses, malware, denial of service, ransomware, destructive or inadequate code, power failures, and physical damage. Confidential and/or sensitive information stored on these information systems, or transmitted to or from Cloud storage, could be intentionally or unintentionally compromised, lost, and/or stolen. While we have implemented security procedures and virus protection software, intrusion

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prevention systems, access control, and emergency recovery processes to mitigate risks like these with respect to information systems that are under our control, they are not fail-safe and may be subject to breaches or failures. Further, we cannot assure that third parties upon whom we rely for various IT services will maintain sufficient vigilance and controls over their systems. Our inability to use or access these information systems at critical points in time, or unauthorized releases of personal or confidential information, could unfavorably impact the timely and efficient operation of our business, including our results of operations, and our reputation, as well as our relationships with our employees or other individuals whose information may have been affected by such cybersecurity incidents.

In addition, regulatory authorities have increased their focus on how companies collect, process, use, store, share and transmit personal data. Privacy security laws and regulations, including the United Kingdom’s Data Protection Act 2018 and the EU General Data Protection Regulation 2016, and similar laws in countries such as Korea and Taiwan, among others, pose increasingly complex compliance challenges, which may increase compliance costs, and any failure to comply with data privacy laws and regulations could result in significant penalties that could adversely affect our business and results of operations.

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~~OUR ABILITY TO RAISE CAPITAL IN THE FUTURE MAY BE LIMITED, WHICH COULD PREVENT US FROM GROWING, AND~~ OUR EXISTING CREDIT AGREEMENT COULD RESTRICT, AND THE MERGER AGREEMENT RESTRICTS, OUR BUSINESS ACTIVITIES

In the future we may be required to raise capital through public or private financing or other arrangements. Such financing may not be available on acceptable terms, or at all, and our failure to raise capital when needed could harm our business. Our Amended Credit Agreement contains financial and other covenants that may restrict our business activities or our ability to execute our strategic objectives, and our failure to comply with these covenants could result in a default under it. ~~Furthermore,~~The Merger Agreement places additional ~~equity financing may dilute the interests of our common stockholders, and debt financing, if available, may involve restrictive covenants that could further restrict~~restrictions on our business activities orand on our ability to ~~execute our strategic objectives and could reduce our profitability. If we~~ raise capital and/or ~~borrow funds on acceptable terms, we may not be able to grow our business or respond to competitive pressures.~~

In addition, borrowings under our Amended Credit Agreement generally bear interest based on (a) a LIBOR, subject to a 0.00% floor, or (b) a base rate in each case, plus an applicable margin of, in the case of borrowings under the Term Loan Facility, 2.00% for LIBOR loans and 1.00% for base rate loans and, in the case of borrowings under the Revolving Credit Facility, initially, 1.50% for LIBOR loans and 0.50% for base rate loans. On July 27, 2017, the Financial Conduct Authority (the authority that regulates LIBOR) announced that it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. In the U.S., the Alternative Reference Rates Committee, the working group formed to recommend an alternative rate to LIBOR, has identified the Secured Overnight Financing Rate as its preferred alternative rate for USD LIBOR. When LIBOR ceases to exist after 2021, any calculation of interest based upon the Alternate Base Rate (or any comparable or replacement formulation), may result in higher interest rates. To the extent that these interest rates increase, our Interest expense will increase, which could adversely affect our financial condition, operating results and cash flows.incur debt.

THE MARKET PRICE FOR OUR COMMON STOCK MAY FLUCTUATE SIGNIFICANTLY AND RAPIDLY

The market price of our common stock has fluctuated and could continue to fluctuate significantly as a result of factors such as: the Entegris Transaction, economic, geopolitical (i.e., Russia’s invasion of Ukraine), global public health (i.e., the Pandemic), political and stock market conditions generally and specifically as they may impact participants in the semiconductor and related industries; and/or participants in oil and gas related industries; changes in financial estimates and recommendations by securities analysts who follow our stock; earnings and other announcements, and changes in market evaluations, by securities analysts, investors, market participants or others, of or related to, us or participants in the semiconductor and related industries; changes in business, trade or regulatory conditions affecting us or participants in the semiconductor and related industries; announcements or implementation by us, our competitors, or our customers of technological innovations, new products or different business strategies; changes in our capital deployment strategy, issuances of shares of our capital stock or entering into a business combination or other strategic transaction; and trading volume of our common stock.

~~ANTI-TAKEOVER PROVISIONS UNDER OUR CERTIFICATE OF INCORPORATION AND BYLAWS MAY DISCOURAGE THIRD PARTIES FROM MAKING AN UNSOLICITED BID FOR OUR COMPANY~~

Our certificate of incorporation and bylaws, and various provisions of the Delaware General Corporation Law may make it more difficult or expensive to effect a change in control of our Company. For instance, our amended and restated certificate of incorporation provides for the division of our Board of Directors into three classes as nearly equal in size as possible with staggered three-year terms.

We have adopted change in control arrangements covering our executive officers and other key employees. These arrangements provide for a cash severance payment, continued medical benefits and other ancillary payments and benefits upon termination of service of a covered employee’s employment following a change in control, which may make it more expensive to acquire our Company.

~~INDEX~~

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

ISSUER PURCHASES OF EQUITY SECURITIES

~~In March 2021, our Board of Directors authorized an increase in the amount available~~We did not repurchase any shares under our share repurchase program ~~to $150.0 million. As~~during the second quarter of ~~June 30, 2021, there was $144.8 million of authorized repurchases remaining under the program. The manner in which the Company repurchases its shares is discussed in~~fiscal 2022. Refer to Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, under the heading “Liquidity and Capital Resources,” of this Report on Form ~~10-Q. To date, we have funded share purchases under~~10-Q for more information regarding our share repurchase ~~program from our available cash balance, and anticipate we will continue to do so.~~

Period Total Number of Shares Purchased
(in thousands) Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
(in thousands) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
(in thousands)
Apr. 1 through Apr. 30, 2021 — $ — — $ 150,000
May 1 through May 31, 2021 9 $ 152.24 9 $ 148,622
June 1 through June 30, 2021 26 $ 151.40 26 $ 144,831
Total 35 $ 151.62 35 $ 144,831

program.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

4435

INDEX

ITEM 6. EXHIBITS

The exhibit numbers in the following list correspond to the number assigned to such exhibits in the Exhibit Table of Item 601 of Regulation S-K:


Exhibit ~~Number~~ No.		Description
~~10.1~~31.1	Incremental Assumption Agreement and Refinancing Amendment No. 2, dated as of July 2, 2021, to Credit Agreement, dated as of November 15, 2018, by and among CMC Materials, Inc., the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 4.1 to Form 8-K filed July 6, 2021).
~~10.2~~	Form of CMC Materials, Inc. 2021 Omnibus Incentive Plan Restricted Stock Unit Award Agreement (non-employee directors).*
~~31.1~~	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Interim Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
~~101. INS~~101.INS		XBRL Instance Document - The Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH		XBRL Taxonomy Extension Schema
101.CAL		XBRL Taxonomy Extension Calculation Linkbase
101.DEF		XBRL Taxonomy Extension Definition Linkbase
101.LAB		XBRL Taxonomy Extension Label Linkbase
101.PRE		XBRL Taxonomy Extension Presentation Linkbase
~~104.~~104		Cover Page Interactive Data File - The Cover Page Interactive Data File does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

*	~~Management contract, or compensatory plan or arrangement.~~

4536

INDEX

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		CMC MATERIALS, INC.
		[Registrant]

Date: ~~August~~May 5, ~~2021~~	~~By:~~	~~/s/ SCOTT D. BEAMER~~
		Scott D. Beamer Vice President and Chief Financial Officer [Principal Financial Officer]

~~Date: August 5, 2021~~2022	By:	/s/ JEANETTE A. PRESS
		Jeanette A. Press ~~Corporate Controller~~Interim Chief Financial Officer and Principal Accounting Officer [Principal ~~Accounting~~Financial Officer]

4637


Part I. Financial Information		Page

Item 1.	Unaudited Financial Statements	3

	Consolidated Statements of ~~Income (Loss)~~Incom e (L oss)	3

	Consolidated Statements of Comprehensive ~~Income~~Incom e (Loss)	4

	Consolidated Balance Sheets	5

	Consolidated Statements of Cash Flows	6

	Consolidated Statements of Changes in Stockholders’ Equity	7

	Notes to the Consolidated Financial Statements	8

Item 2.	~~Management~~’s Management’s Discussion and Analysis of Financial Condition and Results of Operations	2118

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3125

Item 4.	Controls and Procedures	3125

Part II. Other Information

Item 1.	Legal Proceedings	3226

Item 1A.	Risk Factors	3326

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4435

Item 3.	Defaults Upon Senior Securities	4435

Item 4.	Mine Safety Disclosures	4435

Item 6.	Exhibits	4536

	Signatures	4637


	Three Months Ended June 30,				Nine Months Ended June 30,
	2021		2020		2021		2020
Revenue	$	309,516	$	274,727	$	887,907	$	842,063

Cost of sales	180,320		152,973		512,061		470,525

Gross profit	129,196		121,754		375,846		371,538

Operating expenses:
Research, development and technical	13,654		12,165		39,007		38,206
Selling, general and administrative	56,242		51,847		170,700		162,495
Impairment charges	3,090		0		218,658		0
Total operating expenses	72,986		64,012		428,365		200,701

Operating income (loss)	56,210		57,742		(52,519)		170,837

Interest expense	9,551		10,406		28,667		33,079

Interest income	11		131		47		589

Other (expense) income, net	(427)		(201)		541		(1,608)
Income (loss) before income taxes	46,243		47,266		(80,598)		136,739

Provision for income taxes	12,601		12,741		4,038		30,766

Net income (loss)	$	33,642	$	34,525	$	(84,636)	$	105,973

Basic earnings (loss) per share	$	1.15	$	1.19	$	(2.90)	$	3.63

Diluted earnings (loss) per share	$	1.13	$	1.17	$	(2.90)	$	3.58

Weighted average basic shares outstanding	29,260		29,079		29,197		29,157

Weighted average diluted shares outstanding	29,682		29,456		29,197		29,603


	June 30, 2021		September 30, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	228,506	$	257,354
Accounts receivable, less allowance for credit losses of $524 at June 30, 2021 and $583 at September 30, 2020	170,346		134,023
Inventories	169,147		159,134
Prepaid expenses and other current assets	25,901		26,558
Total current assets	593,900		577,069

Property, plant and equipment, net	357,304		362,067
Goodwill	590,806		718,647
Other intangible assets, net	648,006		670,964
Deferred income taxes	8,005		7,713
Other long-term assets	51,804		40,007
Total assets	$	2,249,825	$	2,376,467

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	55,737	$	49,254

Current portion of long-term debt	10,650		10,650
Accrued expenses, income taxes payable and other current liabilities	129,497		121,442
Total current liabilities	195,884		181,346

Long-term debt, net of current portion	904,967		910,764
Deferred income taxes	76,995		112,212
Other long-term liabilities	90,732		97,832
Total liabilities	1,268,578		1,302,154

Commitments and contingencies (Note 13)	0		0

Stockholders’ equity:
Common Stock Authorized: 200,000 shares, $0.001 par value; Issued: 40,217 shares at June 30, 2021, and 39,914 shares at September 30, 2020	40		40
Capital in excess of par value of common stock	1,048,329		1,019,803
Retained earnings	429,078		553,718
Accumulated other comprehensive income (loss)	9,607		(14,104)
Treasury stock at cost, 10,973 shares at June 30, 2021, and 10,834 shares at September 30, 2020	(505,807)		(485,144)
Total stockholders’ equity	981,247		1,074,313

Total liabilities and stockholders’ equity	$	2,249,825	$	2,376,467


	Less Than 1 Year		1-3 Years		3-5 Years		Total
Revenue expected to be recognized on contract liability amounts as of June 30, 2021	$	976	$	1,968	$	35	$	2,979


	Fair Value		Estimated Useful Life (years)	Amortization Method
Technology and know-how	$	25,400	10	Straight-line
Customer relationships	8,100		20	Accelerated
Trade name	3,700		10	Straight-line
Total intangible assets	$	37,200


	Three Months Ended June 30, 2021		Nine Months Ended June 30, 2021
Property, plant, and equipment, net	$	0	$	91
Goodwill	3,090		13,842
Other intangible assets – Product technology	0		583
Other intangible assets – Acquired patents and licenses	0		173
Other intangible assets – Customer relationships, distribution rights, and other	0		2,419
Total wood treatment impairment charges	$	3,090	$	17,108


	June 30, 2021		September 30, 2020
Right of use asset	$	32,849	$	30,999
Interest rate swap (See Note 12)	10,955		0
Vendor contract assets	1,713		2,889
SERP investment	1,438		1,214
Prepaid unamortized debt issuance cost - revolver	408		537
Other long-term assets	4,441		4,368
Total	$	51,804	$	40,007


Fiscal Year	Principal Repayments
Remainder of 2021	$	2,662
2022	10,650
2023	10,650
2024	10,650
2025	10,650
Greater than 5 years	883,113
Total	$	928,375


		Gain (Loss) Recognized in Statement of Income
		Three Months Ended June 30,				Nine Months Ended June 30,
	Consolidated Statement of Income Location	2021		2020		2021		2020
Derivatives designated as hedging instruments
Interest rate swap contract	Interest expense	$	(787)	$	(3,262)	$	(4,041)	$	(5,799)
Terminated interest rate swap contract	Interest expense	(2,786)		0		(6,501)		0
Derivatives not designated as hedging instruments
Foreign exchange contracts	Other income (expense), net	$	(74)	$	(128)	$	(711)	$	(390)


	Amount of Gain (Loss) Recognized in Other Comprehensive Income (Loss)
	Three Months Ended June 30,				Nine Months Ended June 30,
	2021		2020		2021		2020
Derivatives designated as hedging instruments
Interest rate swap contract	$	(6,284)	$	(3,694)	$	6,628	$	(23,034)


Dollars in thousands	Three Months Ended June 30,
	2021			2020
Revenue	$	309,516		$	274,727
Net income	$	33,642		$	34,525
Adjusted EBITDA	$	96,003		$	92,041
Adjusted EBITDA Margin	31.0		%	33.5		%


In thousands	Three Months Ended June 30,				Nine Months Ended June 30,
	2021		2020		2021		2020
Net income (loss)	$	33,642	$	34,525	$	(84,636)	$	105,973
Interest expense	9,551		10,406		28,667		33,079
Interest income	(11)		(131)		(47)		(589)
Income taxes	12,601		12,741		4,038		30,766
Depreciation and amortization	33,927		31,324		98,107		95,516
EBITDA	89,710		88,865		46,129		264,745
Impairment charges	3,090		—		218,658		—
Acquisition and integration-related expenses	3,353		2,735		7,889		7,785
Costs related to the Pandemic, net of grants received	(200)		112		641		349
Net costs related to restructuring of the wood treatment business	24		(293)		96		(293)
Costs related to KMG-Bernuth warehouse fire, net of insurance recovery	26		622		(1,050)		1,220
Adjusted EBITDA	$	96,003	$	92,041	$	272,363	$	273,806


Period	Total Number of Shares Purchased (in thousands)	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (in thousands)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in thousands)
Apr. 1 through Apr. 30, 2021	—	$	—	—	$	150,000
May 1 through May 31, 2021	9	$	152.24	9	$	148,622
June 1 through June 30, 2021	26	$	151.40	26	$	144,831
Total	35	$	151.62	35	$	144,831