Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Mar. 31, 2019 | Apr. 30, 2019 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | CABOT MICROELECTRONICS CORP | |
Entity Central Index Key | 0001102934 | |
Current Fiscal Year End Date | --09-30 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Ex Transition Period | false | |
Entity Common Stock, Shares Outstanding | 29,061,830 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2019 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q2 |
CONSOLIDATED STATEMENTS OF INCO
CONSOLIDATED STATEMENTS OF INCOME (LOSS) (UNAUDITED) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Mar. 31, 2019 | Mar. 31, 2018 | Mar. 31, 2019 | Mar. 31, 2018 | |
CONSOLIDATED STATEMENTS OF INCOME (LOSS) (UNAUDITED) [Abstract] | ||||
Revenue | $ 265,391 | $ 142,978 | $ 487,169 | $ 282,957 |
Cost of sales | 150,571 | 67,933 | 273,016 | 133,898 |
Gross profit | 114,820 | 75,045 | 214,153 | 149,059 |
Operating expenses: | ||||
Research, development and technical | 12,778 | 13,368 | 26,818 | 25,519 |
Selling, general and administrative | 50,328 | 24,589 | 111,456 | 49,340 |
Total operating expenses | 63,106 | 37,957 | 138,274 | 74,859 |
Operating income | 51,714 | 37,088 | 75,879 | 74,200 |
Interest expense | 13,331 | 1,158 | 20,221 | 2,290 |
Interest income | 568 | 1,156 | 1,587 | 2,107 |
Other income (expense), net | (1,014) | (94) | (2,425) | (373) |
Income before income taxes | 37,937 | 36,992 | 54,820 | 73,644 |
Provision for income taxes | 10,800 | 7,255 | 14,240 | 46,990 |
Net income | $ 27,137 | $ 29,737 | $ 40,580 | $ 26,654 |
Basic earnings (loss) per share (in dollars per share) | $ 0.94 | $ 1.16 | $ 1.45 | $ 1.05 |
Weighted average basic shares outstanding (in shares) | 28,997,632 | 25,592,508 | 28,065,759 | 25,473,757 |
Diluted earnings (loss) per share (in dollars per share) | $ 0.92 | $ 1.14 | $ 1.42 | $ 1.02 |
Weighted average diluted shares outstanding (in shares) | 29,479,114 | 26,161,186 | 28,607,033 | 26,075,682 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Mar. 31, 2019 | Mar. 31, 2018 | Mar. 31, 2019 | Mar. 31, 2018 | |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) [Abstract] | ||||
Net income | $ 27,137 | $ 29,737 | $ 40,580 | $ 26,654 |
Other comprehensive income, net of tax: | ||||
Foreign currency translation adjustments | (992) | 3,961 | 1,433 | 11,105 |
Net unrealized gain on available-for-sale securities | 0 | 46 | 0 | 0 |
Minimum pension liability adjustment | 251 | 0 | 0 | 0 |
Net unrealized gain (loss) on cash flow hedges | (6,474) | (52) | (6,474) | 147 |
Other comprehensive income (loss), net of tax | (7,215) | 3,955 | (5,041) | 11,252 |
Comprehensive income | $ 19,922 | $ 33,692 | $ 35,539 | $ 37,906 |
CONSOLIDATED BALANCE SHEETS (UN
CONSOLIDATED BALANCE SHEETS (UNAUDITED) - USD ($) $ in Thousands | Mar. 31, 2019 | Sep. 30, 2018 |
Current assets: | ||
Cash and cash equivalents | $ 192,260 | $ 352,921 |
Accounts receivable, less allowance for doubtful accounts of $1,704 at March 31, 2019, and $1,900 at September 30, 2018 | 131,880 | 75,886 |
Inventories | 147,324 | 71,926 |
Prepaid expenses and other current assets | 30,551 | 22,048 |
Total current assets | 502,015 | 522,781 |
Property, plant and equipment, net | 263,556 | 111,403 |
Goodwill | 705,426 | 101,083 |
Other intangible assets, net | 854,378 | 35,202 |
Deferred income taxes | 5,498 | 5,840 |
Other long-term assets | 6,215 | 4,664 |
Total assets | 2,337,088 | 780,973 |
Current liabilities: | ||
Accounts payable | 47,330 | 18,171 |
Current portion of long-term debt | 13,313 | 0 |
Accrued expenses, income taxes payable and other current liabilities | 86,913 | 82,983 |
Total current liabilities | 147,556 | 101,154 |
Long-term debt, net of current portion, less prepaid debt issuance cost of $20,170 at December 31, 2018 | 987,276 | 0 |
Deferred income taxes | 150,575 | 81 |
Other long-term liabilities | 25,814 | 13,046 |
Total liabilities | 1,311,221 | 114,281 |
Commitments and contingencies (Note 10) | ||
Stockholders' equity: | ||
Common Stock: Authorized: 200,000,000 shares, $0.001 par value; Issued: 39,446,709 shares at March 31, 2019, and 35,862,465 shares at September 30, 2018 | 39 | 36 |
Capital in excess of par value of common stock | 975,612 | 622,498 |
Retained earnings | 487,467 | 471,673 |
Accumulated other comprehensive income | (502) | 4,539 |
Treasury stock at cost, 10,401,574 shares at March 31, 2019, and 10,356,147 shares at September 30, 2018 | (436,749) | (432,054) |
Total stockholders' equity | 1,025,867 | 666,692 |
Total liabilities and stockholders' equity | $ 2,337,088 | $ 780,973 |
CONSOLIDATED BALANCE SHEETS (_2
CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) - USD ($) $ in Thousands | Mar. 31, 2019 | Sep. 30, 2018 |
Current assets: | ||
Allowance for doubtful accounts | $ 1,704 | $ 1,900 |
LIABILITIES AND STOCKHOLDERS' EQUITY | ||
Long-term debt, prepaid debt issuance cost | $ 19,411 | |
Stockholders' equity | ||
Common stock: authorized (in shares) | 200,000,000 | 200,000,000 |
Common stock: par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock: issued (in shares) | 39,446,709 | 35,862,465 |
Treasury stock at cost, shares (in shares) | 10,401,574 | 10,356,147 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) $ in Thousands | 6 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Cash flows from operating activities: | ||
Net income | $ 40,580 | $ 26,654 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 43,889 | 13,138 |
Provision for doubtful accounts | (314) | 5 |
Share-based compensation expense | 11,708 | 10,082 |
Deemed repatriation transition tax | 0 | 24,641 |
Deferred income tax (expense) benefit | (13,811) | 15,291 |
Non-cash foreign exchange (gain) loss | 354 | (11) |
Loss (Gain) on disposal of property, plant and equipment | (58) | 18 |
Non-cash charge on inventory step up of acquired inventory sold | 14,827 | 0 |
Realized loss on the sale of available-for-sale securities | 0 | 118 |
Amortization of debt issuance costs | 1,286 | 63 |
(Gain) on sale of assets | 0 | (956) |
Other | 2,337 | 2,125 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 9,445 | (4,370) |
Inventories | (21,100) | (3,771) |
Prepaid expenses and other assets | 5,415 | (5,503) |
Accounts payable | (429) | (407) |
Accrued expenses, income taxes payable and other liabilities | (40,601) | (9,983) |
Net cash provided by operating activities | 53,528 | 67,134 |
Cash flows from investing activities: | ||
Additions to property, plant and equipment | (19,472) | (8,804) |
Acquisition of a business, net of cash acquired | (1,182,186) | 0 |
Proceeds from the sale of assets | 2,999 | |
Purchases of available-for-sale securities | 0 | (50,673) |
Proceeds from the sale and maturities of available-for-sale securities | 0 | 50,548 |
Cash settlement of life insurance policy | 3,959 | 0 |
Proceeds from the disposition of property | 1,210 | |
Net cash used in investing activities | (1,196,489) | (5,930) |
Cash flows from financing activities: | ||
Repayment of long-term debt | (45,000) | (6,563) |
Repurchases of common stock | (4,695) | (9,937) |
Proceeds from issuance of long-term debt | 1,062,337 | 0 |
Debt issuance costs | (18,745) | 0 |
Proceeds from issuance of stock | 10,361 | 18,089 |
Dividends paid | (21,934) | (10,228) |
Net cash provided by (used in) financing activities | 982,324 | (8,639) |
Effect of exchange rate changes on cash | (24) | 10,979 |
Decrease in cash and cash equivalents | (160,661) | 63,544 |
Cash and cash equivalents at beginning of period | 352,921 | 397,890 |
Cash and cash equivalents at end of period | 192,260 | 461,434 |
Supplemental disclosure of non-cash investing and financing activities: | ||
Purchases of property, plant and equipment in accrued liabilities and accounts payable at the end of the period | 2,425 | 2,068 |
Equity consideration related to the acquisition of KMG Chemicals, Inc | $ 331,048 | $ 0 |
CONSOLIDATED STATEMENT OF CHANG
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED) - USD ($) $ in Thousands | Common Stock [Member] | Capital In Excess Of Par [Member] | Retained Earnings [Member] | Accumulated Other Comprehensive Income [Member] | Treasury Stock [Member] | Total |
Balance at beginning of period at Sep. 30, 2017 | $ 35 | $ 580,938 | $ 397,881 | $ 3,949 | $ (387,766) | $ 595,037 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Share-based compensation expense | 5,881 | 5,881 | ||||
Repurchases of common stock under share repurchase plans, at cost | (1,591) | (1,591) | ||||
Repurchases of common stock - other, at cost | (3,160) | (3,160) | ||||
Exercise of stock options | 6,139 | 6,139 | ||||
Issuance of Cabot Microelectronics restricted stock under Deposit Share Program | 300 | 300 | ||||
Net income | (3,083) | (3,083) | ||||
Dividends | (5,153) | (5,153) | ||||
Foreign currency translation adjustment | 7,144 | 7,144 | ||||
Interest rate swaps | 199 | 199 | ||||
Unrealized loss in short term available-for-sale securities | (46) | (46) | ||||
Balance at end of period at Dec. 31, 2017 | 35 | 593,258 | 389,645 | 11,246 | (392,517) | 601,667 |
Balance at beginning of period at Sep. 30, 2017 | 35 | 580,938 | 397,881 | 3,949 | (387,766) | 595,037 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Net income | 26,654 | |||||
Foreign currency translation adjustment | 11,105 | |||||
Unrealized loss in short term available-for-sale securities | 0 | |||||
Minimum pension liability adjustment | 0 | |||||
Balance at end of period at Mar. 31, 2018 | 36 | 609,104 | 408,992 | 15,201 | (397,822) | 635,511 |
Balance at beginning of period at Dec. 31, 2017 | 35 | 593,258 | 389,645 | 11,246 | (392,517) | 601,667 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Share-based compensation expense | 4,223 | 4,223 | ||||
Repurchases of common stock under share repurchase plans, at cost | (5,005) | (5,005) | ||||
Repurchases of common stock - other, at cost | (300) | (300) | ||||
Exercise of stock options | 1 | 9,611 | 9,612 | |||
Issuance of Cabot Microelectronics stock under Employee Stock Purchase Plan | 2,012 | 2,012 | ||||
Net income | 29,737 | 29,737 | ||||
Dividends | (10,390) | (10,390) | ||||
Foreign currency translation adjustment | 3,961 | 3,961 | ||||
Interest rate swaps | (52) | (52) | ||||
Unrealized loss in short term available-for-sale securities | 46 | 46 | ||||
Minimum pension liability adjustment | 0 | |||||
Balance at end of period at Mar. 31, 2018 | 36 | 609,104 | 408,992 | 15,201 | (397,822) | 635,511 |
Balance at beginning of period at Sep. 30, 2018 | 36 | 622,498 | 471,673 | 4,539 | (432,054) | 666,692 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Share-based compensation expense | 8,170 | 8,170 | ||||
Repurchases of common stock - other, at cost | (4,001) | (4,001) | ||||
Exercise of stock options | 3,097 | 3,097 | ||||
Issuance of common stock in connection with acquisition of KMG Chemicals, Inc. | 3 | 331,045 | 331,048 | |||
Issuance of Cabot Microelectronics restricted stock under Deposit Share Program | 75 | 75 | ||||
Net income | 13,443 | 13,443 | ||||
Dividends | (11,598) | (11,598) | ||||
Foreign currency translation adjustment | 2,425 | 2,425 | ||||
Minimum pension liability adjustment | (251) | (251) | ||||
Balance at end of period at Dec. 31, 2018 | 39 | 964,885 | 472,585 | 6,713 | (436,055) | 1,008,167 |
Balance at beginning of period at Sep. 30, 2018 | 36 | 622,498 | 471,673 | 4,539 | (432,054) | 666,692 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Net income | 40,580 | |||||
Foreign currency translation adjustment | 1,433 | |||||
Unrealized loss in short term available-for-sale securities | 0 | |||||
Minimum pension liability adjustment | 0 | |||||
Balance at end of period at Mar. 31, 2019 | 39 | 975,612 | 487,467 | (502) | (436,749) | 1,025,867 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Effect of the adoption of the revenue recognition accounting standards | (933) | (933) | ||||
Balance at beginning of period at Dec. 31, 2018 | 39 | 964,885 | 472,585 | 6,713 | (436,055) | 1,008,167 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Share-based compensation expense | 3,538 | 3,538 | ||||
Repurchases of common stock - other, at cost | (694) | (694) | ||||
Exercise of stock options | 5,080 | 5,080 | ||||
Issuance of Cabot Microelectronics stock under Employee Stock Purchase Plan | 2,109 | 2,109 | ||||
Net income | 27,137 | 27,137 | ||||
Dividends | (12,255) | (12,255) | ||||
Foreign currency translation adjustment | (992) | (992) | ||||
Interest rate swaps | (6,474) | (6,474) | ||||
Unrealized loss in short term available-for-sale securities | 0 | |||||
Minimum pension liability adjustment | 251 | 251 | ||||
Balance at end of period at Mar. 31, 2019 | $ 39 | $ 975,612 | $ 487,467 | $ (502) | $ (436,749) | $ 1,025,867 |
BACKGROUND AND BASIS OF PRESENT
BACKGROUND AND BASIS OF PRESENTATION | 6 Months Ended |
Mar. 31, 2019 | |
BACKGROUND AND BASIS OF PRESENTATION [Abstract] | |
BACKGROUND AND BASIS OF PRESENTATION | 1. BACKGROUND AND BASIS OF PRESENTATION Cabot Microelectronics Corporation (“Cabot Microelectronics”, “the Company”, “us”, “we”, or “our”') is a leading global supplier of consumable materials to semiconductor manufacturers and pipeline operators. On November 15, 2018 (“Acquisition Date”), we completed our acquisition of KMG Chemicals, Inc. (“KMG”), which produces and distributes specialty chemicals and performance materials for the semiconductor, industrial wood preservation, pipeline and energy industries (“Acquisition”). The Consolidated Financial Statements included in this Report on Form 10-Q include the financial results of KMG from the Acquisition Date. Subsequent to the Acquisition, we have operated our business within two reportable segments: Electronic Materials and Performance Materials. The Electronic Materials segment consists of our heritage CMP slurries and polishing pads businesses, as well as the KMG electronic chemicals business. The Performance Materials segment includes KMG’s heritage pipeline performance and wood treatment businesses, and Cabot Microelectronics’ heritage business. For additional information, refer to Part 1, Item 1, “Business”, in our and KMG’s Annual Reports on Form 10-K for the fiscal year ended September 30, 2018 and July 31, 2018, respectively. The unaudited Consolidated Financial Statements have been prepared by Cabot Microelectronics 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). In the opinion of management, these unaudited Consolidated Financial Statements include all adjustments, consisting of normal recurring adjustments, necessary for the fair statement of Cabot Microelectronics’ financial position as of March 31, 2019, cash flows for the six months ended March 31, 2019 and March 31, 2018, and results of operations for the three and six months ended March 31, 2019 and March 31, 2018. The Consolidated Balance Sheets as of September 30, 2018 were derived from audited financial statements. The results of operations for the three and six months ended March 31, 2019 may not be indicative of results to be expected for future periods, including the fiscal year ending September 30, 2019. Certain prior period amounts have been reclassified to conform to the current period presentation. This Report on Form 10-Q does not contain all of the footnote disclosures from the annual financial statements and should be read in conjunction with the Consolidated Financial Statements and related notes thereto included in Cabot Microelectronics’ Annual Report on Form 10-K for the fiscal year ended September 30, 2018. The Consolidated Financial Statements include the accounts of Cabot Microelectronics and its subsidiaries. All intercompany transactions and balances between the companies have been eliminated as of March 31, 2019 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. The accounting estimates that require management's most difficult and subjective judgments include, but are not limited to, those estimates related to bad debt expense, inventory valuation, impairment of long-lived assets and investments, business combinations, goodwill, other intangible assets, share-based compensation, income taxes and contingencies. We base our estimates on historical experience, current conditions and on various other assumptions that we believe are reasonable under the circumstances. However, future events are subject to change and estimates and judgments routinely require adjustment. Actual results may differ from these estimates under different assumptions or conditions. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS | 6 Months Ended |
Mar. 31, 2019 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS | 2. Significant Accounting Policies and Estimates Except for the discussion on revenue recognition below, no material changes have been made to the Company’s significant accounting policies disclosed in Note 2 of the Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended September 30, 2018. REVENUE RECOGNITION As of October 1, 2018, the Company began applying the provisions of Accounting Standards Codification 606-10, “Revenue from Contracts with Customers” (“ASC 606”), and all related appropriate guidance using the modified retrospective method applied to those contracts which were not completed as of October 1, 2018. The Company recognizes revenue under the core principle of depicting the transfer of control to the Company’s customers in an amount reflecting the consideration to which the Company expects to be entitled. In order to achieve that core principle, the Company applies the following five step approach: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when a performance obligation is satisfied. Upon adoption of ASC 606 we recognized a $933 decrease to the opening balance of retained earnings, net of tax, due to the cumulative impact of adopting the new revenue standards. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. The Company changed its accounting policy for revenue recognition for customer incentives that provide free products and tiered pricing. For free products, the new revenue standards require that a portion of the transaction price be allocated to the free product and deferred until the product has been delivered. We previously accrued for undelivered free product as a charge to cost of sales. In prior fiscal years, in accordance with ASC 605, we did not consider prospective tiered pricing to represent a material right. The cumulative effect of the changes made to our Consolidated Balance Sheet as of October 1, 2018 for the adoption of the new revenue standards Balance at September 30, 2018 Adjustments Due to ASC 606 Balance at October 1, 2018 Deferred income tax assets $ 5,840 $ 261 $ 6,101 Accrued expenses, income taxes payable and other current liabilities 82,983 (47 ) 82,936 Other long-term liabilities 13,046 1,241 14,287 Retained earnings $ 471,673 $ (933 ) $ 470,740 We have determined that the effect of applying the new revenue standards during the three and six months ended March 31, 2019 was immaterial to our financial statements compared to revenue guidance in effect before the adoption of the new revenue standards. As a result, for the three and six months ended March 31, 2019, we are not disclosing the quantitative amount by which each financial statement line item is affected by the application of the new revenue standards. As part of the adoption of ASU 606, the Company elected to use certain allowed practical expedients. For the Company’s contracts that have an original duration of one year or less as of the adoption date, the Company uses the practical expedient applicable to such contracts and does not consider the time value of money. Further, because of the short duration of these contracts, the Company has not disclosed the transaction price for the future performance obligations as of the end of each reporting period for contracts having an expected duration of one year or less. See Note 3 of this Report on Form 10-Q for disaggregated revenue, the reconciliation of contract balances and transaction price allocation to remaining performance obligations for contracts expected to remain effective beyond one year. Performance Obligations and Material Rights At contract inception, the Company assesses the goods and services promised in its contracts with customers and identifies a performance obligation for each material promise to the customer. A performance obligation is a promise in a contract to transfer a distinct good or service, or a bundle of goods or services, to the customer, and is the unit of accounting under ASC 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. A majority of the Company’s contracts have a single performance obligation which represents, in most cases, the products, equipment or services being sold to the customer. Some contracts include multiple performance obligations including prospective tiered price discounts or delivery of free product that we have concluded represents a material right. Contracts with prospective tiered price discounts require judgment in determining if that discount represents a material right. Contracts vary in length and payment terms vary by the type and location of the Company’s customers and the products or services offered. However, the period of time between invoicing and when payment is due is typically not significant and has no significant financing components. Customers pay in accordance with negotiated terms upon receipt of goods or completion of services. For these contracts, the transaction price is determined upon establishment of the contract that contains the final terms of the sale, including the description, quantity, and price of goods or services purchased. In certain instances, we receive consideration from a customer prior to transferring goods or services to the customer under the terms of a sales contract. In such cases, we record deferred revenue until the performance obligation is satisfied, which represents a contract liability, and is included in the contract liabilities discussed in Note 3 of this Form 10-Q. The Company recognizes revenue related to product sales at a point in time following the transfer of control of such products to the customer, which generally occurs upon shipment, or delivery depending on the terms of the underlying contracts. The Company considers control to have transferred upon shipment or delivery because the Company has a present right to payment at that time, the customer has legal title to the asset, the Company has transferred physical possession of the asset, and the customer has significant risks and rewards of ownership of the asset. Revenue is recognized on consignment sales when control transfers to the customer, generally at the point of customer usage of the product. The Company also records revenue for services provided to the pipeline and oilfield energy industries. These services include preventive maintenance, repair and specialized isolation sealing on pipelines and training. Revenue is recorded at a point in time when the services are completed as this is when right to payment and customer acceptance occurs. For sales contracts that contain multiple performance obligations, the Company allocates the transaction price to each performance obligation identified in the contract based on relative standalone selling prices or estimates of such prices. Standalone selling price, once established, is then used to allocate total consideration proportionally to the various performance obligations within a contract. Most contracts where we have determined there to be multiple performance obligations relate to where we have identified a material right to exist such that we provide prospective tiered pricing discounts or free product. When we invoice for products shipped under these contracts, we defer the revenue associated with these rights on the balance sheet as a contract liability. Revenue is recognized when the customer exercises the option to purchase goods at a discount in the case of the prospective tiered pricing discounts or when we ship the free product. Variable Consideration The primary type of variable consideration present in the Company’s contracts are rebates and early payment discounts, both of which are immaterial. Early payment discounts are offered on a limited basis and are not significant. The Company also offers rebates based upon cumulative volume of purchases within a quarter and accrues for the rebate obligation within the quarter that the rebate is earned. ASC 606 did not change the accounting for rebates under ASC 605. Costs to Obtain and Fulfill a Contract For certain contracts within the Performance Materials segment, commissions are paid to sales agents based upon a percentage of end-customer invoice value. Agents are paid the commissions after funds are received by the Company from its customers. Under ASC 340, sales commissions are required to be capitalized and expensed over the associated contract period. However, as a practical expedient, the Company does not capitalize commissions as the associated contracts are generally one year or less in duration. EFFECTS OF RECENT ACCOUNTING PRONOUNCEMENTS In February 2016, the FASB issued ASU No. 2016-02, "Leases" (Topic 842). The provisions of ASU 2016-02 require a dual approach for lessee accounting under which a lessee would recognize a right-of-use asset and a corresponding lease liability. Leases will be classified as either finance or operating leases. For finance leases, a lessee will recognize interest expense and amortization of the right-of-use asset, and for operating leases, the lessee will recognize a straight-line total lease expense. The guidance also requires qualitative and specific quantitative disclosures to supplement the amounts recorded in the financial statements, to afford better understanding of an entity's leasing activities, including any significant judgments and estimates. The guidance was amended through various ASU's subsequent to ASU 2016-02, all of which will be effective for us beginning October 1, 2019, but early adoption is permitted. We are currently evaluating the impact of implementation of this standard on our financial statements. In June 2016, the FASB issued ASU No. 2016-13, "Measurement of Credit Losses on Financial Instruments" (Topic 326). The provisions of this standard require financial assets measured at amortized cost to be presented at the net amount expected to be collected. An allowance account would be established to present the net carrying value at the amount expected to be collected. ASU 2016-13 also provides that credit losses relating to available-for-sale debt securities should be recorded through an allowance for credit losses. ASU 2016-13 will be effective for us beginning October 1, 2020, but early adoption is permitted as of October 1, 2019. We are currently evaluating the impact of implementation of this standard on our financial statements. In March 2017, the FASB issued ASU No. 2017-07 "Improving the Presentation of Net Period Pension Cost and Net Period Postretirement Benefit Cost" (Topic 715). The provisions of ASU 2017-07 provided specific guidance on the presentation of the components of net benefit cost. We adopted this standard ASU 2017-07 effective October 1, 2018 and applied it retrospectively. P ursuant to the adoption, net service costs are recorded as fringe benefit expense under cost of sales and operating expenses, and all other costs are recorded in the Other income (expense), net in our Consolidated Statements of Income. The In May 2017, the FASB issued ASU No. 2017-09 "Scope of Modification Accounting" (Topic 718). The provisions of ASU 2017-09 provide specific guidance about which changes to the term or conditions of a share-based payment require an entity to apply modification accounting. We adopted ASU 2017-09 effective October 1, 2018 and will apply this new standard to the share-based compensation awards, to the extent modified. In August 2017, the FASB issued ASU No. 2017-12 "Derivatives and Hedging" (Topic 815). The provisions of this standard amend the hedge accounting model in ASC 815 to expand an entity's ability to hedge nonfinancial and financial risk components, reduce complexity in fair value hedges of interest rate risk, eliminate the requirement to separately measure and report hedge ineffectiveness, and generally require the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item. The guidance also eases certain documentation and assessment requirements and modifies the accounting for components excluded from the assessment of hedge effectiveness. We early adopted this guidance effective January 1, 2019, and we did not have any hedges that existed as of the initial application date. We applied the new guidance to the interest rate swap that we entered into during our second quarter of fiscal 2019. Pursuant to the guidance, we performed initial quantitative hedge effectiveness testing upon the hedge inception, and determined the hedge to be highly effective. Therefore, unrealized changes in fair value are recorded in other comprehensive income. In addition, we reclassify the realized gains and losses out of other comprehensive income, and into interest expense in our Consolidated Statements of Income, which is the same financial statement line as the hedged item. We will perform subsequent assessments of hedge effectiveness qualitatively on a quarterly basis. In February 2018, the FASB issued ASU No. 2018-02 "Income Statement – Reporting Comprehensive Income (Topic 220)". The amendments in this standard allow a company to reclassify the stranded tax effects resulting from the from accumulated other comprehensive income to retained earnings. ASU 2018-02 will be effective for us beginning October 1, 2019, but early adoption is permitted. We are currently evaluating the impact of implementation of this standard on our financial statements. In June 2018, the FASB issued ASU No. 2018-07 " Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting". The ASU simplified the accounting for share-based payments granted to nonemployees for goods and services, therefore guidance on such payments to nonemployees would be mostly aligned with the requirements for share-based payments granted to employees. ASU 2018-07 will be effective for us beginning October 1, 2019, but early adoption is permitted (but no earlier than the adoption date of Topic 606). We are currently evaluating the impact of implementation of this standard on our financial statements. In August 2018, the FASB issued ASU No. 2018-13 " Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement". The ASU provides specific guidance on various disclosure requirements in Topic 820, including removal, modification and addition to current disclosure requirements. ASU 2018-13 will be effective for us beginning October 1, 2020, but early adoption is permitted. We are currently evaluating the impact of implementation of this standard on our disclosures. In August 2018, the FASB issued 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 (a consensus of the FASB Emerging Issues Task Force)". The ASU Requires an entity (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 related to the service contract and which costs to expense. ASU 2018-15 will be effective for us beginning October 1, 2020, but early adoption is permitted. We are currently evaluating the impact of implementation of this standard on our financial statements. |
REVENUE FROM CONTRACTS WITH CUS
REVENUE FROM CONTRACTS WITH CUSTOMERS | 6 Months Ended |
Mar. 31, 2019 | |
REVENUE FROM CONTRACTS WITH CUSTOMERS [Abstract] | |
REVENUE FROM CONTRACTS WITH CUSTOMERS | 3. REVENUE FROM CONTRACTS WITH CUSTOMERS Disaggregation of Revenue The Company disaggregates revenue by product area and segment as it best depicts the nature and amount of the Company’s revenue. The following table shows revenue generated by product area during the three and six months ended March 31, 2019 and 2018: Three Months Ended March 31, Six Months Ended March 31, 2019 2018 2019 2018 Revenue: Electronic Materials: CMP Slurries $ 110,299 $ 115,086 $ 236,627 $ 229,522 Electronic Chemicals 78,549 - 118,371 - CMP Pads 23,998 21,017 48,464 39,895 Total Electronic Materials 212,846 136,103 403,462 269,417 Performance Materials 52,545 6,875 83,707 13,540 Total revenue $ 265,391 $ 142,978 $ 487,169 $ 282,957 Reconciliation of Contract Liability Balances The following table provides information about contract liability balances: March 31, 2019 October 1, 2018 Contract liabilities (current) $ 3,611 $ 5,310 Contract liabilities (noncurrent) 1,414 1,239 The contract liability balances as of October 1, 2018 in the table above include the amounts recorded upon the adoption of ASC 606. At March 31, 2019, the current portion of contract liabilities of $3,611 is included in accrued liabilities, taxes payable and other current liabilities and the noncurrent portion of $1,414 is included in other long-term liabilities in the Consolidated Balance Sheets. The amount of revenue recognized during the three and six months ended March 31, 2019 that was included in the opening current contract liability balances in our Performance Materials segment were $2,317 and $4,160, respectively. The amount of revenue recognized during the three and six months ended March 31, 2019 that was included in our opening contract liability balances in our Electronic Materials segment was not material. Transaction Price Allocated to Remaining Performance Obligations The table below discloses (1) the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied (or partially 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 March 31, 2019 $ 87 $ 1,085 $ 329 $ 1,501 |
BUSINESS COMBINATION
BUSINESS COMBINATION | 6 Months Ended |
Mar. 31, 2019 | |
BUSINESS COMBINATION [Abstract] | |
BUSINESS COMBINATION | 4. BUSINESS COMBINATION On the Acquisition Date, the Company completed its acquisition of 100% of the outstanding stock of KMG, which was a publicly held company headquartered in Fort Worth, Texas. KMG specializes in producing and distributing electronic chemicals for the semiconductor industry and performance materials for the pipeline, energy, and industrial wood preservation Amount Total cash consideration paid for KMG outstanding common stock and equity awards $ 900,756 Cash provided to payoff KMG debt 304,648 Total cash consideration paid 1,205,404 Fair value of Cabot Microelectronics common stock issued for KMG outstanding common stock and equity awards 331,048 Total consideration transferred $ 1,536,452 The following table summarizes the preliminary allocation of fair values of assets acquired and liabilities assumed as of Acquisition Date: Cash $ 23,217 Accounts receivable 64,711 Inventories 68,963 Prepaid expenses and other current assets 14,798 Property, plant and equipment 149,504 Intangible assets 844,800 Other long-term assets 6,208 Accounts payable (28,894 ) Accrued expenses and other current liabilities (43,451 ) Deferred income taxes liabilities (164,469 ) Other long-term liabilities (3,754 ) Total identifiable net assets 931,633 Goodwill 604,819 Total consideration transferred $ 1,536,452 The acquisition was accounted for using the acquisition method of accounting. Tangible and identifiable intangible assets acquired and liabilities assumed are recorded at fair value as of the Acquisition Date. These valuations are preliminary based on the information currently available, and the expectations and assumptions that have been deemed reasonable by the Company’s management. The Company has not finalized the fair value determinations of the assets acquired and liabilities assumed and expects to finalize as soon as practicable, but not later than one-year from the Acquisition Date. As a result, certain adjustments have been made and will continue to be made to the Company’s Consolidated Balance Sheet and Statements of Income. The fair values of identifiable assets and liabilities acquired were developed with the assistance of a third-party valuation firm. The fair value of acquired property, plant and equipment is primarily valued at its “value-in-use.” The fair value of acquired identifiable intangible assets was determined using the “income approach” on an individual asset basis. The key assumptions used in the calculation of the discounted cash flows include projected revenue, gross margin, operating expenses, discount rate and customer attrition. 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 following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives as of the Acquisition Date: Fair Value Estimated Useful Life (years) Customer relationships $ 704,000 15-20 Technology and know-how 85,500 9-11 Trade name - Flowchem 46,000 Indefinite Trade name - all other 7,000 1-15 EPA product registration rights 2,300 15 Total intangible assets $ 844,800 Customer relationships represent the estimated fair value of the underlying relationships and agreements with KMG’s customers and are being amortized on an accelerated basis in order for the expense to most accurately match the periods of highest cash flows attributable to the identified relationships. Technology and know-how represent the estimated fair value of KMG’s technology, processes and knowledge regarding its product offerings, and are being amortized on a straight-line basis. Trade names represents the estimated fair value of the brand and name recognition associated with the marketing of KMG’s product offerings and are being amortized on a straight-line basis, except for the Flowchem trade name, which we believe has an indefinite life. These intangible assets are capitalized and accounted for as indefinite-lived intangible assets and will be subject to impairment testing. The intangible assets subject to amortization have a weighted average useful life of 17.9 years. The excess of consideration transferred over the fair value of net assets acquired was recorded as goodwill, and is not deductible for income tax purposes. The goodwill is primarily attributable to anticipated revenue growth from the combined company product portfolio, expected synergies of the combined company, and the assembled workforce of KMG. The preliminary allocation of goodwill to each of the Electronic Materials and Performance Materials segments as a result of this Acquisition was $262,746 and $342,073, respectively. For the three and six month ended March 31, 2019, we recorded $2,904 and $30,198 in acquisition and integration-related expenses, including transaction costs, stock compensation expense, severance and retention costs. These items are included within Selling, general and administrative in the Consolidated Statements of Income. In the same three and six month ended March 31, 2019, we also recorded a charge of $4,566 and $14,827 related to the fair value write-up of acquired inventory sold, respectively, which is included in Cost of sales in the Consolidated Statements of Income. KMG’s results of operations have been included in our unaudited Consolidated Statements of Income and Consolidated Statements of Comprehensive Income from the Acquisition Date. Net sales of the acquired KMG business since the Acquisition Date through March 31, 2019 were $185,127. KMG’s net loss since the Acquisition Date was $5,561, which includes $19,996 of acquisition related costs and a $14,827 charge for fair value write-up of inventory sold. Further, additional amortization and depreciation expense associated with recording KMG’s net assets at fair value decreased KMG’s net income post-Acquisition. The following unaudited supplemental pro forma information summarizes the combined results of operations for Cabot Microelectronics and KMG as if the Acquisition had occurred on October 1, 2017. Three Months Ended March 31, Six Months Ended March 31, 2019 2018 2019 2018 Revenues $ 265,391 $ 259,372 $ 549,147 $ 512,105 Net income (loss) 28,056 24,902 66,873 (38,262 ) Earnings per share - basic $ 0.97 $ 0.86 $ 2.32 $ (1.33 ) Earnings per share - diluted $ 0.95 $ 0.85 $ 2.27 $ (1.33 ) The following costs are included in the three and six months ended March 31, 2018: ● Non-recurring transaction costs of $580 and $30,610, respectively. ● Non-recurring transaction-related employee costs, such as accelerated stock compensation expense, retention and severance expense of $460 and $35,601, respectively. ● Non-recurring charge for fair value write-up of inventory sold of $1,045 and $14,859, respectively. The historical financial information has been adjusted by |
FAIR VALUE OF FINANCIAL INSTRUM
FAIR VALUE OF FINANCIAL INSTRUMENTS | 6 Months Ended |
Mar. 31, 2019 | |
FAIR VALUE OF FINANCIAL INSTRUMENTS [Abstract] | |
FAIR VALUE OF FINANCIAL INSTRUMENTS | 5. FAIR VALUE OF FINANCIAL INSTRUMENTS Fair value is defined as the price that would be received from the sale of an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Financial Accounting Standards Board (“FASB”) established a three-level hierarchy for disclosure based on the extent and level of judgment used to estimate fair value. Level 1 inputs consist of valuations based on quoted market prices in active markets for identical assets or liabilities. Level 2 inputs consist of valuations based on quoted prices for similar assets or liabilities, quoted prices for identical assets or liabilities in an inactive market, or other observable inputs. Level 3 inputs consist of valuations based on unobservable inputs that are supported by little or no market activity. The following table presents financial instruments, other than long-term debt, that we measured at fair value on a recurring basis at March 31, 2019 and September 30, 2018. See Note 10 for a detailed discussion of our long-term debt. We have classified the following assets and liabilities in accordance with the fair value hierarchy set forth in the applicable standards. 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 them based on the lowest-level input that is significant to the determination of the fair value. March 31, 2019 Level 1 Level 2 Level 3 Total Fair Value Assets: Cash and cash equivalents $ 192,260 $ - $ - $ 192,260 Other long-term investments 1,371 - - 1,371 Total assets $ 193,631 $ - $ - $ 193,631 Liabilities: Derivative financial instruments - 8,401 - 8,401 Total liabilities $ - $ 8,401 $ - $ 8,401 September 30, 2018 Level 1 Level 2 Level 3 Total Fair Value Assets: Cash and cash equivalents $ 352,921 $ - $ - $ 352,921 Other long-term investments 1,137 - - 1,137 Total assets $ 354,058 $ - $ - $ 354,058 Liabilities: Derivative financial instruments - 339 - 339 Total liabilities $ - $ 339 $ - $ 339 Our 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. We invest only in AAA-rated, prime institutional money market funds, comprised of high quality, short-term fixed income securities. Our other long-term investments represent the fair value of investments under the Cabot Microelectronics Supplemental Employee Retirement Plan (SERP), which is a nonqualified supplemental savings plan. The fair value of the investments is determined through quoted market prices within actively traded markets. Although the investments are allocated to individual participants and investment decisions are made solely by those participants, the SERP is a nonqualified plan. Consequently, the Company owns the assets and the related offsetting liability for disbursement until a participant makes a qualifying withdrawal. The long-term investment was adjusted to $ 1,371 Our derivative financial instruments include foreign exchange contracts and interest rate swap. During the quarter, we entered into a floating-to-fixed interest rate swap agreement to hedge the variability in LIBOR-based interest payments on a portion of our outstanding variable rate debt. 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 LIBOR-based yield curves for interest rate swap, and forward rates and/or the Overnight Index Swap (OIS) curve for forward foreign exchange contracts, among others. We consider the risk of nonperformance, including counterparty credit risk, in the calculation of the fair value of derivative financial instruments. See Note 11 of this Report on Form 10-Q for more information on our use of derivative financial instruments. |
INVENTORIES
INVENTORIES | 6 Months Ended |
Mar. 31, 2019 | |
INVENTORIES [Abstract] | |
INVENTORIES | 6. INVENTORIES Inventories consisted of the following: March 31, 2019 September 30, 2018 Raw materials $ 58,496 $ 35,150 Work in process 12,569 8,117 Finished goods 76,259 28,659 Total $ 147,324 $ 71,926 |
GOODWILL AND OTHER INTANGIBLE A
GOODWILL AND OTHER INTANGIBLE ASSETS | 6 Months Ended |
Mar. 31, 2019 | |
GOODWILL AND OTHER INTANGIBLE ASSETS [Abstract] | |
GOODWILL AND OTHER INTANGIBLE ASSETS | 7. GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill was $705,426 as of March 31, 2019, and $101,083 as of September 30, 2018. The increase in goodwill was due to $ 604,510 in goodwill related to the acquisition of KMG offset by $ 167 in foreign exchange fluctuations. The amount of goodwill assigned to each of the Electronic Materials and Performance Materials segments was $358,141 and , respectively. The components of other intangible assets are as follows: March 31, 2019 September 30, 2018 Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization Other intangible assets subject to amortization: Product technology, trade secrets and know-how $ 134,340 $ 31,131 $ 48,825 $ 25,305 Acquired patents and licenses 10,570 8,315 8,270 8,252 Customer relationships, trade names, and distribution rights 739,560 37,816 28,068 17,574 Total other intangible assets subject to amortization 884,470 77,262 85,163 51,131 Other intangible assets not subject to amortization: Other indefinite-lived intangibles* 47,170 1,170 Total other intangible assets not subject to amortization 47,170 1,170 Total other intangible assets $ 931,640 $ 77,262 $ 86,333 $ 51,131 *Other indefinite-lived intangible assets not subject to amortization consist primarily of trade names. As discussed in Note 4, we recorded $844,800 of intangible assets related to our acquisition of KMG. The allocation of the amount into the various categories of intangible assets, as well as useful lives we have established, are discussed in Note 4. Amortization expense on our intangible assets was $16,960 and $26,318 for the three and six months ended March 31, 2019, respectively, and was $1,963 and $3,936 for the three and six months ended March 31, 2018, respectively. Estimated future amortization expense for the five succeeding fiscal years is as follows: Fiscal Year Estimated Amortization Expense Remainder of 2019 $ 33,881 2020 87,936 2021 87,233 2022 79,822 2023 67,663 Goodwill and indefinite-lived intangible assets are tested for impairment annually in the fourth quarter of our fiscal year or more frequently if indicators of potential impairment exist, using a fair-value-based approach. The recoverability of goodwill is measured at the reporting unit level, which is defined as either an operating segment or one level below an operating segment. An entity has the option to assess the fair value of a reporting unit either using a qualitative analysis ("step zero") or a quantitative analysis ("step one"). Similarly, an entity has the option to use a step zero or a step one approach to determine the recoverability of indefinite-lived intangible assets. In 2018, we chose to use a step one analysis for both goodwill impairment and for indefinite-lived intangible asset impairment, with the exception of our CMP slurries reporting unit, for which we chose to use a step zero analysis for fiscal 2018. We completed our annual impairment test during our fourth quarter of fiscal 2018 and concluded that no impairment existed. There were no indicators of potential impairment during the quarter ended March 31, 2019, so it was not necessary to perform an impairment review for goodwill and indefinite-lived intangible assets during the quarter. There have been no impairment charges recorded on the goodwill for any of our reporting units. |
OTHER LONG-TERM ASSETS
OTHER LONG-TERM ASSETS | 6 Months Ended |
Mar. 31, 2019 | |
OTHER LONG-TERM ASSETS [Abstract] | |
OTHER LONG-TERM ASSETS | 8. OTHER LONG-TERM ASSETS Other long-term assets consisted of the following: March 31, 2019 September 30, 2018 Long-term contract assets 1,024 1,548 Long-term SERP Investment 1,371 1,137 Prepaid unamortized debt issuance cost 795 - Other long-term assets 3,025 1,979 Total $ 6,215 $ 4,664 |
ACCRUED EXPENSES, INCOME TAXES
ACCRUED EXPENSES, INCOME TAXES PAYABLE AND OTHER CURRENT LIABILITIES | 6 Months Ended |
Mar. 31, 2019 | |
ACCRUED EXPENSES, INCOME TAXES PAYABLE AND OTHER CURRENT LIABILITIES [Abstract] | |
ACCRUED EXPENSES, INCOME TAXES PAYABLE AND OTHER CURRENT LIABILITIES | 9. ACCRUED EXPENSES, INCOME TAXES PAYABLE AND OTHER CURRENT LIABILITIES Accrued expenses, income taxes payable and other current liabilities consisted of the following: March 31, 2019 September 30, 2018 Accrued compensation $ 26,148 $ 35,367 Income taxes payable 18,889 18,045 Dividends payable 12,742 10,822 Taxes, other than income taxes 6,530 1,976 Accrued interest 4,197 - Contract liabilities 3,611 4,894 Goods and services received, not yet invoiced 4,260 1,954 Other accrued expenses 10,536 9,925 Total $ 86,913 $ 82,983 |
DEBT
DEBT | 6 Months Ended |
Mar. 31, 2019 | |
DEBT [Abstract] | |
DEBT | 10. DEBT On the Acquisition Date, we entered into the Credit Agreement by and among the Company, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent, which provides for senior secured financing of up to $1,265.0 million, consisting of the Term Loan Facility in an aggregate principal amount of $1,065.0 million and the Revolving Credit Facility in an aggregate principal amount of up to $200.0 million, including a letter of credit sub-facility of up to $50.0 million. The Term Loan Facility and the Revolving Credit Facility are referred to as the “Credit Facilities.” Proceeds of the loans borrowed under the Term Loan Facility on the Acquisition Date were used to fund, in part, the Acquisition and certain of KMG’s existing indebtedness, and to pay related fees and expenses. The Revolving Credit Facility remains undrawn. The Credit Facilities are guaranteed by each of the Company’s wholly owned domestic subsidiaries, including KMG and its subsidiaries, and are secured by substantially all assets of the Company and of each subsidiary guarantor, in each case subject to certain exceptions. Borrowings under the Credit Facilities bear interest at a rate per annum equal to, at the Company’s option, either (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, 2.25% for LIBOR loans and 1.25% 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. The applicable margin for borrowings under the Revolving Credit Facility varies depending on the Company’s first lien secured net leverage ratio. The Company is also required to pay a commitment fee currently equal to 0.25% per annum to the lenders under the Revolving Credit Facility in respect of the unutilized commitments thereunder. The commitment fee under the Revolving Credit Facility varies depending on the Company’s first lien secured net leverage ratio. The Term Loan Facility matures on November 15, 2025, the seven-year anniversary of the Acquisition Date, and amortizes in equal quarterly installments of 0.25% of the initial principal amount, starting with the first full fiscal quarter after the Acquisition Date. The Revolving Facility matures on November 15, 2023, the five-year anniversary of the Acquisition Date. In addition, the Company is required to prepay outstanding loans under the Term Loan Facility, subject to certain exceptions, with up to 50% of the Company’s annual excess cash flow, as defined under the Credit Agreement, and 100% of the net cash proceeds of certain recovery events and non-ordinary course asset sales. The Company may generally prepay outstanding loans under the Credit Facilities at any time, without prepayment premium or penalty, subject to customary “breakage” costs with respect to LIBOR rate loans. Prepayments of the Term Loan Facility in connection with certain “repricing events” resulting in a lower yield occurring at any time during the first six months after the Acquisition Date must be accompanied by a 1.00% prepayment premium. During this quarter we made a prepayment of $45.0 The Revolving Credit Facility requires that the Company maintain a maximum first lien secured net leverage ratio, as defined in the Credit Agreement, of 4.00 to 1.00 as of the last day of each fiscal quarter if any revolving loans are outstanding, commencing with the first full fiscal quarter after the Acquisition Date. The 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. The Credit Agreement contains certain events of default, including relating to a change of control. If an event of default occurs, the lenders under the Credit Facilities will be entitled to take various actions, including the acceleration of amounts due under the Credit Facilities. At March 31, 2019, the fair value of the Term Loan Facility, using level 2 inputs, approximated its carrying value of $1,020,000 as the loan bears a floating market rate of interest. As of March 31, 2019, $13,313 of the debt outstanding was classified as short-term, and In the second quarter of fiscal 2019, we entered into a floating-to-fixed interest rate swap agreement to hedge the variability in our LIBOR-based interest payments on approximately 70% of our Term Loan Facility balance. See Note 11 on the Report on Form 10-Q for additional information. Principal repayments of the Term Loan Facility are generally made on the last calendar day of each quarter if that day is considered to be a business day. As of March 31, 2019, scheduled principal repayments of the Term Loan were as follows: Fiscal Year Principal Repayments Remainder of 2019 $ 7,988 2020 10,650 2021 10,650 2022 10,650 2023 10,650 Greater than 5 years 969,412 Total $ 1,020,000 |
DERIVATIVE FINANCIAL INSTRUMENT
DERIVATIVE FINANCIAL INSTRUMENTS | 6 Months Ended |
Mar. 31, 2019 | |
DERIVATIVE FINANCIAL INSTRUMENTS [Abstract] | |
DERIVATIVE FINANCIAL INSTRUMENTS | 11. 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. We have policies in place that define acceptable instrument types we may enter into and we have established controls to limit our market risk exposure. We do not use derivative financial instruments for trading or speculative purposes. In addition, all derivatives, whether designated in hedging relationships or not, are required to be recorded on the Consolidated Balance Sheets at fair value on a gross basis. Cash Flow Hedges - Interest Rate Swap Agreements During the quarter, we entered into a floating-to-fixed interest rate swap agreement to hedge the variability in LIBOR-based interest payments on a portion of our outstanding variable rate debt. As of March 31, 2019, the notional value of the swap was $746,000 and this value is scheduled to decrease bi-annually, and expire on January 31, 2024. We have designated this swap agreement as a cash flow hedge pursuant to ASC 815, "Derivatives and Hedging". Based on certain quantitative and qualitative assessments, we have determined that the hedge is highly effective and qualifies for hedge accounting. Accordingly, unrealized gains and losses on the hedge are recorded in other comprehensive income. Realized gains and losses are recorded on the same financial statement line as the hedged item, which is interest expense. Foreign Currency Contracts Not Designated as Hedges On a regular basis, 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; therefore, the gains and losses resulting from the impact of currency exchange rate movements on our forward foreign exchange contracts are recognized as other income or expense in the accompanying consolidated income statements in the period in which the exchange rates change. As of March 31, 2019 and September 30, 2018, the notional amounts of the forward contracts we held to purchase U.S. dollars in exchange for foreign currencies were $4,102 and $7,652, respectively, and the notional amounts of forward contracts we held to sell U.S. dollars in exchange for foreign currencies were $23,815 and $24,860, respectively. Net Investment Hedge - Foreign Exchange Contracts In September 2017, we entered into forward contracts to sell 100 billion Korean won and buy U.S. dollars, which we subsequently terminated in the third quarter of fiscal 2018. We had designated these forward contracts as effective net investment hedges. During the second quarter of fiscal 2018, the change in the fair value of these forward contracts in the net investment hedge relationship was $2,966, which was recorded in foreign currency translation adjustments within other comprehensive income. The fair value of our derivative instruments included in the Consolidated Balance Sheets, which was determined using Level 2 inputs, was as follows: Asset Derivatives Liability Derivatives Consolidated Balance Sheet Locatio March 31, 2019 September 30, 2018 March 31, 2019 September 30, 2018 Derivatives designated as hedging instruments Interest rate swap contract Accrued expenses, income taxes payable and other current liabilities $ - $ - $ 781 $ - Other long-term liabilities - - $ 7,572 $ - Derivatives not designated as hedging instruments Foreign exchange contracts Prepaid expenses and other current assets $ - $ - $ - $ - Accrued expenses, income taxes payable and other current liabilities $ - $ - $ 48 $ 339 The following table summarizes the effect of our derivative instruments on our Consolidated Statements of Income for the three and six months ended March 31, 2019 and 2018: Gain (Loss) Recognized in Statement of Income Three Months Ended Six Months Ended Statement of Income Location March 31, 2019 March 31, 2018 March 31, 2019 March 31, 2018 Derivatives not designated as hedging instruments Foreign exchange contracts Other income (expense), net $ (348 ) $ 887 $ (38 ) $ 78 The interest rate swap agreement has been deemed to be effective, and realized gains and losses were immaterial to our Consolidated Statement of Income. We recorded an unrealized loss of $6,473, net of tax, in accumulated comprehensive income during the three and six months ended March 31, 2019 for this interest rate swap. As of March 31, 2019, during the next 12 months, we expect approximately $781 to be reclassed from accumulated other comprehensive income into interest expense related to our interest rate swap based on projected rates of the LIBOR forward curve as of March 31, 2019. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 6 Months Ended |
Mar. 31, 2019 | |
COMMITMENTS AND CONTINGENCIES [Abstract] | |
COMMITMENTS AND CONTINGENCIES | 12. COMMITMENTS AND CONTINGENCIES LEGAL PROCEEDINGS We periodically become a party to legal proceedings, arbitrations and regulatory proceedings (“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 the consolidated financial statements. One of these contingencies, which we assumed in connection with our acquisition of KMG, is discussed below. 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. The Company records legal costs associated with loss contingencies as expenses in the period in which they are incurred. The United States Environmental Protection Agency (“EPA”) has notified KMG’s subsidiary, 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 (“CERCLA”) by virtue of its relationship with certain alleged predecessor companies, including Idacon, Inc. (f/k/a Sonford Chemical Company in connection with the Star Lake Canal Superfund Site near Beaumont, Texas. The EPA has estimated that the remediation will cost approximately $22.0 million. KMG and approximately seven other parties entered into an agreement with the EPA in September 2016 to complete a remedial design phase of the remediation of the site. The remediation work will be performed under a separate future agreement. Although KMG has not conceded liability, KMG established a reserve in connection with the remedial design, and 1,008 Other than as described above, 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. In addition, our Company is Certain licenses, permits and product registrations are required for the Company’s products and operations in the U.S., Mexico and other countries in which it does business. The licenses, permits and product registrations are subject to revocation, modification and renewal by governmental authorities. In the U.S. in particular, producers and distributors of pentachlorophenol (“penta”), which is a product manufactured and sold by a KMG subsidiary as part of the wood treatment business, are subject to registration and notification requirements under the Federal Insecticide, Fungicide and Rodenticide Act (“FIFRA”) and comparable state law in order to sell this product in the U.S. Compliance with these requirements may have a significant effect on our business, financial condition and results of operations. We are subject to contingencies, including litigation relating to EHS laws and regulations, commercial disputes and other matters. Certain of these contingencies are discussed below. 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 the consolidated financial statements. 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. The Company records legal costs associated with loss contingencies as expenses in the period in which they are incurred. Refer to Note 17 of “Notes to the Consolidated Financial Statements” in Item 8 of Part II of our Annual Report on Form 10-K for the fiscal year ended September 30, 2018, for additional information regarding commitments and contingencies. POSTRETIREMENT OBLIGATIONS IN FOREIGN JURISDICTIONS We have defined benefit plans covering employees in certain foreign jurisdictions as required by local law, which are unfunded. We adopted ASU 2017-07 during the first quarter of the fiscal year and pursuant to the adoption, net service costs are recorded as fringe benefit expense under cost of sales and operating expenses, and all other costs are recorded in the Other income (expense), net in our Consolidated Statements of Income. The projected benefit obligations and accumulated benefit obligations under all such unfunded plans are updated annually during the fourth quarter of the fiscal year. Benefit payments under all such unfunded plans to be paid over the next ten years are expected to be approximately $7,906. For more information regarding these plans, refer to Note 17 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, 2018. PURCHASE OBLIGATIONS Purchase obligations include take-or-pay arrangements with suppliers, and purchase orders and other obligations entered into in the normal course of business regarding the purchase of goods and services. We have been operating under a fumed silica supply agreement with Cabot Corporation, our former parent company which is not a related party, the current term of which runs through December 2019. As of March 31, 2019, purchase obligations include $11,073 of contractual commitments related to our Cabot Corporation supply agreement for fumed silica. |
ACCUMULATED OTHER COMPREHENSIVE
ACCUMULATED OTHER COMPREHENSIVE INCOME | 6 Months Ended |
Mar. 31, 2019 | |
ACCUMULATED OTHER COMPREHENSIVE INCOME [Abstract] | |
ACCUMULATED OTHER COMPREHENSIVE INCOME | 13. ACCUMULATED OTHER COMPREHENSIVE INCOME The table below summarizes the components of accumulated other comprehensive income (AOCI), net of tax provision/(benefit), as of March 31, 2019 and 2018: Foreign Currency Translation Cash Flow Hedges Pension and Other Postretirement Liabilities Total Balance at September 30, 2018 $ 5,918 $ (17 ) $ (1,362 ) $ 4,539 Foreign currency translation adjustment, net of tax of $(21) 1,433 - - 1,433 Unrealized gain (loss) on cash flow hedges: Change in fair value, net of tax of $(1,879) - (6,473 ) - (6,473 ) Reclassification adjustment into earnings, net of tax of $0 - (1 ) - (1 ) Balance at March 31, 2019 $ 7,351 $ (6,491 ) $ (1,362 ) $ (502 ) Foreign Currency Translation Cash Flow Hedges Pension and Other Postretirement Liabilities Total Balance at September 30, 2017 $ 5,239 $ 46 $ (1,336 ) $ 3,949 Foreign currency translation adjustment, net of tax of $(1,384) 11,105 - - 11,105 Unrealized gain (loss) on cash flow hedges: Change in fair value, net of tax of $57 - 165 - 165 Reclassification adjustment into earnings, net of tax of $(6) - (18 ) - (18 ) Balance at March 31, 2018 $ 16,344 $ 193 $ (1,336 ) $ 15,201 The before tax amount reclassified from AOCI to net income during the three and six months ended March 31, 2019 and 2018, related to cash flow hedges, were recorded as interest expense on our Consolidated Statement of Income. |
SHARE-BASED COMPENSATION PLANS
SHARE-BASED COMPENSATION PLANS | 6 Months Ended |
Mar. 31, 2019 | |
SHARE-BASED COMPENSATION PLANS [Abstract] | |
SHARE-BASED COMPENSATION PLANS | 14. We issue share-based awards under the following programs: our Cabot Microelectronics Corporation 2012 Omnibus Incentive Plan, as amended effective March 7, 2017 (OIP); our Cabot Microelectronics Corporation 2007 Employee Stock Purchase Plan, as Amended and Restated January 1, 2010 (ESPP); and, pursuant to the OIP, our Directors' Deferred Compensation Plan, as amended September 23, 2008 (DDCP), and our 2001 Executive Officer Deposit Share Program (DSP). In March 2017, our stockholders reapproved the material terms of performance-based awards under the OIP for purposes of complying with Section 162(m) of the Internal Revenue Code of 1986, as amended. For additional information regarding these programs, refer to Note 12 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, 2018. We record share-based compensation expense for all share-based awards, including stock option grants, and restricted stock, restricted stock unit and performance share unit ("PSU") awards, and employee stock purchase plan purchases. We calculate share-based compensation expense using the straight-line approach based on awards ultimately expected to vest, which requires the use of an estimated forfeiture rate. Our estimated forfeiture rate is primarily based on historical experience, but may be revised in future periods if actual forfeitures differ from the estimate. We use the Black-Scholes option-pricing model to estimate the grant date fair value of our stock options and employee stock purchase plan purchases. This model requires the input of highly subjective assumptions, including the price volatility of the underlying stock, the expected term of our stock options, expected dividend yield and the risk-free interest rate. We estimate the expected volatility of our stock options based on a combination of our stock's historical volatility and the implied volatilities from actively-traded options on our stock. We calculate the expected term of our stock options using historical stock option exercise data, and for stock option grants made prior to December 2017, we have added a slight premium to this expected term for employees who meet the definition of retirement-eligible pursuant to their stock option grants during the contractual term of the grant. As of December 2017, the provisions of stock option grants and restricted stock unit awards stated that, except in certain circumstances including termination for cause, once an employee meets the retirement eligibility requirements, any remaining unvested share-based awards will continue to vest regardless of termination of service. Consequently, the requisite service period for the award is satisfied upon retirement eligibility. Therefore, we record the total share-based compensation expense upon award for those employees who have met the retirement eligibility at the grant date. The expected dividend yield represents our annualized dividend in dollars divided by the stock price on the date of grant. The risk-free interest rate is derived from the U.S. Treasury yield curve in effect at the time of grant. The PSUs that have been awarded may be subject to downward or upward adjustment depending on the total shareholder return achieved by the Company during the particular performance period related to the PSUs, relative to the total shareholder return of an established market index. We use a third-party service provider to estimate the fair value of the PSUs at grant date by using a Monte Carlo simulation model. This model simulates the stock price movements of the Company and Index constituents using certain assumptions, including the stock price of the Company and index constituents, the risk-free interest rate and stock price volatility. Subsequent to the KMG acquisition, the performance of the PSUs awarded in December 2017 were modified to KMG awards granted subsequent to the entry into the definitive agreement, but prior to the Acquisition Date, were converted to our restricted stock units (“Replacement Award”), with vesting in three equal installments on the first three anniversaries of the original award date. If the recipient is terminated without cause or resigns with good reason during the 18 months following the Acquisition Date, the Replacement Award will vest as of such termination date in a number of shares equal to 150% of the Replacement Award. The share-based compensation expense related to the Replacement Awards, including accelerated vesting, was $3,253 in the first quarter of fiscal 2019 and not material in the second quarter of fiscal 2019. The expense was included in the table below. |
INCOME TAXES
INCOME TAXES | 6 Months Ended |
Mar. 31, 2019 | |
INCOME TAXES [Abstract] | |
INCOME TAXES | 15. INCOME TAXES The Company’s effective tax rate was 28.5% and 26.0% for the three and six months ended March 31, 2019, respectively, compared to a 19.6% and 63.8% effective income tax rate for the three and six months ended March 31, 2018. The decrease in our effective tax rate for the six months ended March 31, 2019 compared to the prior year is primarily |
EARNINGS PER SHARE
EARNINGS PER SHARE | 6 Months Ended |
Mar. 31, 2019 | |
EARNINGS PER SHARE [Abstract] | |
EARNINGS PER SHARE | 16. EARNINGS PER SHARE Basic earnings per share (EPS) is calculated by dividing net income available to common stockholders by the weighted-average number of common shares outstanding during the period, excluding the effects of unvested restricted stock awards that have a right to receive non-forfeitable dividends, which are considered participating securities as prescribed by the two-class method under ASC 260 “Earnings per Share”. Diluted EPS is calculated in a similar manner, but the weighted-average number of common shares outstanding during the period is increased to include the weighted-average dilutive effect of “in-the-money” stock options and unvested restricted stock shares using the treasury stock method. The standards of accounting for earnings per share require companies to provide a reconciliation of the numerator and denominator of the basic and diluted earnings per share computations. Basic and diluted earnings per share were calculated as follows: Three Months Ended March 31, Six Months Ended March 31, 2019 2018 2019 2018 Numerator: Net Income $ 27,137 $ 29,737 $ 40,580 26,654 Less: income attributable to participating securities - (30 ) - (34 ) Earnings available to common shares $ 27,137 $ 29,707 $ 40,580 26,620 Denominator: Weighted average common shares 28,997,632 25,592,508 28,065,759 25,473,757 (Denominator for basic calculation) Weighted average effect of dilutive securities: Share-based compensation 481,482 568,678 541,274 601,925 Diluted weighted average common shares 29,479,114 26,161,186 28,607,033 26,075,682 (Denominator for diluted calculation) Earnings per share: Basic $ 0.94 $ 1.16 $ 1.45 1.05 Diluted $ 0.92 $ 1.14 $ 1.42 1.02 Approximately March 31, 2019 |
SEGMENT REPORTING
SEGMENT REPORTING | 6 Months Ended |
Mar. 31, 2019 | |
SEGMENT REPORTING [Abstract] | |
SEGMENT REPORTING | 17. 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 historically have operated predominantly in one industry segment – the development, manufacture and sale of Chemical Mechanical Planarization (CMP) consumables products. With our acquisition of KMG, we reassessed our operating and reportable segments, and determined that we now have the following two reportable segments: Electronic Materials Electronic Materials includes products and solutions for the semiconductor industry. We manufacture and sell CMP consumables, including CMP slurries and polishing pad products, Performance Materials Performance Materials includes pipeline performance products and services , wood treatment products, and Beginning in fiscal 2019 and with the acquisition of KMG, 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 items related to our acquisition of KMG, such as expenses incurred to complete the acquisition, integration-related expenses and impact of fair value adjustments to inventory acquired from KMG. We exclude these items from earnings when presenting our adjusted EBITDA measure because we believe they will be incurred infrequently and/or are otherwise not indicative of a segment's regular, ongoing operating performance. Adjusted EBITDA is also the basis of a performance metric for our fiscal 2019 Short-Term Incentive Program (STIP). In addition, our chief operating decision maker does not use assets by segment to evaluate performance or allocate resources. Therefore, we do not disclose assets by segment. Revenue from external customers and segment adjusted EBITDA were (in thousands): Three Months Ended March 31, Six Months Ended March 31, 2019 2018 2019 2018 Segment Revenue Electronic Materials $ 212,846 $ 136,103 $ 403,462 $ 269,417 Performance Materials 52,545 6,875 83,707 13,540 Total $ 265,391 $ 142,978 $ 487,169 $ 282,957 Three Months Ended March 31, Six Months Ended March 31, 2019 2018 2019 2018 Segment adjusted EBITDA: Electronic Materials $ 74,910 $ 52,285 $ 149,735 $ 105,181 Performance Materials 22,660 1,231 35,727 2,519 Unallocated corporate expenses (12,052 ) (9,884 ) (23,094 ) (20,735 ) Interest income 568 1,156 1,587 2,107 Interest expense (13,331 ) (1,158 ) (20,221 ) (2,290 ) Depreciation and amortization (27,348 ) (6,638 ) (43,889 ) (13,138 ) Charge for fair value write-up of acquired inventory sold (4,566 ) - (14,827 ) - Acquisition and integration related expenses (2,904 ) - (30,198 ) - Income before income taxes $ 37,937 $ 36,992 $ 54,820 $ 73,644 We began to manage and report our results under the new organizational structure in conjunction with the KMG acquisition in fiscal 2019 and have reflected this change for all historical periods presented. Since the two segments operate independently and serve different markets and customers, there are no sales between segments. Revenue from external customers and segment adjusted EBITDA shown for Performance Materials for the quarter ended March 31, 2018 includes Cabot Microelectronics’ heritage QED business and an immaterial business that was sold in March 2018. |
BACKGROUND AND BASIS OF PRESE_2
BACKGROUND AND BASIS OF PRESENTATION (Policies) | 6 Months Ended |
Mar. 31, 2019 | |
BACKGROUND AND BASIS OF PRESENTATION [Abstract] | |
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. The accounting estimates that require management's most difficult and subjective judgments include, but are not limited to, those estimates related to bad debt expense, inventory valuation, impairment of long-lived assets and investments, business combinations, goodwill, other intangible assets, share-based compensation, income taxes and contingencies. We base our estimates on historical experience, current conditions and on various other assumptions that we believe are reasonable under the circumstances. However, future events are subject to change and estimates and judgments routinely require adjustment. Actual results may differ from these estimates under different assumptions or conditions. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS (Policies) | 6 Months Ended |
Mar. 31, 2019 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS [Abstract] | |
REVENUE RECOGNITION | REVENUE RECOGNITION As of October 1, 2018, the Company began applying the provisions of Accounting Standards Codification 606-10, “Revenue from Contracts with Customers” (“ASC 606”), and all related appropriate guidance using the modified retrospective method applied to those contracts which were not completed as of October 1, 2018. The Company recognizes revenue under the core principle of depicting the transfer of control to the Company’s customers in an amount reflecting the consideration to which the Company expects to be entitled. In order to achieve that core principle, the Company applies the following five step approach: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when a performance obligation is satisfied. Upon adoption of ASC 606 we recognized a $933 decrease to the opening balance of retained earnings, net of tax, due to the cumulative impact of adopting the new revenue standards. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. The Company changed its accounting policy for revenue recognition for customer incentives that provide free products and tiered pricing. For free products, the new revenue standards require that a portion of the transaction price be allocated to the free product and deferred until the product has been delivered. We previously accrued for undelivered free product as a charge to cost of sales. In prior fiscal years, in accordance with ASC 605, we did not consider prospective tiered pricing to represent a material right. The cumulative effect of the changes made to our Consolidated Balance Sheet as of October 1, 2018 for the adoption of the new revenue standards Balance at September 30, 2018 Adjustments Due to ASC 606 Balance at October 1, 2018 Deferred income tax assets $ 5,840 $ 261 $ 6,101 Accrued expenses, income taxes payable and other current liabilities 82,983 (47 ) 82,936 Other long-term liabilities 13,046 1,241 14,287 Retained earnings $ 471,673 $ (933 ) $ 470,740 We have determined that the effect of applying the new revenue standards during the three and six months ended March 31, 2019 was immaterial to our financial statements compared to revenue guidance in effect before the adoption of the new revenue standards. As a result, for the three and six months ended March 31, 2019, we are not disclosing the quantitative amount by which each financial statement line item is affected by the application of the new revenue standards. As part of the adoption of ASU 606, the Company elected to use certain allowed practical expedients. For the Company’s contracts that have an original duration of one year or less as of the adoption date, the Company uses the practical expedient applicable to such contracts and does not consider the time value of money. Further, because of the short duration of these contracts, the Company has not disclosed the transaction price for the future performance obligations as of the end of each reporting period for contracts having an expected duration of one year or less. See Note 3 of this Report on Form 10-Q for disaggregated revenue, the reconciliation of contract balances and transaction price allocation to remaining performance obligations for contracts expected to remain effective beyond one year. Performance Obligations and Material Rights At contract inception, the Company assesses the goods and services promised in its contracts with customers and identifies a performance obligation for each material promise to the customer. A performance obligation is a promise in a contract to transfer a distinct good or service, or a bundle of goods or services, to the customer, and is the unit of accounting under ASC 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. A majority of the Company’s contracts have a single performance obligation which represents, in most cases, the products, equipment or services being sold to the customer. Some contracts include multiple performance obligations including prospective tiered price discounts or delivery of free product that we have concluded represents a material right. Contracts with prospective tiered price discounts require judgment in determining if that discount represents a material right. Contracts vary in length and payment terms vary by the type and location of the Company’s customers and the products or services offered. However, the period of time between invoicing and when payment is due is typically not significant and has no significant financing components. Customers pay in accordance with negotiated terms upon receipt of goods or completion of services. For these contracts, the transaction price is determined upon establishment of the contract that contains the final terms of the sale, including the description, quantity, and price of goods or services purchased. In certain instances, we receive consideration from a customer prior to transferring goods or services to the customer under the terms of a sales contract. In such cases, we record deferred revenue until the performance obligation is satisfied, which represents a contract liability, and is included in the contract liabilities discussed in Note 3 of this Form 10-Q. The Company recognizes revenue related to product sales at a point in time following the transfer of control of such products to the customer, which generally occurs upon shipment, or delivery depending on the terms of the underlying contracts. The Company considers control to have transferred upon shipment or delivery because the Company has a present right to payment at that time, the customer has legal title to the asset, the Company has transferred physical possession of the asset, and the customer has significant risks and rewards of ownership of the asset. Revenue is recognized on consignment sales when control transfers to the customer, generally at the point of customer usage of the product. The Company also records revenue for services provided to the pipeline and oilfield energy industries. These services include preventive maintenance, repair and specialized isolation sealing on pipelines and training. Revenue is recorded at a point in time when the services are completed as this is when right to payment and customer acceptance occurs. For sales contracts that contain multiple performance obligations, the Company allocates the transaction price to each performance obligation identified in the contract based on relative standalone selling prices or estimates of such prices. Standalone selling price, once established, is then used to allocate total consideration proportionally to the various performance obligations within a contract. Most contracts where we have determined there to be multiple performance obligations relate to where we have identified a material right to exist such that we provide prospective tiered pricing discounts or free product. When we invoice for products shipped under these contracts, we defer the revenue associated with these rights on the balance sheet as a contract liability. Revenue is recognized when the customer exercises the option to purchase goods at a discount in the case of the prospective tiered pricing discounts or when we ship the free product. Variable Consideration The primary type of variable consideration present in the Company’s contracts are rebates and early payment discounts, both of which are immaterial. Early payment discounts are offered on a limited basis and are not significant. The Company also offers rebates based upon cumulative volume of purchases within a quarter and accrues for the rebate obligation within the quarter that the rebate is earned. ASC 606 did not change the accounting for rebates under ASC 605. Costs to Obtain and Fulfill a Contract For certain contracts within the Performance Materials segment, commissions are paid to sales agents based upon a percentage of end-customer invoice value. Agents are paid the commissions after funds are received by the Company from its customers. Under ASC 340, sales commissions are required to be capitalized and expensed over the associated contract period. However, as a practical expedient, the Company does not capitalize commissions as the associated contracts are generally one year or less in duration. |
EFFECTS OF RECENT ACCOUNTING PRONOUNCEMENTS | EFFECTS OF RECENT ACCOUNTING PRONOUNCEMENTS In February 2016, the FASB issued ASU No. 2016-02, "Leases" (Topic 842). The provisions of ASU 2016-02 require a dual approach for lessee accounting under which a lessee would recognize a right-of-use asset and a corresponding lease liability. Leases will be classified as either finance or operating leases. For finance leases, a lessee will recognize interest expense and amortization of the right-of-use asset, and for operating leases, the lessee will recognize a straight-line total lease expense. The guidance also requires qualitative and specific quantitative disclosures to supplement the amounts recorded in the financial statements, to afford better understanding of an entity's leasing activities, including any significant judgments and estimates. The guidance was amended through various ASU's subsequent to ASU 2016-02, all of which will be effective for us beginning October 1, 2019, but early adoption is permitted. We are currently evaluating the impact of implementation of this standard on our financial statements. In June 2016, the FASB issued ASU No. 2016-13, "Measurement of Credit Losses on Financial Instruments" (Topic 326). The provisions of this standard require financial assets measured at amortized cost to be presented at the net amount expected to be collected. An allowance account would be established to present the net carrying value at the amount expected to be collected. ASU 2016-13 also provides that credit losses relating to available-for-sale debt securities should be recorded through an allowance for credit losses. ASU 2016-13 will be effective for us beginning October 1, 2020, but early adoption is permitted as of October 1, 2019. We are currently evaluating the impact of implementation of this standard on our financial statements. In March 2017, the FASB issued ASU No. 2017-07 "Improving the Presentation of Net Period Pension Cost and Net Period Postretirement Benefit Cost" (Topic 715). The provisions of ASU 2017-07 provided specific guidance on the presentation of the components of net benefit cost. We adopted this standard ASU 2017-07 effective October 1, 2018 and applied it retrospectively. P ursuant to the adoption, net service costs are recorded as fringe benefit expense under cost of sales and operating expenses, and all other costs are recorded in the Other income (expense), net in our Consolidated Statements of Income. The In May 2017, the FASB issued ASU No. 2017-09 "Scope of Modification Accounting" (Topic 718). The provisions of ASU 2017-09 provide specific guidance about which changes to the term or conditions of a share-based payment require an entity to apply modification accounting. We adopted ASU 2017-09 effective October 1, 2018 and will apply this new standard to the share-based compensation awards, to the extent modified. In August 2017, the FASB issued ASU No. 2017-12 "Derivatives and Hedging" (Topic 815). The provisions of this standard amend the hedge accounting model in ASC 815 to expand an entity's ability to hedge nonfinancial and financial risk components, reduce complexity in fair value hedges of interest rate risk, eliminate the requirement to separately measure and report hedge ineffectiveness, and generally require the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item. The guidance also eases certain documentation and assessment requirements and modifies the accounting for components excluded from the assessment of hedge effectiveness. We early adopted this guidance effective January 1, 2019, and we did not have any hedges that existed as of the initial application date. We applied the new guidance to the interest rate swap that we entered into during our second quarter of fiscal 2019. Pursuant to the guidance, we performed initial quantitative hedge effectiveness testing upon the hedge inception, and determined the hedge to be highly effective. Therefore, unrealized changes in fair value are recorded in other comprehensive income. In addition, we reclassify the realized gains and losses out of other comprehensive income, and into interest expense in our Consolidated Statements of Income, which is the same financial statement line as the hedged item. We will perform subsequent assessments of hedge effectiveness qualitatively on a quarterly basis. In February 2018, the FASB issued ASU No. 2018-02 "Income Statement – Reporting Comprehensive Income (Topic 220)". The amendments in this standard allow a company to reclassify the stranded tax effects resulting from the from accumulated other comprehensive income to retained earnings. ASU 2018-02 will be effective for us beginning October 1, 2019, but early adoption is permitted. We are currently evaluating the impact of implementation of this standard on our financial statements. In June 2018, the FASB issued ASU No. 2018-07 " Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting". The ASU simplified the accounting for share-based payments granted to nonemployees for goods and services, therefore guidance on such payments to nonemployees would be mostly aligned with the requirements for share-based payments granted to employees. ASU 2018-07 will be effective for us beginning October 1, 2019, but early adoption is permitted (but no earlier than the adoption date of Topic 606). We are currently evaluating the impact of implementation of this standard on our financial statements. In August 2018, the FASB issued ASU No. 2018-13 " Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement". The ASU provides specific guidance on various disclosure requirements in Topic 820, including removal, modification and addition to current disclosure requirements. ASU 2018-13 will be effective for us beginning October 1, 2020, but early adoption is permitted. We are currently evaluating the impact of implementation of this standard on our disclosures. In August 2018, the FASB issued 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 (a consensus of the FASB Emerging Issues Task Force)". The ASU Requires an entity (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 related to the service contract and which costs to expense. ASU 2018-15 will be effective for us beginning October 1, 2020, but early adoption is permitted. We are currently evaluating the impact of implementation of this standard on our financial statements. |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS (Tables) | 6 Months Ended |
Mar. 31, 2019 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS [Abstract] | |
Cumulative Effect Adoption of ASC 606 on Balance Sheet | The cumulative effect of the changes made to our Consolidated Balance Sheet as of October 1, 2018 for the adoption of the new revenue standards Balance at September 30, 2018 Adjustments Due to ASC 606 Balance at October 1, 2018 Deferred income tax assets $ 5,840 $ 261 $ 6,101 Accrued expenses, income taxes payable and other current liabilities 82,983 (47 ) 82,936 Other long-term liabilities 13,046 1,241 14,287 Retained earnings $ 471,673 $ (933 ) $ 470,740 |
REVENUE FROM CONTRACTS WITH C_2
REVENUE FROM CONTRACTS WITH CUSTOMERS (Tables) | 6 Months Ended |
Mar. 31, 2019 | |
REVENUE FROM CONTRACTS WITH CUSTOMERS [Abstract] | |
Disaggregation of Revenue | The following table shows revenue generated by product area during the three and six months ended March 31, 2019 and 2018: Three Months Ended March 31, Six Months Ended March 31, 2019 2018 2019 2018 Revenue: Electronic Materials: CMP Slurries $ 110,299 $ 115,086 $ 236,627 $ 229,522 Electronic Chemicals 78,549 - 118,371 - CMP Pads 23,998 21,017 48,464 39,895 Total Electronic Materials 212,846 136,103 403,462 269,417 Performance Materials 52,545 6,875 83,707 13,540 Total revenue $ 265,391 $ 142,978 $ 487,169 $ 282,957 |
Reconciliation of Contract Balances | Reconciliation of Contract Liability Balances The following table provides information about contract liability balances: March 31, 2019 October 1, 2018 Contract liabilities (current) $ 3,611 $ 5,310 Contract liabilities (noncurrent) 1,414 1,239 |
Transaction Price Allocated to Remaining Performance Obligations | Transaction Price Allocated to Remaining Performance Obligations The table below discloses (1) the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied (or partially 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 March 31, 2019 $ 87 $ 1,085 $ 329 $ 1,501 |
BUSINESS COMBINATION (Tables)
BUSINESS COMBINATION (Tables) | 6 Months Ended |
Mar. 31, 2019 | |
BUSINESS COMBINATION [Abstract] | |
Total Consideration Compromises | Amount Total cash consideration paid for KMG outstanding common stock and equity awards $ 900,756 Cash provided to payoff KMG debt 304,648 Total cash consideration paid 1,205,404 Fair value of Cabot Microelectronics common stock issued for KMG outstanding common stock and equity awards 331,048 Total consideration transferred $ 1,536,452 |
Assets Acquired and Liabilities Assumed | The following table summarizes the preliminary allocation of fair values of assets acquired and liabilities assumed as of Acquisition Date: Cash $ 23,217 Accounts receivable 64,711 Inventories 68,963 Prepaid expenses and other current assets 14,798 Property, plant and equipment 149,504 Intangible assets 844,800 Other long-term assets 6,208 Accounts payable (28,894 ) Accrued expenses and other current liabilities (43,451 ) Deferred income taxes liabilities (164,469 ) Other long-term liabilities (3,754 ) Total identifiable net assets 931,633 Goodwill 604,819 Total consideration transferred $ 1,536,452 |
Identifiable Intangible Assets | The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives as of the Acquisition Date: Fair Value Estimated Useful Life (years) Customer relationships $ 704,000 15-20 Technology and know-how 85,500 9-11 Trade name - Flowchem 46,000 Indefinite Trade name - all other 7,000 1-15 EPA product registration rights 2,300 15 Total intangible assets $ 844,800 |
Pro Forma Combined Results of Operations | The following unaudited supplemental pro forma information summarizes the combined results of operations for Cabot Microelectronics and KMG as if the Acquisition had occurred on October 1, 2017. Three Months Ended March 31, Six Months Ended March 31, 2019 2018 2019 2018 Revenues $ 265,391 $ 259,372 $ 549,147 $ 512,105 Net income (loss) 28,056 24,902 66,873 (38,262 ) Earnings per share - basic $ 0.97 $ 0.86 $ 2.32 $ (1.33 ) Earnings per share - diluted $ 0.95 $ 0.85 $ 2.27 $ (1.33 ) The following costs are included in the three and six months ended March 31, 2018: ● Non-recurring transaction costs of $580 and $30,610, respectively. ● Non-recurring transaction-related employee costs, such as accelerated stock compensation expense, retention and severance expense of $460 and $35,601, respectively. ● Non-recurring charge for fair value write-up of inventory sold of $1,045 and $14,859, respectively. |
FAIR VALUE OF FINANCIAL INSTR_2
FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables) | 6 Months Ended |
Mar. 31, 2019 | |
FAIR VALUE OF FINANCIAL INSTRUMENTS [Abstract] | |
Fair Value of Financial Instruments | The following table presents financial instruments, other than long-term debt, that we measured at fair value on a recurring basis at March 31, 2019 and September 30, 2018. See Note 10 for a detailed discussion of our long-term debt. We have classified the following assets and liabilities in accordance with the fair value hierarchy set forth in the applicable standards. 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 them based on the lowest-level input that is significant to the determination of the fair value. March 31, 2019 Level 1 Level 2 Level 3 Total Fair Value Assets: Cash and cash equivalents $ 192,260 $ - $ - $ 192,260 Other long-term investments 1,371 - - 1,371 Total assets $ 193,631 $ - $ - $ 193,631 Liabilities: Derivative financial instruments - 8,401 - 8,401 Total liabilities $ - $ 8,401 $ - $ 8,401 September 30, 2018 Level 1 Level 2 Level 3 Total Fair Value Assets: Cash and cash equivalents $ 352,921 $ - $ - $ 352,921 Other long-term investments 1,137 - - 1,137 Total assets $ 354,058 $ - $ - $ 354,058 Liabilities: Derivative financial instruments - 339 - 339 Total liabilities $ - $ 339 $ - $ 339 |
INVENTORIES (Tables)
INVENTORIES (Tables) | 6 Months Ended |
Mar. 31, 2019 | |
INVENTORIES [Abstract] | |
Inventories | Inventories consisted of the following: March 31, 2019 September 30, 2018 Raw materials $ 58,496 $ 35,150 Work in process 12,569 8,117 Finished goods 76,259 28,659 Total $ 147,324 $ 71,926 |
GOODWILL AND OTHER INTANGIBLE_2
GOODWILL AND OTHER INTANGIBLE ASSETS (Tables) | 6 Months Ended |
Mar. 31, 2019 | |
GOODWILL AND OTHER INTANGIBLE ASSETS [Abstract] | |
Other Intangible Assets | The components of other intangible assets are as follows: March 31, 2019 September 30, 2018 Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization Other intangible assets subject to amortization: Product technology, trade secrets and know-how $ 134,340 $ 31,131 $ 48,825 $ 25,305 Acquired patents and licenses 10,570 8,315 8,270 8,252 Customer relationships, trade names, and distribution rights 739,560 37,816 28,068 17,574 Total other intangible assets subject to amortization 884,470 77,262 85,163 51,131 Other intangible assets not subject to amortization: Other indefinite-lived intangibles* 47,170 1,170 Total other intangible assets not subject to amortization 47,170 1,170 Total other intangible assets $ 931,640 $ 77,262 $ 86,333 $ 51,131 |
Estimated Future Amortization Expense for the Succeeding Five Fiscal Years | Amortization expense on our intangible assets was $16,960 and $26,318 for the three and six months ended March 31, 2019, respectively, and was $1,963 and $3,936 for the three and six months ended March 31, 2018, respectively. Estimated future amortization expense for the five succeeding fiscal years is as follows: Fiscal Year Estimated Amortization Expense Remainder of 2019 $ 33,881 2020 87,936 2021 87,233 2022 79,822 2023 67,663 |
OTHER LONG-TERM ASSETS (Tables)
OTHER LONG-TERM ASSETS (Tables) | 6 Months Ended |
Mar. 31, 2019 | |
OTHER LONG-TERM ASSETS [Abstract] | |
Other Long Term Assets | Other long-term assets consisted of the following: March 31, 2019 September 30, 2018 Long-term contract assets 1,024 1,548 Long-term SERP Investment 1,371 1,137 Prepaid unamortized debt issuance cost 795 - Other long-term assets 3,025 1,979 Total $ 6,215 $ 4,664 |
ACCRUED EXPENSES, INCOME TAXE_2
ACCRUED EXPENSES, INCOME TAXES PAYABLE AND OTHER CURRENT LIABILITIES (Tables) | 6 Months Ended |
Mar. 31, 2019 | |
ACCRUED EXPENSES, INCOME TAXES PAYABLE AND OTHER CURRENT LIABILITIES [Abstract] | |
Accrued Expenses, Income Taxes Payable and Other Current Liabilities | Accrued expenses, income taxes payable and other current liabilities consisted of the following: March 31, 2019 September 30, 2018 Accrued compensation $ 26,148 $ 35,367 Income taxes payable 18,889 18,045 Dividends payable 12,742 10,822 Taxes, other than income taxes 6,530 1,976 Accrued interest 4,197 - Contract liabilities 3,611 4,894 Goods and services received, not yet invoiced 4,260 1,954 Other accrued expenses 10,536 9,925 Total $ 86,913 $ 82,983 |
DEBT (Tables)
DEBT (Tables) | 6 Months Ended |
Mar. 31, 2019 | |
DEBT [Abstract] | |
Schedule of Principal Repayments of Term Loan | Principal repayments of the Term Loan Facility are generally made on the last calendar day of each quarter if that day is considered to be a business day. As of March 31, 2019, scheduled principal repayments of the Term Loan were as follows: Fiscal Year Principal Repayments Remainder of 2019 $ 7,988 2020 10,650 2021 10,650 2022 10,650 2023 10,650 Greater than 5 years 969,412 Total $ 1,020,000 |
DERIVATIVE FINANCIAL INSTRUME_2
DERIVATIVE FINANCIAL INSTRUMENTS (Tables) | 6 Months Ended |
Mar. 31, 2019 | |
DERIVATIVE FINANCIAL INSTRUMENTS [Abstract] | |
Fair Value of Derivative Instruments in the Consolidated Balance Sheet | The fair value of our derivative instruments included in the Consolidated Balance Sheets, which was determined using Level 2 inputs, was as follows: Asset Derivatives Liability Derivatives Consolidated Balance Sheet Locatio March 31, 2019 September 30, 2018 March 31, 2019 September 30, 2018 Derivatives designated as hedging instruments Interest rate swap contract Accrued expenses, income taxes payable and other current liabilities $ - $ - $ 781 $ - Other long-term liabilities - - $ 7,572 $ - Derivatives not designated as hedging instruments Foreign exchange contracts Prepaid expenses and other current assets $ - $ - $ - $ - Accrued expenses, income taxes payable and other current liabilities $ - $ - $ 48 $ 339 |
Effect of Derivative Instruments on the Consolidated Statement of Income | The following table summarizes the effect of our derivative instruments on our Consolidated Statements of Income for the three and six months ended March 31, 2019 and 2018: Gain (Loss) Recognized in Statement of Income Three Months Ended Six Months Ended Statement of Income Location March 31, 2019 March 31, 2018 March 31, 2019 March 31, 2018 Derivatives not designated as hedging instruments Foreign exchange contracts Other income (expense), net $ (348 ) $ 887 $ (38 ) $ 78 |
ACCUMULATED OTHER COMPREHENSI_2
ACCUMULATED OTHER COMPREHENSIVE INCOME (Tables) | 6 Months Ended |
Mar. 31, 2019 | |
ACCUMULATED OTHER COMPREHENSIVE INCOME [Abstract] | |
Accumulated Other Comprehensive Income | The table below summarizes the components of accumulated other comprehensive income (AOCI), net of tax provision/(benefit), as of March 31, 2019 and 2018: Foreign Currency Translation Cash Flow Hedges Pension and Other Postretirement Liabilities Total Balance at September 30, 2018 $ 5,918 $ (17 ) $ (1,362 ) $ 4,539 Foreign currency translation adjustment, net of tax of $(21) 1,433 - - 1,433 Unrealized gain (loss) on cash flow hedges: Change in fair value, net of tax of $(1,879) - (6,473 ) - (6,473 ) Reclassification adjustment into earnings, net of tax of $0 - (1 ) - (1 ) Balance at March 31, 2019 $ 7,351 $ (6,491 ) $ (1,362 ) $ (502 ) Foreign Currency Translation Cash Flow Hedges Pension and Other Postretirement Liabilities Total Balance at September 30, 2017 $ 5,239 $ 46 $ (1,336 ) $ 3,949 Foreign currency translation adjustment, net of tax of $(1,384) 11,105 - - 11,105 Unrealized gain (loss) on cash flow hedges: Change in fair value, net of tax of $57 - 165 - 165 Reclassification adjustment into earnings, net of tax of $(6) - (18 ) - (18 ) Balance at March 31, 2018 $ 16,344 $ 193 $ (1,336 ) $ 15,201 |
SHARE-BASED COMPENSATION PLANS
SHARE-BASED COMPENSATION PLANS (Tables) | 6 Months Ended |
Mar. 31, 2019 | |
SHARE-BASED COMPENSATION PLANS [Abstract] | |
Share Based Compensation Expense | Share-based compensation expense for the three and six months ended March 31, 2019 and 2018, was as follows: Three Months Ended March 31, Six Months Ended March 31, 2019 2018 2019 2018 Cost of sales $ 574 $ 567 $ 1,629 $ 1,354 Research, development and technical 442 516 1,343 1,046 Selling, general and administrative 2,522 3,201 8,736 7,704 Total share-based compensation expense 3,538 4,284 11,708 10,104 Tax benefit (761 ) (1,022 ) (2,452 ) (2,249 ) Total share-based compensation expense, net of tax $ 2,777 $ 3,262 $ 9,256 $ 7,855 |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 6 Months Ended |
Mar. 31, 2019 | |
EARNINGS PER SHARE [Abstract] | |
Basic and Diluted Earnings per Share | The standards of accounting for earnings per share require companies to provide a reconciliation of the numerator and denominator of the basic and diluted earnings per share computations. Basic and diluted earnings per share were calculated as follows: Three Months Ended March 31, Six Months Ended March 31, 2019 2018 2019 2018 Numerator: Net Income $ 27,137 $ 29,737 $ 40,580 26,654 Less: income attributable to participating securities - (30 ) - (34 ) Earnings available to common shares $ 27,137 $ 29,707 $ 40,580 26,620 Denominator: Weighted average common shares 28,997,632 25,592,508 28,065,759 25,473,757 (Denominator for basic calculation) Weighted average effect of dilutive securities: Share-based compensation 481,482 568,678 541,274 601,925 Diluted weighted average common shares 29,479,114 26,161,186 28,607,033 26,075,682 (Denominator for diluted calculation) Earnings per share: Basic $ 0.94 $ 1.16 $ 1.45 1.05 Diluted $ 0.92 $ 1.14 $ 1.42 1.02 |
SEGMENT REPORTING (Tables)
SEGMENT REPORTING (Tables) | 6 Months Ended |
Mar. 31, 2019 | |
SEGMENT REPORTING [Abstract] | |
Segment Revenue | Revenue from external customers and segment adjusted EBITDA were (in thousands): Three Months Ended March 31, Six Months Ended March 31, 2019 2018 2019 2018 Segment Revenue Electronic Materials $ 212,846 $ 136,103 $ 403,462 $ 269,417 Performance Materials 52,545 6,875 83,707 13,540 Total $ 265,391 $ 142,978 $ 487,169 $ 282,957 |
Segment Adjusted EBITDA | Three Months Ended March 31, Six Months Ended March 31, 2019 2018 2019 2018 Segment adjusted EBITDA: Electronic Materials $ 74,910 $ 52,285 $ 149,735 $ 105,181 Performance Materials 22,660 1,231 35,727 2,519 Unallocated corporate expenses (12,052 ) (9,884 ) (23,094 ) (20,735 ) Interest income 568 1,156 1,587 2,107 Interest expense (13,331 ) (1,158 ) (20,221 ) (2,290 ) Depreciation and amortization (27,348 ) (6,638 ) (43,889 ) (13,138 ) Charge for fair value write-up of acquired inventory sold (4,566 ) - (14,827 ) - Acquisition and integration related expenses (2,904 ) - (30,198 ) - Income before income taxes $ 37,937 $ 36,992 $ 54,820 $ 73,644 |
BACKGROUND AND BASIS OF PRESE_3
BACKGROUND AND BASIS OF PRESENTATION (Details) - Segment | 3 Months Ended | 6 Months Ended |
Mar. 31, 2019 | Mar. 31, 2019 | |
BACKGROUND AND BASIS OF PRESENTATION [Abstract] | ||
Number of reportable segments | 2 | 2 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS (Details) - USD ($) $ in Thousands | Mar. 31, 2019 | Sep. 30, 2018 |
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||
Deferred income tax assets | $ 5,498 | $ 5,840 |
Accrued expenses, income taxes payable and other current liabilities | 86,913 | 82,983 |
Other long-term liabilities | 25,814 | 13,046 |
Retained earnings | $ 487,467 | 471,673 |
ASU 2014-09 [Member] | Adjustments Due to ASU 2014-09 [Member] | ||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||
Deferred income tax assets | 261 | |
Accrued expenses, income taxes payable and other current liabilities | (47) | |
Other long-term liabilities | 1,241 | |
Retained earnings | (933) | |
ASU 2014-09 [Member] | Effect before Topic 606 [Member] | ||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||
Deferred income tax assets | 6,101 | |
Accrued expenses, income taxes payable and other current liabilities | 82,936 | |
Other long-term liabilities | 14,287 | |
Retained earnings | $ 470,740 |
REVENUE FROM CONTRACTS WITH C_3
REVENUE FROM CONTRACTS WITH CUSTOMERS, Disaggregation of Revenue (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Mar. 31, 2019USD ($)Segment | Mar. 31, 2018USD ($) | Mar. 31, 2019USD ($)Segment | Mar. 31, 2018USD ($) | |
REVENUE FROM CONTRACTS WITH CUSTOMERS [Abstract] | ||||
Number of reportable segments | Segment | 2 | 2 | ||
Disaggregation of Revenue [Abstract] | ||||
Total revenue | $ 265,391 | $ 142,978 | $ 487,169 | $ 282,957 |
Electronic Materials [Member] | ||||
Disaggregation of Revenue [Abstract] | ||||
Total revenue | 212,846 | 136,103 | 403,462 | 269,417 |
Electronic Materials [Member] | CMP Slurries [Member] | ||||
Disaggregation of Revenue [Abstract] | ||||
Total revenue | 110,299 | 115,086 | 236,627 | 229,522 |
Electronic Materials [Member] | Electronic Chemicals [Member] | ||||
Disaggregation of Revenue [Abstract] | ||||
Total revenue | 78,549 | 0 | 118,371 | 0 |
Electronic Materials [Member] | CMP Pads [Member] | ||||
Disaggregation of Revenue [Abstract] | ||||
Total revenue | 23,998 | 21,017 | 48,464 | 39,895 |
Performance Materials [Member] | ||||
Disaggregation of Revenue [Abstract] | ||||
Total revenue | $ 52,545 | $ 6,875 | $ 83,707 | $ 13,540 |
REVENUE FROM CONTRACTS WITH C_4
REVENUE FROM CONTRACTS WITH CUSTOMERS, Transaction Price Allocated to Remaining Performance Obligations (Details) $ in Thousands | Mar. 31, 2019USD ($) |
Revenue, Performance Obligation [Abstract] | |
Revenue expected to be recognized on contract liability amounts as of end of period | $ 1,501 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-01-01 | |
Revenue, Performance Obligation [Abstract] | |
Revenue expected to be recognized on contract liability amounts as of end of period | $ 87 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-01-01 | Maximum [Member] | |
Revenue, Performance Obligation [Abstract] | |
Revenue expected to be recognized on contract liability, satisfaction period | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-01-01 | |
Revenue, Performance Obligation [Abstract] | |
Revenue expected to be recognized on contract liability amounts as of end of period | $ 1,085 |
Revenue expected to be recognized on contract liability, satisfaction period | 2 years |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-01-01 | |
Revenue, Performance Obligation [Abstract] | |
Revenue expected to be recognized on contract liability amounts as of end of period | $ 329 |
Revenue expected to be recognized on contract liability, satisfaction period | 3 years |
REVENUE FROM CONTRACTS WITH C_5
REVENUE FROM CONTRACTS WITH CUSTOMERS, Reconciliation of Contract Balances (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2019 | Sep. 30, 2018 | |
Contract with Customer, Liability [Abstract] | |||
Contract liabilities (current) | $ 3,611 | $ 3,611 | $ 5,310 |
Contract liabilities (noncurrent) | 1,414 | 1,414 | $ 1,239 |
Change in Contract with Customer, Liability [Abstract] | |||
Revenue recognized in contract liability | $ 2,317 | $ 4,160 |
BUSINESS COMBINATION (Details)
BUSINESS COMBINATION (Details) - USD ($) $ / shares in Units, $ in Thousands | Nov. 15, 2018 | Mar. 31, 2019 | Dec. 31, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Mar. 31, 2019 | Mar. 31, 2018 | Sep. 30, 2018 |
Business combination disclosure [Abstract] | ||||||||
Acquisition of business, net of cash acquired | $ 1,182,186 | $ 0 | ||||||
Face amount of debt | $ 1,265,000 | |||||||
Total consideration [Abstract] | ||||||||
Fair value of Cabot Microelectronics common stock issued for KMG outstanding common stock and equity awards | 331,048 | 0 | ||||||
Fair values of assets acquired and liabilities assumed [Abstract] | ||||||||
Goodwill | $ 705,426 | 705,426 | $ 101,083 | |||||
Net income | 27,137 | $ 13,443 | $ 29,737 | $ (3,083) | 40,580 | 26,654 | ||
Non-recurring costs [Abstract] | ||||||||
Share-based compensation expense | 11,708 | 10,082 | ||||||
Fair value write-up of inventory sold | 4,566 | 0 | 14,827 | 0 | ||||
Acquisition-related Costs [Member] | ||||||||
Fair values of assets acquired and liabilities assumed [Abstract] | ||||||||
Transaction and acquisition-related expenses | 580 | 30,610 | ||||||
Non-recurring costs [Abstract] | ||||||||
Transaction costs | 580 | 30,610 | ||||||
Share-based compensation expense | 460 | 35,601 | ||||||
Fair Value Write-up of Inventory Sold [Member] | ||||||||
Non-recurring costs [Abstract] | ||||||||
Fair value write-up of inventory sold | 1,045 | 14,859 | ||||||
Revolving Credit Facility [Member] | ||||||||
Business combination disclosure [Abstract] | ||||||||
Face amount of debt | 200,000 | |||||||
Line of credit facility, borrowing capacity | 200,000 | |||||||
Term Loan [Member] | ||||||||
Business combination disclosure [Abstract] | ||||||||
Face amount of debt | $ 1,065,000 | |||||||
Selling, general, and administrative [Member] | ||||||||
Fair values of assets acquired and liabilities assumed [Abstract] | ||||||||
Transaction and acquisition-related expenses | 2,904 | 30,198 | ||||||
Non-recurring costs [Abstract] | ||||||||
Transaction costs | 2,904 | 30,198 | ||||||
Cost of Sales [Member] | ||||||||
Fair values of assets acquired and liabilities assumed [Abstract] | ||||||||
Transaction and acquisition-related expenses | 4,566 | 14,827 | ||||||
Non-recurring costs [Abstract] | ||||||||
Transaction costs | 4,566 | 14,827 | ||||||
Electronic Materials [Member] | ||||||||
Fair values of assets acquired and liabilities assumed [Abstract] | ||||||||
Goodwill | 358,141 | 358,141 | ||||||
Performance Materials [Member] | ||||||||
Fair values of assets acquired and liabilities assumed [Abstract] | ||||||||
Goodwill | 347,285 | 347,285 | ||||||
KMG [Member] | ||||||||
Business combination disclosure [Abstract] | ||||||||
Business acquisition, percentage of voting interests acquired | 100.00% | |||||||
Acquisition of business, net of cash acquired | $ 1,513,235 | |||||||
Cash acquired from acquisition | $ 23,217 | |||||||
Amount received for each share of KMG common stock (in dollars per share) | $ 55.65 | |||||||
Business Acquisition Share Percentage | 0.2000 | |||||||
Shares issued to acquire entity | 3,237,005 | |||||||
Business Acquisition, Share Price | $ 102.27 | |||||||
Face amount of debt | $ 1,065,000 | |||||||
Line of credit facility, borrowing capacity | 200,000 | |||||||
Debt Issuance Costs, Net | 21,408 | |||||||
Total consideration [Abstract] | ||||||||
Cash provided to payoff KMG debt | 304,648 | |||||||
Total cash consideration paid | 1,205,404 | |||||||
Total consideration transferred | 1,536,452 | |||||||
Fair values of assets acquired and liabilities assumed [Abstract] | ||||||||
Cash | 23,217 | |||||||
Accounts receivable | 64,711 | |||||||
Inventories | 68,963 | |||||||
Prepaid expenses and other current assets | 14,798 | |||||||
Property, plant and equipment | 149,504 | |||||||
Intangible assets | 844,800 | |||||||
Other long-term assets | 6,208 | |||||||
Accounts payable | (28,894) | |||||||
Accrued expenses and other current liabilities | (43,451) | |||||||
Deferred tax liabilities | (164,469) | |||||||
Other long-term liabilities | (3,754) | |||||||
Total identifiable net assets acquired | 931,633 | |||||||
Goodwill | 604,819 | |||||||
Total | 1,536,452 | |||||||
Net sales | 185,127 | |||||||
Net income | 5,561 | |||||||
Transaction and acquisition-related expenses | 19,996 | |||||||
Non-recurring costs [Abstract] | ||||||||
Transaction costs | 19,996 | |||||||
Business acquisition, pro forma information [Abstract] | ||||||||
Revenue | 265,391 | 259,372 | 549,147 | 512,105 | ||||
Net income | $ 28,056 | $ 24,902 | $ 66,873 | $ (38,262) | ||||
Earnings per share - basic (in dollars per share) | $ 0.97 | $ 0.86 | $ 2.32 | $ (1.33) | ||||
Earnings per share - diluted (in dollars per share) | $ 0.95 | $ 0.85 | $ 2.27 | $ (1.33) | ||||
Intangible assets acquired [Abstract] | ||||||||
Fair value | $ 844,800 | |||||||
Weighted average useful life | 17 years 10 months 24 days | |||||||
KMG [Member] | Revolving Credit Facility [Member] | ||||||||
Business combination disclosure [Abstract] | ||||||||
Debt Issuance Costs, Net | $ 859 | |||||||
KMG [Member] | Term Loan [Member] | ||||||||
Business combination disclosure [Abstract] | ||||||||
Debt Issuance Costs, Net | 20,549 | |||||||
KMG [Member] | Electronic Materials [Member] | ||||||||
Fair values of assets acquired and liabilities assumed [Abstract] | ||||||||
Goodwill | 262,746 | |||||||
KMG [Member] | Performance Materials [Member] | ||||||||
Fair values of assets acquired and liabilities assumed [Abstract] | ||||||||
Goodwill | 342,073 | |||||||
KMG [Member] | Customer Relationships [Member] | ||||||||
Intangible assets acquired [Abstract] | ||||||||
Fair value | 704,000 | |||||||
KMG [Member] | Customer Relationships [Member] | Minimum [Member] | ||||||||
Intangible assets acquired [Abstract] | ||||||||
Estimated useful lives | 15 years | |||||||
KMG [Member] | Customer Relationships [Member] | Maximum [Member] | ||||||||
Intangible assets acquired [Abstract] | ||||||||
Estimated useful lives | 20 years | |||||||
KMG [Member] | Technology and Know-how [Member] | ||||||||
Intangible assets acquired [Abstract] | ||||||||
Fair value | 85,500 | |||||||
KMG [Member] | Technology and Know-how [Member] | Minimum [Member] | ||||||||
Intangible assets acquired [Abstract] | ||||||||
Estimated useful lives | 9 years | |||||||
KMG [Member] | Technology and Know-how [Member] | Maximum [Member] | ||||||||
Intangible assets acquired [Abstract] | ||||||||
Estimated useful lives | 11 years | |||||||
KMG [Member] | Trade Name - Flowchem [Member] | ||||||||
Intangible assets acquired [Abstract] | ||||||||
Fair value | 46,000 | |||||||
KMG [Member] | Trade Name - All Other [Member] | ||||||||
Intangible assets acquired [Abstract] | ||||||||
Fair value | 7,000 | |||||||
KMG [Member] | Trade Name - All Other [Member] | Minimum [Member] | ||||||||
Intangible assets acquired [Abstract] | ||||||||
Estimated useful lives | 1 year | |||||||
KMG [Member] | Trade Name - All Other [Member] | Maximum [Member] | ||||||||
Intangible assets acquired [Abstract] | ||||||||
Estimated useful lives | 15 years | |||||||
KMG [Member] | EPA Product Registration Rights [Member] | ||||||||
Intangible assets acquired [Abstract] | ||||||||
Fair value | 2,300 | |||||||
Estimated useful lives | 15 years | |||||||
KMG [Member] | Common Stock and Equity Awards [Member] | ||||||||
Total consideration [Abstract] | ||||||||
Total cash consideration paid | 900,756 | |||||||
Fair value of Cabot Microelectronics common stock issued for KMG outstanding common stock and equity awards | $ 331,048 |
FAIR VALUE OF FINANCIAL INSTR_3
FAIR VALUE OF FINANCIAL INSTRUMENTS (Details) - Recurring [Member] - USD ($) $ in Thousands | Mar. 31, 2019 | Sep. 30, 2018 |
Assets [Abstract] | ||
Cash and cash equivalents | $ 192,260 | $ 352,921 |
Other long-term investments | 1,371 | 1,137 |
Total assets | 193,631 | 354,058 |
Liabilities [Abstract] | ||
Derivative financial instruments | 8,401 | 339 |
Total liabilities | 8,401 | 339 |
Level 1 [Member] | ||
Assets [Abstract] | ||
Cash and cash equivalents | 192,260 | 352,921 |
Other long-term investments | 1,371 | 1,137 |
Total assets | 193,631 | 354,058 |
Liabilities [Abstract] | ||
Derivative financial instruments | 0 | 0 |
Total liabilities | 0 | 0 |
Level 2 [Member] | ||
Assets [Abstract] | ||
Cash and cash equivalents | 0 | 0 |
Other long-term investments | 0 | 0 |
Total assets | 0 | 0 |
Liabilities [Abstract] | ||
Derivative financial instruments | 8,401 | 339 |
Total liabilities | 8,401 | 339 |
Level 3 [Member] | ||
Assets [Abstract] | ||
Cash and cash equivalents | 0 | 0 |
Other long-term investments | 0 | 0 |
Total assets | 0 | 0 |
Liabilities [Abstract] | ||
Derivative financial instruments | 0 | 0 |
Total liabilities | $ 0 | $ 0 |
INVENTORIES (Details)
INVENTORIES (Details) - USD ($) $ in Thousands | Mar. 31, 2019 | Sep. 30, 2018 |
INVENTORIES [Abstract] | ||
Raw materials | $ 58,496 | $ 35,150 |
Work in process | 12,569 | 8,117 |
Finished goods | 76,259 | 28,659 |
Total | $ 147,324 | $ 71,926 |
GOODWILL AND OTHER INTANGIBLE_3
GOODWILL AND OTHER INTANGIBLE ASSETS, Goodwill (Details) $ in Thousands | 6 Months Ended |
Mar. 31, 2019USD ($) | |
Goodwill | $ 705,426 |
Goodwill [Roll Forward] | |
Balance, beginning of period | 101,083 |
Foreign exchange fluctuations | (167) |
Goodwill recorded in connection with acquisition | 604,510 |
Balance, end of period | 705,426 |
Electronic Materials [Member] | |
Goodwill | 358,141 |
Goodwill [Roll Forward] | |
Balance, end of period | 358,141 |
Performance Materials [Member] | |
Goodwill | 347,285 |
Goodwill [Roll Forward] | |
Balance, end of period | $ 347,285 |
GOODWILL AND OTHER INTANGIBLE_4
GOODWILL AND OTHER INTANGIBLE ASSETS, Intangible Assets (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||||
Mar. 31, 2019 | Mar. 31, 2018 | Mar. 31, 2019 | Mar. 31, 2018 | Sep. 30, 2018 | ||
Finite-Lived Intangible Assets, Net [Abstract] | ||||||
Total other intangible assets subject to amortization | $ 884,470 | $ 884,470 | $ 85,163 | |||
Accumulated amortization | 77,262 | 77,262 | 51,131 | |||
Indefinite-lived Intangible Assets [Abstract] | ||||||
Total other intangible assets not subject to amortization | 47,170 | 47,170 | 1,170 | |||
Total other intangible assets, | 931,640 | 931,640 | 86,333 | |||
Other intangible assets [Abstract] | ||||||
Intangible assets acquired during the period | 844,800 | |||||
Amortization expense | 16,960 | $ 1,963 | 26,318 | $ 3,936 | ||
Estimated future amortization expense [Abstract] | ||||||
Remainder of 2019 | 33,881 | 33,881 | ||||
2020 | 87,936 | 87,936 | ||||
2021 | 87,233 | 87,233 | ||||
2022 | 79,822 | 79,822 | ||||
2023 | 67,663 | 67,663 | ||||
Other Indefinite-lived Intangibles [Member] | ||||||
Indefinite-lived Intangible Assets [Abstract] | ||||||
Total other intangible assets not subject to amortization | [1] | 47,170 | 47,170 | 1,170 | ||
Product Technology, Trade Secrets and Know-How [Member] | ||||||
Finite-Lived Intangible Assets, Net [Abstract] | ||||||
Total other intangible assets subject to amortization | 134,340 | 134,340 | 48,825 | |||
Accumulated amortization | 31,131 | 31,131 | 25,305 | |||
Acquired Patents and Licenses [Member] | ||||||
Finite-Lived Intangible Assets, Net [Abstract] | ||||||
Total other intangible assets subject to amortization | 10,570 | 10,570 | 8,270 | |||
Accumulated amortization | 8,315 | 8,315 | 8,252 | |||
Customer Relationships, Distribution Rights and Other | ||||||
Finite-Lived Intangible Assets, Net [Abstract] | ||||||
Total other intangible assets subject to amortization | 739,560 | 739,560 | 28,068 | |||
Accumulated amortization | $ 37,816 | $ 37,816 | $ 17,574 | |||
[1] | Other indefinite-lived intangible assets not subject to amortization consist primarily of trade names. |
OTHER LONG-TERM ASSETS (Details
OTHER LONG-TERM ASSETS (Details) - USD ($) $ in Thousands | Mar. 31, 2019 | Sep. 30, 2018 |
Other long-term assets [Abstract] | ||
Long-term contract assets | $ 1,024 | $ 1,548 |
Long-term SERP Investment | 1,371 | 1,137 |
Prepaid umamortized debt issuance cost | 795 | 0 |
Other long-term assets | 3,025 | 1,979 |
Total | 6,215 | $ 4,664 |
Long-term liability, SERP investments | $ 1,242 |
ACCRUED EXPENSES, INCOME TAXE_3
ACCRUED EXPENSES, INCOME TAXES PAYABLE AND OTHER CURRENT LIABILITIES (Details) - USD ($) $ in Thousands | Mar. 31, 2019 | Sep. 30, 2018 |
ACCRUED EXPENSES, INCOME TAXES PAYABLE AND OTHER CURRENT LIABILITIES [Abstract] | ||
Accrued compensation | $ 26,148 | $ 35,367 |
Income taxes payable | 18,889 | 18,045 |
Dividends payable | 12,742 | 10,822 |
Taxes, other than income taxes | 6,530 | 1,976 |
Interest Payable | 4,197 | 0 |
Contract liabilities | 3,611 | 4,894 |
Goods and services received, not yet invoiced | 4,260 | 1,954 |
Environmental accrual | 1,008 | |
Other accrued expenses | 10,536 | 9,925 |
Total | $ 86,913 | $ 82,983 |
DEBT (Details)
DEBT (Details) - USD ($) $ in Thousands | Apr. 30, 2019 | Mar. 31, 2019 | Mar. 31, 2019 | Mar. 31, 2018 | Nov. 15, 2018 | Sep. 30, 2018 |
Long-term Debt [Abstract] | ||||||
Face amount of debt | $ 1,265,000 | |||||
Percentage of initial principal payment amount | 0.25% | |||||
Repayments of Long-term Debt | $ 45,000 | $ 6,563 | ||||
Current portion of long-term debt | $ 13,313 | $ 13,313 | $ 0 | |||
Percentage of debt hedged by interest rate swaps | 70.00% | 70.00% | ||||
Long-term Debt, by Maturity [Abstract] | ||||||
Remainder of 2019 | $ 7,988 | $ 7,988 | ||||
2020 | 10,650 | 10,650 | ||||
2021 | 10,650 | 10,650 | ||||
2022 | 10,650 | 10,650 | ||||
2023 | 10,650 | 10,650 | ||||
Greater than 5 years | 969,412 | 969,412 | ||||
Total | $ 1,020,000 | $ 1,020,000 | ||||
Revolving Credit Facility [Member] | ||||||
Long-term Debt [Abstract] | ||||||
Debt instrument term | 5 years | |||||
Face amount of debt | $ 200,000 | |||||
Line of credit facility, borrowing capacity | 200,000 | |||||
Maturity date of credit facility | Nov. 15, 2023 | |||||
Commitment fee percentage | 0.25% | |||||
Revolving Credit Facility [Member] | LIBOR [Member] | ||||||
Long-term Debt [Abstract] | ||||||
Current applicable rate | 1.50% | 1.50% | ||||
Revolving Credit Facility [Member] | ABR borrowings [Member] | ||||||
Long-term Debt [Abstract] | ||||||
Current applicable rate | 0.50% | 0.50% | ||||
Term Loan [Member] | ||||||
Long-term Debt [Abstract] | ||||||
Debt instrument term | 7 years | |||||
Face amount of debt | $ 1,065,000 | |||||
Maturity date of credit facility | Nov. 15, 2025 | |||||
Contingent payment of principal | In addition, the Company is required to prepay outstanding loans under the Term Loan Facility, subject to certain exceptions, with up to 50% of the Company’s annual excess cash flow, as defined under the Credit Agreement, and 100% of the net cash proceeds of certain recovery events and non-ordinary course asset sales. | |||||
Prepayment Premium | 1.00% | |||||
Repayments of Long-term Debt | $ 55,000 | $ 45,000 | ||||
Fair value of debt | 1,020,000 | $ 1,020,000 | ||||
Current portion of long-term debt | 13,313 | 13,313 | ||||
Debt issuance costs, long-term debt | $ 19,411 | $ 19,411 | ||||
Term Loan [Member] | LIBOR [Member] | ||||||
Long-term Debt [Abstract] | ||||||
Current applicable rate | 2.25% | 2.25% | ||||
Term Loan [Member] | ABR borrowings [Member] | ||||||
Long-term Debt [Abstract] | ||||||
Current applicable rate | 1.25% | 1.25% | ||||
Letter of Credit [Member] | ||||||
Long-term Debt [Abstract] | ||||||
Line of credit facility, borrowing capacity | $ 50,000 | |||||
Credit Agreement [Member] | Maximum [Member] | ||||||
Long-term Debt [Abstract] | ||||||
Secured net leverage ratio | 4 |
DERIVATIVE FINANCIAL INSTRUME_3
DERIVATIVE FINANCIAL INSTRUMENTS, Cash Flow Hedges, Foreign Currency Contracts and Net Investment Contracts (Details) ₩ in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Mar. 31, 2019USD ($) | Mar. 31, 2018USD ($) | Mar. 31, 2019USD ($) | Sep. 30, 2018USD ($) | Sep. 30, 2017KRW (₩) | |
Derivative Instruments [Abstract] | |||||
Reclassification period | 12 months | ||||
Interest Rate Swap [Member] | |||||
Derivative Instruments [Abstract] | |||||
Derivative notional amount | $ 746,000 | $ 746,000 | |||
Derivatives expiration date | Jan. 31, 2024 | ||||
Unrealized loss | (6,473) | $ (6,473) | |||
Reclassified from accumulated other comprehensive income into interest expense | 781 | ||||
Foreign Exchange Contracts [Member] | Buy [Member] | |||||
Derivative Instruments [Abstract] | |||||
Derivative notional amount | 4,102 | 4,102 | $ 7,652 | ||
Foreign Exchange Contracts [Member] | Sell [Member] | |||||
Derivative Instruments [Abstract] | |||||
Derivative notional amount | $ 23,815 | $ 23,815 | $ 24,860 | ||
Net Investment Hedging [Member] | |||||
Derivative Instruments [Abstract] | |||||
Derivative notional amount | ₩ | ₩ 100,000,000 | ||||
Amount recogized in Other comprehensive income | $ 2,966 |
DERIVATIVE FINANCIAL INSTRUME_4
DERIVATIVE FINANCIAL INSTRUMENTS, Fair Value of Derivative Instruments in the Consolidated Balance Sheet (Details) - USD ($) $ in Thousands | Mar. 31, 2019 | Sep. 30, 2018 |
Designated as Hedging Instrument [Member] | Interest Rate Swap [Member] | Accrued Expenses, Income Taxes and Other Current Liabilities [Member] | ||
Asset Derivatives [Abstract] | ||
Asset derivatives | $ 0 | $ 0 |
Liability Derivatives [Abstract] | ||
Liability derivatives | 781 | 0 |
Designated as Hedging Instrument [Member] | Interest Rate Swap [Member] | Other Long-term Liabilities [Member] | ||
Asset Derivatives [Abstract] | ||
Asset derivatives | 0 | 0 |
Liability Derivatives [Abstract] | ||
Liability derivatives | 7,572 | 0 |
Not Designated as Hedging Instrument [Member] | Foreign Exchange Contracts [Member] | Prepaid Expenses and Other Current Assets [Member] | ||
Asset Derivatives [Abstract] | ||
Asset derivatives | 0 | 0 |
Liability Derivatives [Abstract] | ||
Liability derivatives | 0 | 0 |
Not Designated as Hedging Instrument [Member] | Foreign Exchange Contracts [Member] | Accrued Expenses, Income Taxes and Other Current Liabilities [Member] | ||
Asset Derivatives [Abstract] | ||
Asset derivatives | 0 | 0 |
Liability Derivatives [Abstract] | ||
Liability derivatives | $ 48 | $ 339 |
DERIVATIVE FINANCIAL INSTRUME_5
DERIVATIVE FINANCIAL INSTRUMENTS, Effect of Derivative Instruments on the Consolidated Statement of Income (Details) - Not Designated as Hedging Instrument [Member] - Foreign Exchange Contracts [Member] - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Mar. 31, 2019 | Mar. 31, 2018 | Mar. 31, 2019 | Mar. 31, 2018 | |
Other Income, Net [Member] | ||||
Derivative Instruments, Gain (Loss) [Abstract] | ||||
Other income (loss), net | $ (38) | $ 78 | ||
Other Income (Expense), Net [Member] | ||||
Derivative Instruments, Gain (Loss) [Abstract] | ||||
Other income (loss), net | $ (348) | $ 887 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details) - USD ($) $ in Thousands | Nov. 15, 2018 | Mar. 31, 2019 |
COMMITMENTS AND CONTINGENCIES [Abstract] | ||
Environmental Exit Costs, Anticipated Cost | $ 22,000 | |
Environmental Accrual | $ 1,008 | |
Postretirement Obligations in Foreign Jurisdictions [Abstract] | ||
Expected term for benefit payments of all unfunded plans | 10 years | |
Expected future benefit payments | $ 7,906 | |
Purchase obligations [Abstract] | ||
Contractual obligation | $ 11,073 |
ACCUMULATED OTHER COMPREHENSI_3
ACCUMULATED OTHER COMPREHENSIVE INCOME (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||||
Mar. 31, 2019 | Dec. 31, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Mar. 31, 2019 | Mar. 31, 2018 | |
Components of Accumulated Comprehensive Income [Roll Forward] | ||||||
Balance at beginning of period | $ 1,008,167 | $ 666,692 | $ 601,667 | $ 595,037 | $ 666,692 | $ 595,037 |
Foreign currency translation adjustment, net of tax | (992) | 2,425 | 3,961 | 7,144 | 1,433 | 11,105 |
Available-for-sale securities adjustments, net of tax | 0 | 46 | (46) | 0 | 0 | |
Change in fair value, net of tax | (6,473) | 165 | ||||
Reclassification adjustment into earnings, net of tax | (1) | (18) | ||||
Minimum pension liability adjustment | 251 | (251) | 0 | 0 | 0 | |
Balance at end of period | 1,025,867 | 1,008,167 | 635,511 | 601,667 | 1,025,867 | 635,511 |
Other Comprehensive Income, Tax [Abstract] | ||||||
Foreign currency translation adjustment, tax | 21 | (1,384) | ||||
Change in fair value, tax | 1,879 | 57 | ||||
Reclassification adjustment into earnings, tax | (6) | |||||
Accumulated Other Comprehensive Income [Member] | ||||||
Components of Accumulated Comprehensive Income [Roll Forward] | ||||||
Balance at beginning of period | 6,713 | 4,539 | 11,246 | 3,949 | 4,539 | 3,949 |
Foreign currency translation adjustment, net of tax | (992) | 2,425 | 3,961 | 7,144 | ||
Available-for-sale securities adjustments, net of tax | 46 | (46) | ||||
Minimum pension liability adjustment | 251 | (251) | ||||
Balance at end of period | (502) | 6,713 | 15,201 | 11,246 | (502) | 15,201 |
Foreign Currency Translation [Member] | ||||||
Components of Accumulated Comprehensive Income [Roll Forward] | ||||||
Balance at beginning of period | 5,918 | 5,239 | 5,918 | 5,239 | ||
Foreign currency translation adjustment, net of tax | 1,433 | 11,105 | ||||
Balance at end of period | 7,351 | 16,344 | 7,351 | 16,344 | ||
Cash Flow Hedges [Member] | ||||||
Components of Accumulated Comprehensive Income [Roll Forward] | ||||||
Balance at beginning of period | (17) | 46 | (17) | 46 | ||
Change in fair value, net of tax | (6,473) | 165 | ||||
Reclassification adjustment into earnings, net of tax | (1) | (18) | ||||
Balance at end of period | (6,491) | 193 | (6,491) | 193 | ||
Pension and Other Postretirement Liabilities [Member] | ||||||
Components of Accumulated Comprehensive Income [Roll Forward] | ||||||
Balance at beginning of period | $ (1,362) | $ (1,336) | (1,362) | (1,336) | ||
Balance at end of period | $ (1,362) | $ (1,336) | $ (1,362) | $ (1,336) |
SHARE-BASED COMPENSATION PLAN_2
SHARE-BASED COMPENSATION PLANS (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Mar. 31, 2019USD ($) | Mar. 31, 2018USD ($) | Mar. 31, 2019USD ($)Installment | Mar. 31, 2018USD ($) | |
Share-based Compensation, Allocation and Classification in Financial Statements [Abstract] | ||||
Total share-based compensation expense | $ 3,538 | $ 4,284 | $ 11,708 | $ 10,104 |
Tax benefit | (761) | (1,022) | (2,452) | (2,249) |
Total share-based compensation expense, net of tax | 2,777 | 3,262 | 9,256 | 7,855 |
Share-based Compensation | 11,708 | 10,082 | ||
Cost of Goods Sold [Member] | ||||
Share-based Compensation, Allocation and Classification in Financial Statements [Abstract] | ||||
Total share-based compensation expense | 574 | 567 | 1,629 | 1,354 |
Research, Development and Technical [Member] | ||||
Share-based Compensation, Allocation and Classification in Financial Statements [Abstract] | ||||
Total share-based compensation expense | 442 | 516 | 1,343 | 1,046 |
Selling, general, and administrative [Member] | ||||
Share-based Compensation, Allocation and Classification in Financial Statements [Abstract] | ||||
Total share-based compensation expense | $ 2,522 | $ 3,201 | 8,736 | $ 7,704 |
Performance Stock Awards [Member] | ||||
Share-based Compensation, Allocation and Classification in Financial Statements [Abstract] | ||||
Share-based Compensation | (778) | |||
Stock Option and Restricted Stock [Member] | ||||
Share-based Compensation, Allocation and Classification in Financial Statements [Abstract] | ||||
Share-based Compensation | $ 3,253 | |||
Replacement Award [Member] | ||||
Share-based Compensation, Allocation and Classification in Financial Statements [Abstract] | ||||
Number of equal installments | Installment | 3 | |||
Period of termination to accelerate vest awards to shares | 18 months | |||
Percentage of accelerate vest awards to number of shares | 150.00% |
INCOME TAXES (Details)
INCOME TAXES (Details) | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||
Mar. 31, 2019 | Mar. 31, 2018 | Mar. 31, 2019 | Mar. 31, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Income Tax [Abstract] | ||||||
Effective income tax rate | 28.50% | 19.60% | 26.00% | 63.80% | ||
Corporate statutory rate | 21.00% | 24.50% | ||||
Forecast [Member] | ||||||
Income Tax [Abstract] | ||||||
Corporate statutory rate | 21.00% |
EARNINGS PER SHARE (Details)
EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 6 Months Ended | ||||
Mar. 31, 2019 | Dec. 31, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Mar. 31, 2019 | Mar. 31, 2018 | |
Numerator [Abstract] | ||||||
Net income | $ 27,137 | $ 13,443 | $ 29,737 | $ (3,083) | $ 40,580 | $ 26,654 |
Less: income attributable to participating securities | 0 | (30) | 0 | (34) | ||
Earnings available to common shares | $ 27,137 | $ 29,707 | $ 40,580 | $ 26,620 | ||
Denominator [Abstract] | ||||||
Weighted-average common shares (Denominator for basic calculation) (in shares) | 28,997,632 | 25,592,508 | 28,065,759 | 25,473,757 | ||
Weighted average effect of dilutive securities [Abstract] | ||||||
Share-based compensation (in shares) | 481,482 | 568,678 | 541,274 | 601,925 | ||
Diluted weighted average common shares (Denominator for diluted calculation) (in shares) | 29,479,114 | 26,161,186 | 28,607,033 | 26,075,682 | ||
Earnings per share [Abstract] | ||||||
Basic (in dollars per share) | $ 0.94 | $ 1.16 | $ 1.45 | $ 1.05 | ||
Diluted (in dollars per share) | $ 0.92 | $ 1.14 | $ 1.42 | $ 1.02 | ||
Stock Options [Member] | ||||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Abstract] | ||||||
Outstanding stock options excluded from diluted earnings (in shares) | 200,000 | 100,000 | 200,000 | 100,000 |
SEGMENT REPORTING (Details)
SEGMENT REPORTING (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Mar. 31, 2019USD ($)Segment | Mar. 31, 2018USD ($) | Mar. 31, 2019USD ($)Segment | Mar. 31, 2018USD ($) | |
SEGMENT REPORTING [Abstract] | ||||
Number of operating segments | Segment | 1 | |||
Number of reportable segments | Segment | 2 | 2 | ||
Revenue from External Customers by Products and Services [Abstract] | ||||
Revenue | $ 265,391 | $ 142,978 | $ 487,169 | $ 282,957 |
Segment Reporting Information, Income (Loss) before Income Taxes [Abstract] | ||||
Adjusted EBITDA - Electronic Materials | 74,910 | 52,285 | 149,735 | 105,181 |
Adjusted EBITDA - Performance Materials | 22,660 | 1,231 | 35,727 | 2,519 |
Adjusted EBITDA - Unallocated corporate expenses | (12,052) | (9,884) | (23,094) | (20,735) |
Interest income | 568 | 1,156 | 1,587 | 2,107 |
Interest expense | (13,331) | (1,158) | (20,221) | (2,290) |
Depreciation and amortization | (27,348) | (6,638) | (43,889) | (13,138) |
Charge for fair value write-up of acquired inventory sold | (4,566) | 0 | (14,827) | 0 |
Acquisition and integration related | (2,904) | 0 | (30,198) | 0 |
Income before income taxes | 37,937 | 36,992 | 54,820 | 73,644 |
Electronic Materials [Member] | ||||
Revenue from External Customers by Products and Services [Abstract] | ||||
Revenue | 212,846 | 136,103 | 403,462 | 269,417 |
Performance Materials [Member] | ||||
Revenue from External Customers by Products and Services [Abstract] | ||||
Revenue | $ 52,545 | $ 6,875 | $ 83,707 | $ 13,540 |