Cover Page
Cover Page - shares | 3 Months Ended | |
Dec. 31, 2019 | Jan. 31, 2020 | |
Cover page. | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Dec. 31, 2019 | |
Document Transition Report | false | |
Entity File Number | 000-30205 | |
Entity Registrant Name | CABOT MICROELECTRONICS CORPORATION | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 36-4324765 | |
Entity Address, Address Line One | 870 North Commons Drive | |
Entity Address, City or Town | Aurora | |
Entity Address, State or Province | IL | |
Entity Address, Postal Zip Code | 60504 | |
City Area Code | 630 | |
Local Phone Number | 375-6631 | |
Title of 12(b) Security | Common Stock, par value $0.001 per share | |
Trading Symbol | CCMP | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 29,227,174 | |
Entity Central Index Key | 0001102934 | |
Current Fiscal Year End Date | --09-30 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q1 |
CONSOLIDATED STATEMENTS OF INCO
CONSOLIDATED STATEMENTS OF INCOME - USD ($) $ in Thousands | 3 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Income Statement [Abstract] | ||
Revenue | $ 283,143 | $ 221,778 |
Cost of sales | 154,461 | 122,445 |
Gross profit | 128,682 | 99,333 |
Operating expenses: | ||
Research, development and technical | 12,811 | 14,040 |
Selling, general and administrative | 54,439 | 61,128 |
Total operating expenses | 67,250 | 75,168 |
Operating income | 61,432 | 24,165 |
Interest Expense | 11,920 | 6,890 |
Interest income | 315 | 1,019 |
Other income (expense), net | (397) | (1,411) |
Income before income taxes | 49,430 | 16,883 |
Provision for income taxes | 10,881 | 3,440 |
Net income | $ 38,549 | $ 13,443 |
Basic earnings per share (in dollars per share) | $ 1.32 | $ 0.50 |
Weighted average basic shares outstanding (in shares) | 29,137,483 | 27,156,882 |
Diluted earnings per share (in dollars per share) | $ 1.30 | $ 0.48 |
Weighted average diluted shares outstanding (in shares) | 29,693,694 | 27,761,836 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands | 3 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Statement of Comprehensive Income [Abstract] | ||
Net income | $ 38,549 | $ 13,443 |
Other comprehensive income, net of tax: | ||
Foreign currency translation adjustments | 15,851 | 2,425 |
Minimum pension liability adjustment | 0 | (251) |
Net unrealized loss on cash flow hedges | 4,259 | |
Net unrealized loss on cash flow hedges | 0 | |
Other comprehensive income, net of tax | 20,110 | 2,174 |
Comprehensive income | $ 58,659 | $ 15,617 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Dec. 31, 2019 | Sep. 30, 2019 |
Current assets: | ||
Cash and cash equivalents | $ 194,328 | $ 188,495 |
Accounts receivable, less allowance for doubtful accounts of $2,406 at December 31, 2019, and $2,377 at September 30, 2019 | 144,741 | 146,113 |
Inventories | 156,140 | 145,278 |
Prepaid expenses and other current assets | 31,634 | 28,670 |
Total current assets | 526,843 | 508,556 |
Property, plant and equipment, net | 296,724 | 276,818 |
Goodwill | 717,313 | 710,071 |
Other intangible assets, net | 737,076 | 754,044 |
Deferred income taxes | 6,634 | 6,566 |
Other long-term assets | 35,819 | 5,711 |
Total assets | 2,320,409 | 2,261,766 |
Current liabilities: | ||
Accounts payable | 49,485 | 54,529 |
Current portion of long-term debt | 10,650 | 13,313 |
Accrued expenses, income taxes payable and other current liabilities | 98,022 | 103,618 |
Total current liabilities | 158,157 | 171,460 |
Long-term debt, net of current portion, less prepaid debt issuance costs of $17,159 at December 31, 2019 and $17,900 at September 30, 2019 | 926,541 | 928,463 |
Deferred income taxes | 128,549 | 121,993 |
Other long-term liabilities | 77,163 | 59,473 |
Total liabilities | 1,290,410 | 1,281,389 |
Commitments and contingencies (Note 13) | ||
Stockholders’ equity: | ||
Common Stock: Authorized: 200,000,000 shares, $0.001 par value; Issued: 39,719,407 shares at December 31, 2019, and 39,592,468 shares at September 30, 2019 | 40 | 40 |
Capital in excess of par value of common stock | 995,191 | 988,980 |
Retained earnings | 488,187 | 461,501 |
Accumulated other comprehensive income (loss) | (3,616) | (23,238) |
Treasury stock at cost, 10,513,931 shares at December 31, 2019, and 10,491,252 shares at September 30, 2019 | (449,803) | (446,906) |
Total stockholders’ equity | 1,029,999 | 980,377 |
Total liabilities and stockholders’ equity | $ 2,320,409 | $ 2,261,766 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Dec. 31, 2019 | Sep. 30, 2019 |
Statement of Financial Position [Abstract] | ||
Accounts receivable, allowance for doubtful accounts | $ 2,406 | $ 2,377 |
Prepaid debt issuance cost | $ 17,159 | $ 17,900 |
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) | 39,719,407 | 39,592,468 |
Treasury stock (in shares) | 10,513,931 | 10,491,252 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Cash flows from operating activities: | ||
Net income | $ 38,549 | $ 13,443 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 31,642 | 16,541 |
Accretion on Asset Retirement Obligations - Liabilities | 106 | 0 |
Provision for doubtful accounts | (30) | (169) |
Share-based compensation expense | 4,763 | 8,170 |
Deferred income tax (expense) benefit | 1,434 | (12,925) |
Non-cash foreign exchange (gain) loss | (98) | 160 |
Loss on disposal of property, plant and equipment | 6 | 33 |
Amortization of Acquisition Costs | 0 | 10,261 |
Amortization of debt issuance costs | 783 | 485 |
Other | 1,833 | 3,130 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 2,204 | 2,584 |
Inventories | (10,037) | (7,393) |
Prepaid expenses and other assets | (2,455) | (2,051) |
Accounts payable | (5,587) | 7,819 |
Accrued expenses, income taxes payable and other liabilities | (14,989) | (26,387) |
Net cash provided by operating activities | 48,124 | 13,701 |
Cash flows from investing activities: | ||
Additions to property, plant and equipment | (26,013) | (7,847) |
Proceeds from sales of property, plant and equipment | 543 | 0 |
Acquisition of a business, net of cash acquired | 0 | (1,182,186) |
Net cash used in investing activities | (25,470) | (1,190,033) |
Cash flows from financing activities: | ||
Repayment of long-term debt | (5,326) | 0 |
Repurchases of common stock | (2,897) | (4,001) |
Proceeds from issuance of long-term debt | 0 | 1,062,337 |
Debt issuance costs | 0 | (18,745) |
Principal payments under financing lease obligations | (2) | |
Proceeds from issuance of stock | 1,448 | 3,031 |
Dividends paid | (12,487) | (10,377) |
Net cash (used in) provided by financing activities | (19,264) | 1,032,245 |
Effect of exchange rate changes on cash | 2,443 | 46 |
Increase (decrease) in cash and cash equivalents | 5,833 | (144,041) |
Cash and cash equivalents at beginning of period | 188,495 | 352,921 |
Cash and cash equivalents at end of period | 194,328 | 208,880 |
Supplementary Cash Flow Information: | ||
Purchases of property, plant and equipment in accrued liabilities and accounts payable at the end of the period | 9,043 | 1,558 |
Equity consideration related to the acquisition of KMG Chemicals, Inc | 0 | $ 331,048 |
Cash paid during the period for lease liabilities | 1,897 | |
Right of use asset obtained in exchange for lease liabilities | $ 1,155 |
CONSOLIDATED STATEMENT OF CHANG
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) $ in Thousands | Total | Common Stock | Capital In Excess Of Par | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Treasury Stock |
Balance at beginning of period at Sep. 30, 2018 | $ 666,692 | $ 36 | $ 622,498 | $ 471,673 | $ 4,539 | $ (432,054) |
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 Cabot Microelectronics restricted stock under Deposit Share Program | 75 | 75 | ||||
Issuance of common stock in connection with acquisition of KMG Chemicals, Inc. | 331,048 | 3 | 331,045 | |||
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 | 1,008,167 | 39 | 964,885 | 472,585 | 6,713 | (436,055) |
Balance at beginning of period at Sep. 30, 2019 | 980,377 | 40 | 988,980 | 461,501 | (23,238) | (446,906) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Share-based compensation expense | 4,763 | 4,763 | ||||
Repurchases of common stock - other, at cost | (2,897) | (2,897) | ||||
Exercise of stock options | 1,298 | 1,298 | ||||
Issuance of Cabot Microelectronics restricted stock under Deposit Share Program | 150 | 150 | ||||
Net income | 38,549 | 38,549 | ||||
Dividends | (12,351) | (12,351) | ||||
Effect of the adoption of the stranded tax effect accounting standards | 488 | (488) | ||||
Foreign currency translation adjustment | 15,851 | 15,851 | ||||
Cash flow hedges | 4,259 | 4,259 | ||||
Minimum pension liability adjustment | 0 | |||||
Balance at end of period at Dec. 31, 2019 | $ 1,029,999 | $ 40 | $ 995,191 | $ 488,187 | $ (3,616) | $ (449,803) |
CONSOLIDATED STATEMENT OF CHA_2
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (Parenthetical) - $ / shares | 3 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Statement of Stockholders' Equity [Abstract] | ||
Dividends (in dollars per share) | $ 0.42 | $ 0.40 |
BACKGROUND AND BASIS OF PRESENT
BACKGROUND AND BASIS OF PRESENTATION | 3 Months Ended |
Dec. 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
BACKGROUND AND BASIS OF PRESENTATION | 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 companies. The Company's products play a critical role in the production of advanced semiconductor devices, helping to enable the manufacture of smaller, faster and more complex devices by its customers. On November 15, 2018 (the “Acquisition Date”), we completed our acquisition of KMG Chemicals, Inc. (“KMG”), which produces and distributes specialty chemicals and performance materials for the semiconductor industry, pipeline and adjacent industries, and industrial wood preservation industry (the “Acquisition”). The Acquisition extended and strengthened our position as one of the leading suppliers of consumable materials to the semiconductor industry and expanded our portfolio with the addition of KMG’s businesses, which we believe enables us to be a leading global provider of performance materials to pipeline operators. The Consolidated Financial Statements included in this Report on Form 10-Q include the financial results of KMG from the Acquisition Date. Since the Acquisition, we now operate 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 our heritage QED business. For additional information, refer to Item 1 of Part I of our Annual Report on Form 10-K for the fiscal year ended September 30, 2019. 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 December 31, 2019, cash flows for the three months ended December 31, 2019 and December 31, 2018, and results of operations for the three months ended December 31, 2019 and December 31, 2018. The Consolidated Balance Sheets as of September 30, 2019 were derived from audited financial statements. The results of operations for the three months ended December 31, 2019 may not be indicative of results to be expected for future periods, including the fiscal year ending September 30, 2020. This Report on Form 10-Q does not contain all of the footnote disclosures from our annual financial statements and should be read in conjunction with the Consolidated Financial Statements and related notes thereto included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2019. 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 December 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 challenging and subjective judgments include, but are not limited to, those estimates related to impairment of long-lived assets, business combinations, asset retirement obligations, goodwill, other intangible assets, 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 | 3 Months Ended |
Dec. 31, 2019 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS Significant Accounting Policies and Estimates There have been no material changes, except for those disclosed below, made to the Company’s significant accounting policies disclosed in Note 2 of "Notes to the Consolidated Financial Statements" included in Item 8 of Part II of our Annual Report on Form 10-K for the fiscal year ended September 30, 2019. In February 2016, the FASB issued ASU No. 2016-02, "Leases" (ASC 842) to change the criteria for recognizing leasing transactions. The provisions of this guidance require a lessee to recognize a right of use asset and a corresponding lease liability for operating leases. Under this guidance, rental expense for operating leases, continues to be recognized on a straight-line basis over the non-cancelable lease term. As of October 1, 2019, the Company began applying the provisions of this standard prospectively for all lease transactions as of and after the effective date. Upon adoption, the Company recorded a lease liability of $30,881 and a right of use asset of $30,115. The difference between the right of use asset and lease liability primarily relates to deferred rent recorded prior to adoption. The new guidance did not have a material impact on our results of operations or cash flows for the quarter ended December 31, 2019. Refer to Note 11 of this Report on Form 10-Q for additional information regarding the Company’s lease transactions. In February 2018, the FASB issued ASU No. 2018-02 "Income Statement – Reporting Comprehensive Income" (Topic 220). The amendments in this standard allows for an optional one-time reclassification of the stranded tax effects resulting from the change in the U.S. federal corporate income tax rate under the Tax Cuts and Jobs Act (the "Tax Act") from Accumulated other comprehensive income to Retained earnings. The Company adopted this standard effective October 1, 2019, which resulted in an increase of $488 to both Retained earnings and Accumulated other comprehensive loss. 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. The guidance was amended through various ASU's subsequent to ASU 2016-13, all of which will be effective for the Company beginning October 1, 2020. We are currently evaluating the impact of implementing 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. We are currently evaluating the impact of implementing this standard on our disclosures. In December 2019, the FASB issued ASU No. 2019-12 “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” The ASU was issued to simplify Topic 740 through improving consistency and removing certain exceptions to general principles. ASU 2019-12 will be effective for us beginning October 1, 2021, but early adoption is permitted. We are currently evaluating the impact of implementing this standard on our financial statements. |
REVENUE FROM CONTRACTS WITH CUS
REVENUE FROM CONTRACTS WITH CUSTOMERS | 3 Months Ended |
Dec. 31, 2019 | |
Revenue from Contract with Customer [Abstract] | |
REVENUE FROM CONTRACTS WITH CUSTOMERS | REVENUE FROM CONTRACTS WITH CUSTOMERS Disaggregated Revenue The Company disaggregates revenue by product area and segment as it best depicts the nature and amount of the Company’s revenue. See Note 18 of this Report on Form 10-Q for more information. Contract Balances The following table provides information about contract liability balances: December 31, 2019 September 30, 2019 Contract liabilities (current) $ 5,064 $ 5,008 Contract liabilities (noncurrent) 820 1,130 At December 31, 2019, the current portion of contract liabilities of $5,064 is included in Accrued expenses, income taxes payable and other current liabilities, and the non-current portion of $820 is included in Other long-term liabilities in the Consolidated Balance Sheets. The amount of revenue recognized during the three months ended December 31, 2019 that was included in the opening current contract liability balance in our Performance Materials segment was $2,258. The amount of revenue recognized during the three months ended December 31, 2019 that was included in our opening contract liability balance 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 December 31, 2019 $ 1,485 $ 820 $ — $ 2,305 |
BUSINESS COMBINATION
BUSINESS COMBINATION | 3 Months Ended |
Dec. 31, 2019 | |
Business Combinations [Abstract] | |
BUSINESS COMBINATION | 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 specialized in producing, processing, and distributing electronic chemicals for the semiconductor industry and performance materials for the pipeline and adjacent industries, and industrial wood preservation industry. We acquired KMG to extend and strengthen our position as one of the leading suppliers of consumable materials to the semiconductor industry and to expand our portfolio with the addition of KMG’s performance materials businesses, which we believe enables us to become a leading global provider of performance materials to pipeline operators. The purchase consideration was $1,513,235, including consideration transferred of $1,536,452, less cash acquired of $23,217. The consideration was comprised of cash consideration to KMG common shareholders and equity award holders, stock consideration to KMG common shareholders and equity award holders, and cash consideration in the form of the retirement of KMG’s preexisting debt obligations. Under the terms of the definitive agreement to acquire KMG, each share of KMG common stock was converted into the right to receive $55.65 in cash and 0.2000 of a share of Cabot Microelectronics common stock. As a result, we issued 3,237,005 shares of our common stock to KMG’s common stockholders, with a stock price of $102.27 on the Acquisition Date. In connection with the Acquisition, we entered into a credit agreement which provided a seven 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 allocation of fair values of assets acquired and liabilities assumed as of the Acquisition Date. Amount Cash $ 23,217 Accounts receivable 63,950 Inventories 68,087 Prepaid expenses and other current assets 14,694 Property, plant and equipment 147,170 Intangible assets 844,800 Other long-term assets 5,805 Accounts payable (28,835) Accrued expenses and other current liabilities (44,216) Deferred income taxes liabilities (156,474) Other long-term liabilities (15,080) Total identifiable net assets acquired 923,118 Goodwill 613,334 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. We believe that the information we used provides a reasonable basis for estimating the fair value of assets acquired and liabilities assumed. The Company finalized the purchase price allocation during the fourth quarter of fiscal 2019. During the first quarter of fiscal 2020, the Company made adjustments to the purchase price allocation to correct immaterial errors. 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, Operating expenses, discount rates terminal growth rates, and customer attrition rates. 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 Customer relationships - Flowchem $ 315,000 20 Customer relationships - Electronic chemicals 280,000 19 Customer relationships - all other 109,000 15-16 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 represent 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. The intangible assets subject to amortization have a weighted average useful life of 17.9 years. For intangible assets related to the wood treatment business, the remaining useful lives were limited to the end of the calendar year 2021. As discussed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2019, the Company recognized asset impairment charges of $67,372, net for the wood treatment asset group due to triggering events that occurred in the fourth quarter of fiscal 2019. The Company continues to monitor the wood treatment asset group for indicators of long-lived asset or goodwill impairment. As the Company approaches the announced closure date of the facilities and there are lower estimated future cash flows, there is a potential for further impairments of long-lived assets and goodwill absent a sale of the business. While the timing and amounts of any further impairments are unknown, they could be material to the Company’s Consolidated Balance Sheets and to the Consolidated Statements of Income, but they will not affect the Company’s reported Net cash provided by operating activities. Refer to Note 10 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, 2019 for additional information. 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 allocation of goodwill to each of the Electronic Materials and Performance Materials segments as a result of the Acquisition was $259,859 and $353,475, respectively. For the three months ended December 31, 2019, we recorded $2,204 in Acquisition and integration-related expenses, including professional fees and retention costs. These items are included within Selling, general and administrative 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 (Loss) from the Acquisition Date. Net sales of the acquired KMG businesses for the three months ended December 31, 2019 were $133,433. KMG’s Net income for the three months ended December 31, 2019 was $14,686, which includes $206 of Acquisition-related costs. 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 Revenue $ 283,756 Net income 38,038 Earnings per share - basic 1.32 Earnings per share - diluted 1.29 The following costs are included in the three months ended December 31, 2018: • Non-recurring transaction costs of $354. • Non-recurring transaction-related employee costs, such as accelerated stock compensation expense, retention and severance expense of $84. • Non-recurring charge for fair value write-up of inventory sold of $10,261. The historical financial information has been adjusted by applying the Company’s accounting policies and giving effect to the pro forma adjustments, which consist of (i) amortization expense associated with identified intangible assets; (ii) depreciation of fixed asset step-up (for pre-Acquisition periods only); (iii) accretion of inventory step-up value; (iv) the elimination of Interest expense on pre-Acquisition KMG debt and replacement of Interest expense related to the Acquisition-related financing; (v) transaction-related costs; (vi) accelerated share-based compensation expense (pre-Acquisition periods only); (vii) retention and severance expense incurred as a direct result of the Acquisition; and (viii) an adjustment to tax-effect the aforementioned unaudited pro forma adjustments using an estimated weighted-average effective income tax rate of each entity and the jurisdictions to which the above adjustments relate. The pro forma consolidated results are not necessarily indicative of what the consolidated results actually would have been had the Acquisition been completed on October 1, 2017. The pro forma consolidated results do not purport to project future results of combined operations, nor do they reflect the expected realization of any revenue or cost synergies associated with the Acquisition. |
FAIR VALUE OF FINANCIAL INSTRUM
FAIR VALUE OF FINANCIAL INSTRUMENTS | 3 Months Ended |
Dec. 31, 2019 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE OF FINANCIAL INSTRUMENTS | 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 December 31, 2019 and September 30, 2019. See Note 10 of this Report on Form 10-Q 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. December 31, 2019 Level 1 Level 2 Level 3 Total Assets: Cash and cash equivalents $ 194,328 $ — $ — $ 194,328 Other long-term investments 1,176 — — 1,176 Derivative financial instruments — 78 — 78 Total assets $ 195,504 $ 78 $ — $ 195,582 Liabilities: Derivative financial instruments — 18,916 — 18,916 Total liabilities $ — $ 18,916 $ — $ 18,916 September 30, 2019 Level 1 Level 2 Level 3 Total Assets: Cash and cash equivalents $ 188,495 $ — $ — $ 188,495 Other long-term investments 980 — — 980 Total assets $ 189,475 $ — $ — $ 189,475 Liabilities: Derivative financial instruments — 24,244 — 24,244 Total liabilities $ — $ 24,244 $ — $ 24,244 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 non-qualified 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 non-qualified plan. Consequently, the Company owns the assets and the related offsetting liability for disbursement until such time as a participant makes a qualifying withdrawal. The long-term asset was adjusted to $1,176 in the first quarter of fiscal 2020 to reflect its fair value as of December 31, 2019. Our derivative financial instruments include foreign exchange contracts and an interest rate swap contract. During the second quarter of fiscal 2019, we entered into a floating-to-fixed interest rate swap contract to hedge the variability in LIBOR-based interest payments on a portion of our outstanding variable rate debt. The 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 the 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 12 of this Report on Form 10-Q for more information on our use of derivative financial instruments. |
INVENTORIES
INVENTORIES | 3 Months Ended |
Dec. 31, 2019 | |
Inventory Disclosure [Abstract] | |
INVENTORIES | INVENTORIES Inventories consisted of the following: December 31, September 30, 2019 Raw materials $ 66,225 $ 60,157 Work in process 14,209 12,940 Finished goods 75,706 72,181 Total $ 156,140 $ 145,278 |
GOODWILL AND OTHER INTANGIBLE A
GOODWILL AND OTHER INTANGIBLE ASSETS | 3 Months Ended |
Dec. 31, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
GOODWILL AND OTHER INTANGIBLE ASSETS | GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill activity for each of the Company’s reportable segments, which carry goodwill, Electronic Materials and Performance Materials, for the three months ended December 31, 2019. Electronic Materials Performance Materials Total Balance at September 30, 2019 $ 352,797 $ 357,274 $ 710,071 Foreign currency translation impact 5,487 550 6,037 Other — 1,205 1,205 Balance at December 31, 2019 $ 358,284 $ 359,029 $ 717,313 The components of other intangible assets are: December 31, 2019 September 30, 2019 Gross Accumulated Gross Accumulated Other intangible assets subject to amortization: Product technology, trade secrets and know-how $ 124,534 $ 41,077 $ 123,948 $ 37,993 Acquired patents and licenses 9,023 8,462 9,023 8,397 Customer relationships, trade names, and distribution rights 689,414 83,526 684,764 64,471 Total other intangible assets subject to amortization 822,971 133,065 817,735 110,861 Other intangible assets not subject to amortization: Other indefinite-lived intangibles* 47,170 47,170 Total other intangible assets not subject to amortization 47,170 47,170 Total other intangible assets $ 870,141 $ 133,065 $ 864,905 $ 110,861 *Other indefinite-lived intangible assets not subject to amortization consist primarily of trade names. Amortization expense was $21,364 and $9,356 for the three months ended December 31, 2019 and 2018, respectively. Estimated future amortization expense for the five succeeding fiscal years is as follows: Fiscal Year Estimated Amortization Expense Remainder of 2020 $ 64,441 2021 83,139 2022 74,628 2023 62,781 2024 55,481 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 fiscal year 2019, 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 and QED reporting units, for which we chose to use a step zero analysis for fiscal year 2019. |
OTHER LONG-TERM ASSETS
OTHER LONG-TERM ASSETS | 3 Months Ended |
Dec. 31, 2019 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
OTHER LONG-TERM ASSETS | OTHER LONG-TERM ASSETS Other long-term assets consisted of the following: December 31, September 30, Long-term right of use asset $ 29,662 $ — Long-term contract assets 1,721 1,164 Long-term SERP investment 1,176 980 Prepaid unamortized debt issuance cost - revolver 666 709 Other long-term assets 2,594 2,858 Total $ 35,819 $ 5,711 |
ACCRUED EXPENSES, INCOME TAXES
ACCRUED EXPENSES, INCOME TAXES PAYABLE AND OTHER CURRENT LIABILITIES | 3 Months Ended |
Dec. 31, 2019 | |
Payables and Accruals [Abstract] | |
ACCRUED EXPENSES, INCOME TAXES PAYABLE AND OTHER CURRENT LIABILITIES | ACCRUED EXPENSES, INCOME TAXES PAYABLE AND OTHER CURRENT LIABILITIES Accrued expenses, income taxes payable and other current liabilities consisted of the following: December 31, September 30, Accrued compensation $ 23,817 $ 33,809 Income taxes payable 20,070 15,725 Dividends payable 12,817 12,953 Taxes, other than income taxes 9,490 6,281 Current portion of operating lease liability 5,461 — Interest rate swap liability 5,398 5,351 Contract liabilities (current) 5,064 5,008 Goods and services received, not yet invoiced 4,519 3,075 KMG - Bernuth warehouse fire related (See Note 13) 700 7,998 Accrued interest 125 3,739 Other 10,561 9,679 Total $ 98,022 $ 103,618 |
DEBT
DEBT | 3 Months Ended |
Dec. 31, 2019 | |
Debt Disclosure [Abstract] | |
DEBT | DEBT In connection with the Acquisition, we entered into a seven The Term Loan Facility matures on November 15, 2025, the seven five During the first quarter of fiscal year 2020, the Company amended the Credit Agreement to reduce the interest rate on term loan borrowings. The amended Term Loan Facility and amended Credit Facilities are referred to as "Amended Term Loan Facility" and "Amended Credit Facilities", respectively. Borrowings under the Amended 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 Amended Term Loan Facility, 2.00% for LIBOR loans and 1.00% for base rate loans and, in the case of borrowings under the Revolving Credit Facility, initially, 1.50% for LIBOR loans and 0.50% for base rate loans. 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. No amount was outstanding under the Revolving Credit Facility as of December 31, 2019. At December 31, 2019, the fair value of the Term Loan Facility, using level 2 inputs, approximated its carrying value of $954,350 as the loan bears a floating market rate of interest. As of December 31, 2019, $10,650 of the debt outstanding was classified as short-term, and $17,159 of debt issuance costs related to our Term Loan were presented as a reduction of long-term debt. In the second quarter of fiscal 2019, we entered into a floating-to-fixed interest rate swap contract to hedge the variability in our LIBOR-based interest payments on approximately 70% of our Term Loan Facility balance. See Note 12 of this 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 a business day. As of December 31, 2019, scheduled principal repayments of the Term Loan were: Fiscal Year Principal Repayments Remainder of 2020 $ 7,987 2021 10,650 2022 10,650 2023 10,650 2024 10,650 Greater than 5 years 903,763 Total $ 954,350 |
LEASES
LEASES | 3 Months Ended |
Dec. 31, 2019 | |
Leases [Abstract] | |
LEASES | LEASES Effective October 1, 2019, the Company adopted the new lease accounting guidance which requires the recognition of a right of use asset and a corresponding lease liability for operating leases. As part of the adoption, the Company elected to apply provisions of the guidance to operating leases with terms of more than twelve months for all lease classes except for real estate leases for which the guidance is applied to all leases. Additionally, the Company elected to account for non-lease components and lease components together as a single lease component for all asset classes. The Company’s lease transactions primarily consist of leases for facilities, equipment and vehicles under operating leases. The Company does not have any material finance leases. The weighted average remaining lease term for operating leases included in the lease liability was approximately seven years, as of December 31, 2019. Certain of the Company’s leases have an option to extend the lease term and the renewal period is included in determining the lease term for leases where the renewal option is reasonably certain to be exercised. Total lease cost for the Company for the three months ended December 31, 2019 was $2,486, which included $1,983 related to operating lease cost and $503 related to short-term and variable lease costs. The right of use asset related to operating leases as of December 31, 2019 was $29,662 and was recorded in Other long-term assets. As of December 31, 2019, the current portion of the lease liability for operating leases was $5,461 and was included in Accrued expenses, income taxes payable and other current liabilities, and the long-term portion was $25,095 and was included in Other long-term liabilities. The weighted average discount rate for operating leases was 3.02%, and was determined based on the secured incremental borrowing rate of the Company and its subsidiaries as the implicit rate is not readily determinable. Future maturities of operating lease liabilities for the years ended September 30 are as follows: Fiscal Year Amount January 2020 through September 30, 2020 $ 4,888 2021 4,845 2022 4,505 2023 4,331 2024 4,069 2025 and future years 11,538 Total future lease payments 34,176 Less: Imputed interest 3,620 Operating lease liability 30,556 Less: Current portion of operating lease liability 5,461 Long-term portion of operating lease liability $ 25,095 As of September 30, 2019, minimum lease payments under operating leases with noncancelable terms in excess of one are as follows: Fiscal Year Amount 2020 $ 6,984 2021 4,941 2022 4,291 2023 4,122 2024 3,710 Thereafter 12,010 Total future minimum lease payments $ 36,058 |
DERIVATIVE FINANCIAL INSTRUMENT
DERIVATIVE FINANCIAL INSTRUMENTS | 3 Months Ended |
Dec. 31, 2019 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
DERIVATIVE FINANCIAL INSTRUMENTS | 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 Contract During the second quarter of fiscal 2019, we entered into a floating-to-fixed interest rate swap contract to hedge the variability in LIBOR-based interest payments on a portion of our outstanding variable rate debt. As of December 31, 2019, the notional value of the interest rate swap was $699,000. This value is scheduled to decrease bi-annually and will expire on January 31, 2024. We have designated this swap contract 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 (expense), net in the accompanying Consolidated Statements of Income in the period in which the exchange rates change. As of December 31, 2019 and September 30, 2019, the notional amounts of the forward contracts we held to purchase U.S. dollars in exchange for foreign currencies were $9,762 and $6,239, respectively, and the notional amounts of forward contracts we held to sell U.S. dollars in exchange for foreign currencies were $21,115 and $24,270, respectively. The fair value of our derivative instruments included in the Consolidated Balance Sheets, which was determined using level 2 inputs, was as follows: Derivative Assets Derivative Liabilities Consolidated Balance Sheet Location December 31, 2019 September 30, 2019 December 31, 2019 September 30, 2019 Derivatives designated as hedging instruments Interest rate swap contract Accrued expenses, income taxes payable and other current liabilities $ — $ — $ 5,398 $ 5,351 Other long-term liabilities $ — $ — $ 13,308 $ 18,841 Derivatives not designated as hedging instruments Foreign exchange contracts Prepaid expenses and other current assets $ 78 $ — $ — $ — Accrued expenses, income taxes payable and other current liabilities $ — $ — $ 210 $ 52 The following table summarizes the effect of our derivative instruments on our Consolidated Statements of Income for the three months ended December 31, 2019 and 2018: Gain Recognized in Statement of Income Three Months Ended Statement of Income Location December 31, 2019 December 31, 2018 Derivatives not designated as hedging instruments Foreign exchange contracts Other income (expense), net $ 6 $ 311 The interest rate swap contract has been deemed to be effective, and we realized a loss of $909 in Interest expense during the three months ended December 31, 2019. We recorded an unrealized gain of $3,350, net of tax, in Accumulated comprehensive income during the three months ended December 31, 2019 for this interest rate swap. As of December 31, 2019, during the next 12 months, we expect approximately $5,398 to be reclassified from Accumulated other comprehensive (loss) income into Interest expense related to our interest rate swap based on projected rates of the LIBOR forward curve as of December 31, 2019. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Dec. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES LEGAL PROCEEDINGS AND OTHER CONTINGENCIES 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 our consolidated financial statements. One of these contingencies, related to Star Lake Canal, which we assumed in connection with the Acquisition, 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. On May 31, 2019, a fire occurred at the warehouse of the facility of KMG’s subsidiary, KMG-Bernuth, in Tuscaloosa, Alabama, which processes pentachlorophenol ("penta") for sale to customers in the United States and Canada. The warehouse fire, which we believe originated from non-hazardous waste materials temporarily stored in the warehouse for recycling purposes, caused no injuries and was extinguished in less than an hour. Company personnel investigated the incident, and KMG-Bernuth commenced cleanup with oversight from certain local, state and federal authorities. The carrying value of the warehouse and the affected inventory are not material. Applying the accounting guidance under ASC 410-30, Environmental Obligations and ASC 450, Contingencies, we determined that since we have environmental obligations as of the date of the fire, costs for the fire waste cleanup and disposal should be recognized to the extent they are probable and reasonably estimable. We recorded an expense of $9,494 in fiscal year 2019 and $381 in the first quarter of fiscal 2020, of which $700 remains accrued as a loss contingency. These disposal costs were charged to Cost of sales. Although we believe we have completed cleanup efforts related to the fire incident, there are potential additional disposal and other costs that cannot be reasonably estimated as of this time related to materials in the warehouse impacted by the incident due to the nature of federally-regulated penta-related requirements. The fire waste cleanup and disposal costs were significant due to these requirements, and we may incur additional significant disposal costs related to the impacted warehouse materials. We will continue to update the estimated losses as new information becomes available. In addition, we are working with our insurance carriers on possible recovery of losses and costs, but at this point we cannot reasonably estimate whether we will receive, or if so, the amount of, any potential insurance recoveries. As such, no insurance recoveries have been recognized as of December 31, 2019. Separately, in 2014, prior to the Acquisition, the United States Environmental Protection Agency (“EPA”) had notified KMG-Bernuth, that the EPA considered it to be a potentially responsible party under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (“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-Bernuth 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-Bernuth has not conceded liability, a reserve in connection with the remedial design was established, and as of December 31, 2019, the reserve remaining was $728. We also may face other governmental or third-party claims, or otherwise incur costs, relating to cleanup of, or for injuries resulting from, contamination at sites associated with this or other past and present operations. We accrue for environmental liabilities when a determination can be made that they are probable and reasonably estimable. Other than as described herein, we are not involved in any legal proceedings that we believe could have a material impact on our consolidated financial position, results of operations or cash flows. In addition, our Company is subject to extensive federal, state and local laws, regulations and ordinances in the United States and in other countries. These regulatory requirements relate to the use, generation, storage, handling, emission, transportation and discharge of certain hazardous materials, substances and waste into the environment. The Company, including its KMG entities, manage Environmental, Health and Safety (“EHS”) matters related to protection of the environment and human health, the cleanup of contaminated sites, the treatment, storage and disposal of wastes, and the emission of substances into the air or waterways, among other EHS concerns. Governmental authorities can enforce compliance with their regulations, and violators may be subject to fines, injunctions or both. The Company devotes significant financial resources to compliance, including costs for ongoing compliance. Certain licenses, permits and product registrations are required for the Company’s products and operations in the United States, 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 United States in particular, producers and distributors of penta, which is a product manufactured and sold by KMG-Bernuth 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 United States. 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 above and 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 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. INDEMNIFICATION In the normal course of business, we are a party to a variety of agreements pursuant to which we may be obligated to indemnify the other party with respect to certain matters. Generally, these obligations arise in the context of agreements entered into by us, under which we customarily agree to hold the other party harmless against losses arising from items such as a breach of certain representations and covenants including title to assets sold, certain intellectual property rights and certain environmental matters. These terms are common in the industries in which we conduct business. In each of these circumstances, payment by us is subject to certain monetary and other limitations and is conditioned on the other party making an adverse claim pursuant to the procedures specified in the particular agreement, which typically allow us to challenge the other party's claims. We evaluate estimated losses for such indemnifications under the accounting standards related to contingencies and guarantees. We consider such factors as the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss. To date, we have not experienced material costs as a result of such obligations and, as of December 31, 2019, have not recorded any liabilities related to such indemnifications in our financial statements as we do not believe the likelihood of such obligations is probable. Refer to Note 20 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, 2019, 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. 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 $7,872. For more information regarding these plans, refer to Note 20 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, 2019. 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 an abrasive particle supply agreement with Cabot Corporation, our former parent company which is not a related party, the current term of which as a result of an amendment to the agreement in the first quarter of fiscal year 2020, now runs through December 2022. As of December 31, 2019, purchase obligations include $31,715 of contractual commitments related to this agreement. In addition, we have a purchase commitment of $7,586 to purchase non-water-based carrier fluid, and have another purchase contract to purchase $3,900 of abrasive particles. |
ACCUMULATED OTHER COMPREHENSIVE
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | 3 Months Ended |
Dec. 31, 2019 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) The table below summarizes the components of Accumulated other comprehensive income (loss) (AOCI), net of Provision for income taxes/(benefit), for the three months ended December 31, 2019 and 2018: Foreign Cash Flow Pension and Total Balance at September 30, 2019 $ (2,630) $ (18,797) $ (1,811) $ (23,238) Foreign currency translation adjustment, net of tax of $32 15,851 — — 15,851 Unrealized gain (loss) on cash flow hedges: Change in fair value, net of tax of $964 — 3,350 — 3,350 Reclassification adjustment into earnings, net of tax of $261 — 909 — 909 Effect of the adoption of the stranded tax effect accounting standards (497) 9 — (488) Balance at December 31, 2019 $ 12,724 $ (14,529) $ (1,811) $ (3,616) Foreign Cash Flow Pension and Total Balance at September 30, 2018 $ 5,918 $ (17) $ (1,362) $ 4,539 Foreign currency translation adjustment, net of tax of $608 2,425 — — 2,425 Change in pension and other postretirement, net of tax of $0 — — (251) (251) Balance at December 31, 2018 $ 8,343 $ (17) $ (1,613) $ 6,713 The before tax amount reclassified from AOCI to Net income during the three months ended December 31, 2019 and 2018, related to cash flow hedges, were recorded as Interest expense on our Consolidated Statements of Income. During the first quarter of fiscal 2020, the Company adopted ASU No. 2018-02 regarding the reclassification of stranded tax effects resulting from the change in the U.S. federal corporate income tax rate under the Tax Act and as a result, we reclassified $488 of stranded tax effects from Accumulated other comprehensive income to Retained earnings. |
SHARE-BASED COMPENSATION PLANS
SHARE-BASED COMPENSATION PLANS | 3 Months Ended |
Dec. 31, 2019 | |
Share-based Payment Arrangement [Abstract] | |
SHARE-BASED COMPENSATION PLANS | SHARE-BASED COMPENSATION PLANSWe 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 approved 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 16 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, 2019. 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 Acquisition, the performance metrics of the PSUs awarded in December 2017 were modified to reflect the performance metrics expected due to the Acquisition for the post-Acquisition time period subject to the PSUs. KMG awards granted subsequent to the entry into the definitive agreement for the Acquisition, but prior to the Acquisition Date, were converted to our restricted stock units (“Replacement Awards”), 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 of $3,253 related to the Replacement Awards, including accelerated vesting, for the three months ended December 31, 2018 is included in the table below. The expense for the three months ended December 31, 2019 included in the table below is not material. Share-based compensation expense for the three months ended December 31, 2019 and 2018, was as follows: Three Months Ended December 31, 2019 2018 Cost of sales $ 912 $ 1,055 Research, development and technical 804 901 Selling, general and administrative 3,047 6,214 Total share-based compensation expense 4,763 8,170 Tax benefit (938) (1,691) Total share-based compensation expense, net of tax $ 3,825 $ 6,479 For additional information regarding the estimation of fair value, refer to Note 16 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, 2019. |
INCOME TAXES
INCOME TAXES | 3 Months Ended |
Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXESThe Company’s effective income tax rate for the first quarter of fiscal 2020 was 22.0%, compared to 20.4% in the same quarter last year. The increase in our effective tax rate is primarily driven by lower tax benefit related to share based compensation, partially offset by favorable impact from the absence of non-deductible KMG Acquisition-related costs. |
EARNINGS PER SHARE
EARNINGS PER SHARE | 3 Months Ended |
Dec. 31, 2019 | |
Earnings Per Share [Abstract] | |
EARNINGS PER SHARE | 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 with 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 and units 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 December 31, 2019 2018 Numerator: Net income available to common shares $ 38,549 $ 13,443 Denominator: Weighted average common shares 29,137,483 27,156,882 (Denominator for basic calculation) Weighted average effect of dilutive securities 556,211 604,954 Diluted weighted average common shares 29,693,694 27,761,836 (Denominator for diluted calculation) Earnings per share: Basic $ 1.32 $ 0.50 Diluted $ 1.30 $ 0.48 For the three months ended December 31, 2019 and 2018, approximately 36 thousand and 120 thousand shares attributable to outstanding stock options were excluded from the calculation of Diluted earnings per share. |
SEGMENT REPORTING
SEGMENT REPORTING | 3 Months Ended |
Dec. 31, 2019 | |
Segment Reporting [Abstract] | |
SEGMENT REPORTING | 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 had operated predominantly in one industry segment – the development, manufacture and sale of Chemical Mechanical Planarization (CMP) consumables products. In connection with the Acquisition, we reassessed our operating and reportable segments, and determined that we 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 pads, and high-purity process chemicals used to etch and clean silicon wafers in the production of semiconductors, photovoltaics (solar cells) and flat panel displays. Performance Materials Performance Materials includes pipeline performance products and services, wood treatment products, and products and equipment used in the precision optics industry. Beginning in fiscal 2019 and with the Acquisition, 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 the Acquisition, such as expenses incurred to complete the Acquisition, integration-related expenses and impact of fair value adjustments to inventory acquired from KMG, and certain costs related to the KMG-Bernuth warehouse fire, asset impairment and restructuring charges related to the wood treatment reporting unit. 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 2020 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 by segment are as follows: Three Months Ended December 31, 2019 2018 Segment Revenue Electronic Materials $ 220,721 $ 190,617 Performance Materials 62,422 31,161 Total $ 283,143 $ 221,778 Capital expenditures by segment are as follows: Three Months Ended December 31, 2019 2018 Capital Expenditures Electronic Materials $ 8,485 $ 6,399 Performance Materials 16,369 260 Corporate 1,512 1,226 Total $ 26,366 $ 7,885 Adjusted EBITDA by segment are as follows: Three Months Ended December 31, 2019 2018 Segment adjusted EBITDA: Electronic Materials $ 81,198 $ 74,825 Performance Materials 27,478 13,067 Unallocated corporate expenses (13,403) (11,042) Interest expense (11,920) (6,890) Interest income 315 1,019 Depreciation and amortization (31,642) (16,541) Acquisition and integration-related expenses (2,204) (27,294) Charge for fair value write-up of acquired inventory sold — (10,261) Costs related to KMG-Bernuth warehouse fire (See Note 13) and restructuring of wood treatment business (392) — Income before income taxes $ 49,430 $ 16,883 We began to manage and report our results under the new organizational structure in conjunction with the 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 December 31, 2018 includes Cabot Microelectronics’ heritage QED business. The adjustments to segment EBITDA for the three months ended December 31, 2019 represent addbacks of the Acquisition and integration-related expenses, costs related to KMG-Bernuth warehouse fire, and restructuring and asset impairment charges related to wood treatment business. The adjustments to segment EBITDA for the three months ended December 31, 2018 represent addbacks of Acquisition and integration-related expenses, and a charge for the write-up of inventory acquired from KMG to fair value for inventory sold in the period. The unallocated portions of corporate functions including finance, legal, human resources, information technology, and corporate development are not directly attributable to a reportable segment. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS (Policies) | 3 Months Ended |
Dec. 31, 2019 | |
Accounting Policies [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 challenging and subjective judgments include, but are not limited to, those estimates related to impairment of long-lived assets, business combinations, asset retirement obligations, goodwill, other intangible assets, 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. |
EFFECTS OF RECENT ACCOUNTING PRONOUNCEMENTS | In February 2016, the FASB issued ASU No. 2016-02, "Leases" (ASC 842) to change the criteria for recognizing leasing transactions. The provisions of this guidance require a lessee to recognize a right of use asset and a corresponding lease liability for operating leases. Under this guidance, rental expense for operating leases, continues to be recognized on a straight-line basis over the non-cancelable lease term. As of October 1, 2019, the Company began applying the provisions of this standard prospectively for all lease transactions as of and after the effective date. Upon adoption, the Company recorded a lease liability of $30,881 and a right of use asset of $30,115. The difference between the right of use asset and lease liability primarily relates to deferred rent recorded prior to adoption. The new guidance did not have a material impact on our results of operations or cash flows for the quarter ended December 31, 2019. Refer to Note 11 of this Report on Form 10-Q for additional information regarding the Company’s lease transactions. In February 2018, the FASB issued ASU No. 2018-02 "Income Statement – Reporting Comprehensive Income" (Topic 220). The amendments in this standard allows for an optional one-time reclassification of the stranded tax effects resulting from the change in the U.S. federal corporate income tax rate under the Tax Cuts and Jobs Act (the "Tax Act") from Accumulated other comprehensive income to Retained earnings. The Company adopted this standard effective October 1, 2019, which resulted in an increase of $488 to both Retained earnings and Accumulated other comprehensive loss. 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. The guidance was amended through various ASU's subsequent to ASU 2016-13, all of which will be effective for the Company beginning October 1, 2020. We are currently evaluating the impact of implementing 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. We are currently evaluating the impact of implementing this standard on our disclosures. In December 2019, the FASB issued ASU No. 2019-12 “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” The ASU was issued to simplify Topic 740 through improving consistency and removing certain exceptions to general principles. ASU 2019-12 will be effective for us beginning October 1, 2021, but early adoption is permitted. We are currently evaluating the impact of implementing this standard on our financial statements. |
REVENUE FROM CONTRACTS WITH C_2
REVENUE FROM CONTRACTS WITH CUSTOMERS (Tables) | 3 Months Ended |
Dec. 31, 2019 | |
Revenue from Contract with Customer [Abstract] | |
Reconciliation of contract liability balances | The following table provides information about contract liability balances: December 31, 2019 September 30, 2019 Contract liabilities (current) $ 5,064 $ 5,008 Contract liabilities (noncurrent) 820 1,130 |
Transaction price allocated to remaining performance obligation | 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 December 31, 2019 $ 1,485 $ 820 $ — $ 2,305 |
BUSINESS COMBINATION (Tables)
BUSINESS COMBINATION (Tables) | 3 Months Ended |
Dec. 31, 2019 | |
Business Combinations [Abstract] | |
Summary of components of total consideration | See below for a summary of the different components that comprise the total consideration. 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 |
Summary of preliminary allocation of fair values of assets acquired and liabilities assumed | The following table summarizes the allocation of fair values of assets acquired and liabilities assumed as of the Acquisition Date. Amount Cash $ 23,217 Accounts receivable 63,950 Inventories 68,087 Prepaid expenses and other current assets 14,694 Property, plant and equipment 147,170 Intangible assets 844,800 Other long-term assets 5,805 Accounts payable (28,835) Accrued expenses and other current liabilities (44,216) Deferred income taxes liabilities (156,474) Other long-term liabilities (15,080) Total identifiable net assets acquired 923,118 Goodwill 613,334 Total consideration transferred $ 1,536,452 |
Components of identifiable intangible asset acquired and their estimated useful lives | 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 Customer relationships - Flowchem $ 315,000 20 Customer relationships - Electronic chemicals 280,000 19 Customer relationships - all other 109,000 15-16 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 |
Summary of pro forma information | 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 Revenue $ 283,756 Net income 38,038 Earnings per share - basic 1.32 Earnings per share - diluted 1.29 |
FAIR VALUE OF FINANCIAL INSTR_2
FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables) | 3 Months Ended |
Dec. 31, 2019 | |
Fair Value Disclosures [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 December 31, 2019 and September 30, 2019. See Note 10 of this Report on Form 10-Q 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. December 31, 2019 Level 1 Level 2 Level 3 Total Assets: Cash and cash equivalents $ 194,328 $ — $ — $ 194,328 Other long-term investments 1,176 — — 1,176 Derivative financial instruments — 78 — 78 Total assets $ 195,504 $ 78 $ — $ 195,582 Liabilities: Derivative financial instruments — 18,916 — 18,916 Total liabilities $ — $ 18,916 $ — $ 18,916 September 30, 2019 Level 1 Level 2 Level 3 Total Assets: Cash and cash equivalents $ 188,495 $ — $ — $ 188,495 Other long-term investments 980 — — 980 Total assets $ 189,475 $ — $ — $ 189,475 Liabilities: Derivative financial instruments — 24,244 — 24,244 Total liabilities $ — $ 24,244 $ — $ 24,244 |
INVENTORIES (Tables)
INVENTORIES (Tables) | 3 Months Ended |
Dec. 31, 2019 | |
Inventory Disclosure [Abstract] | |
Schedule of inventories | Inventories consisted of the following: December 31, September 30, 2019 Raw materials $ 66,225 $ 60,157 Work in process 14,209 12,940 Finished goods 75,706 72,181 Total $ 156,140 $ 145,278 |
GOODWILL AND OTHER INTANGIBLE_2
GOODWILL AND OTHER INTANGIBLE ASSETS (Tables) | 3 Months Ended |
Dec. 31, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill activity | Goodwill activity for each of the Company’s reportable segments, which carry goodwill, Electronic Materials and Performance Materials, for the three months ended December 31, 2019. Electronic Materials Performance Materials Total Balance at September 30, 2019 $ 352,797 $ 357,274 $ 710,071 Foreign currency translation impact 5,487 550 6,037 Other — 1,205 1,205 Balance at December 31, 2019 $ 358,284 $ 359,029 $ 717,313 |
Schedule of other intangible assets | The components of other intangible assets are: December 31, 2019 September 30, 2019 Gross Accumulated Gross Accumulated Other intangible assets subject to amortization: Product technology, trade secrets and know-how $ 124,534 $ 41,077 $ 123,948 $ 37,993 Acquired patents and licenses 9,023 8,462 9,023 8,397 Customer relationships, trade names, and distribution rights 689,414 83,526 684,764 64,471 Total other intangible assets subject to amortization 822,971 133,065 817,735 110,861 Other intangible assets not subject to amortization: Other indefinite-lived intangibles* 47,170 47,170 Total other intangible assets not subject to amortization 47,170 47,170 Total other intangible assets $ 870,141 $ 133,065 $ 864,905 $ 110,861 *Other indefinite-lived intangible assets not subject to amortization consist primarily of trade names. |
Schedule of amortization expense on intangible assets | Estimated future amortization expense for the five succeeding fiscal years is as follows: Fiscal Year Estimated Amortization Expense Remainder of 2020 $ 64,441 2021 83,139 2022 74,628 2023 62,781 2024 55,481 |
OTHER LONG-TERM ASSETS (Tables)
OTHER LONG-TERM ASSETS (Tables) | 3 Months Ended |
Dec. 31, 2019 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Other long-term assets | Other long-term assets consisted of the following: December 31, September 30, Long-term right of use asset $ 29,662 $ — Long-term contract assets 1,721 1,164 Long-term SERP investment 1,176 980 Prepaid unamortized debt issuance cost - revolver 666 709 Other long-term assets 2,594 2,858 Total $ 35,819 $ 5,711 |
ACCRUED EXPENSES, INCOME TAXE_2
ACCRUED EXPENSES, INCOME TAXES PAYABLE AND OTHER CURRENT LIABILITIES (Tables) | 3 Months Ended |
Dec. 31, 2019 | |
Payables and Accruals [Abstract] | |
Accrued expenses, income taxes payable and other current liabilities | Accrued expenses, income taxes payable and other current liabilities consisted of the following: December 31, September 30, Accrued compensation $ 23,817 $ 33,809 Income taxes payable 20,070 15,725 Dividends payable 12,817 12,953 Taxes, other than income taxes 9,490 6,281 Current portion of operating lease liability 5,461 — Interest rate swap liability 5,398 5,351 Contract liabilities (current) 5,064 5,008 Goods and services received, not yet invoiced 4,519 3,075 KMG - Bernuth warehouse fire related (See Note 13) 700 7,998 Accrued interest 125 3,739 Other 10,561 9,679 Total $ 98,022 $ 103,618 |
DEBT (Tables)
DEBT (Tables) | 3 Months Ended |
Dec. 31, 2019 | |
Debt Disclosure [Abstract] | |
Schedule of principal repayments of debt | As of December 31, 2019, scheduled principal repayments of the Term Loan were: Fiscal Year Principal Repayments Remainder of 2020 $ 7,987 2021 10,650 2022 10,650 2023 10,650 2024 10,650 Greater than 5 years 903,763 Total $ 954,350 |
LEASES (Tables)
LEASES (Tables) | 3 Months Ended |
Dec. 31, 2019 | |
Leases [Abstract] | |
Future maturities of operating lease liabilities | Future maturities of operating lease liabilities for the years ended September 30 are as follows: Fiscal Year Amount January 2020 through September 30, 2020 $ 4,888 2021 4,845 2022 4,505 2023 4,331 2024 4,069 2025 and future years 11,538 Total future lease payments 34,176 Less: Imputed interest 3,620 Operating lease liability 30,556 Less: Current portion of operating lease liability 5,461 Long-term portion of operating lease liability $ 25,095 |
Minimum lease payments under operating leases | As of September 30, 2019, minimum lease payments under operating leases with noncancelable terms in excess of one are as follows: Fiscal Year Amount 2020 $ 6,984 2021 4,941 2022 4,291 2023 4,122 2024 3,710 Thereafter 12,010 Total future minimum lease payments $ 36,058 |
DERIVATIVE FINANCIAL INSTRUME_2
DERIVATIVE FINANCIAL INSTRUMENTS (Tables) | 3 Months Ended |
Dec. 31, 2019 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of derivative instruments in the Consolidated Balance Sheets | The fair value of our derivative instruments included in the Consolidated Balance Sheets, which was determined using level 2 inputs, was as follows: Derivative Assets Derivative Liabilities Consolidated Balance Sheet Location December 31, 2019 September 30, 2019 December 31, 2019 September 30, 2019 Derivatives designated as hedging instruments Interest rate swap contract Accrued expenses, income taxes payable and other current liabilities $ — $ — $ 5,398 $ 5,351 Other long-term liabilities $ — $ — $ 13,308 $ 18,841 Derivatives not designated as hedging instruments Foreign exchange contracts Prepaid expenses and other current assets $ 78 $ — $ — $ — Accrued expenses, income taxes payable and other current liabilities $ — $ — $ 210 $ 52 |
Schedule of derivative instruments on Consolidated Statements of Income | The following table summarizes the effect of our derivative instruments on our Consolidated Statements of Income for the three months ended December 31, 2019 and 2018: Gain Recognized in Statement of Income Three Months Ended Statement of Income Location December 31, 2019 December 31, 2018 Derivatives not designated as hedging instruments Foreign exchange contracts Other income (expense), net $ 6 $ 311 |
ACCUMULATED OTHER COMPREHENSI_2
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Tables) | 3 Months Ended |
Dec. 31, 2019 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |
Accumulated other comprehensive income (loss) | The table below summarizes the components of Accumulated other comprehensive income (loss) (AOCI), net of Provision for income taxes/(benefit), for the three months ended December 31, 2019 and 2018: Foreign Cash Flow Pension and Total Balance at September 30, 2019 $ (2,630) $ (18,797) $ (1,811) $ (23,238) Foreign currency translation adjustment, net of tax of $32 15,851 — — 15,851 Unrealized gain (loss) on cash flow hedges: Change in fair value, net of tax of $964 — 3,350 — 3,350 Reclassification adjustment into earnings, net of tax of $261 — 909 — 909 Effect of the adoption of the stranded tax effect accounting standards (497) 9 — (488) Balance at December 31, 2019 $ 12,724 $ (14,529) $ (1,811) $ (3,616) Foreign Cash Flow Pension and Total Balance at September 30, 2018 $ 5,918 $ (17) $ (1,362) $ 4,539 Foreign currency translation adjustment, net of tax of $608 2,425 — — 2,425 Change in pension and other postretirement, net of tax of $0 — — (251) (251) Balance at December 31, 2018 $ 8,343 $ (17) $ (1,613) $ 6,713 |
SHARE-BASED COMPENSATION PLANS
SHARE-BASED COMPENSATION PLANS (Tables) | 3 Months Ended |
Dec. 31, 2019 | |
Share-based Payment Arrangement [Abstract] | |
Schedule of share-based compensation expense | Share-based compensation expense for the three months ended December 31, 2019 and 2018, was as follows: Three Months Ended December 31, 2019 2018 Cost of sales $ 912 $ 1,055 Research, development and technical 804 901 Selling, general and administrative 3,047 6,214 Total share-based compensation expense 4,763 8,170 Tax benefit (938) (1,691) Total share-based compensation expense, net of tax $ 3,825 $ 6,479 |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 3 Months Ended |
Dec. 31, 2019 | |
Earnings Per Share [Abstract] | |
Schedule of 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 December 31, 2019 2018 Numerator: Net income available to common shares $ 38,549 $ 13,443 Denominator: Weighted average common shares 29,137,483 27,156,882 (Denominator for basic calculation) Weighted average effect of dilutive securities 556,211 604,954 Diluted weighted average common shares 29,693,694 27,761,836 (Denominator for diluted calculation) Earnings per share: Basic $ 1.32 $ 0.50 Diluted $ 1.30 $ 0.48 |
SEGMENT REPORTING (Tables)
SEGMENT REPORTING (Tables) | 3 Months Ended |
Dec. 31, 2019 | |
Segment Reporting [Abstract] | |
Schedule of segment revenue | Revenue from external customers by segment are as follows: Three Months Ended December 31, 2019 2018 Segment Revenue Electronic Materials $ 220,721 $ 190,617 Performance Materials 62,422 31,161 Total $ 283,143 $ 221,778 |
Schedule of capital expenditures by segment | Capital expenditures by segment are as follows: Three Months Ended December 31, 2019 2018 Capital Expenditures Electronic Materials $ 8,485 $ 6,399 Performance Materials 16,369 260 Corporate 1,512 1,226 Total $ 26,366 $ 7,885 |
Schedule of segment adjusted EBITDA | Adjusted EBITDA by segment are as follows: Three Months Ended December 31, 2019 2018 Segment adjusted EBITDA: Electronic Materials $ 81,198 $ 74,825 Performance Materials 27,478 13,067 Unallocated corporate expenses (13,403) (11,042) Interest expense (11,920) (6,890) Interest income 315 1,019 Depreciation and amortization (31,642) (16,541) Acquisition and integration-related expenses (2,204) (27,294) Charge for fair value write-up of acquired inventory sold — (10,261) Costs related to KMG-Bernuth warehouse fire (See Note 13) and restructuring of wood treatment business (392) — Income before income taxes $ 49,430 $ 16,883 |
BACKGROUND AND BASIS OF PRESE_2
BACKGROUND AND BASIS OF PRESENTATION (Details) | 3 Months Ended |
Dec. 31, 2019segment | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Number of reportable segments | 2 |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Dec. 31, 2019 | Oct. 01, 2019 | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Operating lease liability | $ 30,556 | |
Operating lease, right of use asset | 29,662 | |
Retained Earnings | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Effect of the adoption of the stranded tax effect accounting standards | $ 488 | |
Accounting Standards Update 2016-02 | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Operating lease liability | $ 30,881 | |
Operating lease, right of use asset | $ 30,115 |
REVENUE FROM CONTRACTS WITH C_3
REVENUE FROM CONTRACTS WITH CUSTOMERS - Reconciliation of Contract Balances (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Dec. 31, 2019 | Sep. 30, 2019 | |
Contract with Customer, Liability [Abstract] | ||
Contract liabilities (current) | $ 5,064 | $ 5,008 |
Contract liabilities (noncurrent) | 820 | $ 1,130 |
Change in Contract with Customer, Liability [Abstract] | ||
Revenue recognized in contract liability | 2,258 | |
Accrued expenses, income taxes payable and other current liabilities | ||
Contract with Customer, Liability [Abstract] | ||
Contract liabilities (current) | 5,064 | |
Other long-term liabilities | ||
Contract with Customer, Liability [Abstract] | ||
Contract liabilities (noncurrent) | $ 820 |
REVENUE FROM CONTRACTS WITH C_4
REVENUE FROM CONTRACTS WITH CUSTOMERS - Transaction Price Allocated to Remaining Performance Obligations (Details) $ in Thousands | Dec. 31, 2019USD ($) |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Revenue expected to be recognized on contract liability amounts as of end of period | $ 2,305 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-01-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Revenue expected to be recognized on contract liability amounts as of end of period | $ 1,485 |
Revenue, Performance Obligation [Abstract] | |
Revenue expected to be recognized on contract liability, satisfaction period | 9 months |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-01-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Revenue expected to be recognized on contract liability amounts as of end of period | $ 820 |
Revenue, Performance Obligation [Abstract] | |
Revenue expected to be recognized on contract liability, satisfaction period | 2 years |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-01-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Revenue expected to be recognized on contract liability amounts as of end of period | $ 0 |
Revenue, Performance Obligation [Abstract] | |
Revenue expected to be recognized on contract liability, satisfaction period | 2 years |
BUSINESS COMBINATION - Narrativ
BUSINESS COMBINATION - Narrative (Details) - USD ($) $ / shares in Units, $ in Thousands | Nov. 15, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2019 |
Business Acquisition [Line Items] | ||||
Acquisition of business, net of cash acquired | $ 0 | $ 1,182,186 | ||
Asset impairment | $ 67,372 | |||
Goodwill | 717,313 | 710,071 | ||
Share-based compensation expense | 4,763 | 8,170 | ||
Amortization of Acquisition Costs | 0 | 10,261 | ||
Electronic Materials | ||||
Business Acquisition [Line Items] | ||||
Goodwill | 358,284 | 352,797 | ||
Performance Materials | ||||
Business Acquisition [Line Items] | ||||
Goodwill | 359,029 | $ 357,274 | ||
KMG | ||||
Business Acquisition [Line Items] | ||||
Business acquisition, percentage of voting interest acquired | 100.00% | |||
Acquisition of business, net of cash acquired | $ 1,513,235 | |||
Consideration transferred | 1,536,452 | |||
Cash acquired from acquisition | $ 23,217 | |||
Amount received for each share of KMG common stock (in dollars per share) | $ 55.65 | |||
Share percentage received for each share of KMG common stock (in shares) | 0.2000 | |||
Shares issued to acquire entity (in shares) | 3,237,005 | |||
Share price of shares issued to acquire entity (in dollars per share) | $ 102.27 | |||
Weighted average useful life | 17 years 10 months 24 days | |||
Goodwill | $ 613,334 | |||
Transaction costs | 206 | |||
Net sales | 133,433 | |||
Net income | 14,686 | |||
KMG | Acquisition-related costs | ||||
Business Acquisition [Line Items] | ||||
Transaction costs | 354 | |||
Share-based compensation expense | 84 | |||
KMG | Fair value write-up of inventory | ||||
Business Acquisition [Line Items] | ||||
Amortization of Acquisition Costs | $ 10,261 | |||
KMG | Selling, general and administrative | ||||
Business Acquisition [Line Items] | ||||
Transaction costs | $ 2,204 | |||
KMG | Electronic Materials | ||||
Business Acquisition [Line Items] | ||||
Goodwill | 259,859 | |||
KMG | Performance Materials | ||||
Business Acquisition [Line Items] | ||||
Goodwill | $ 353,475 |
BUSINESS COMBINATION - Consider
BUSINESS COMBINATION - Consideration (Details) - KMG $ in Thousands | Nov. 15, 2018USD ($) |
Business Combination, Consideration Transferred [Abstract] | |
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 |
BUSINESS COMBINATION - Allocati
BUSINESS COMBINATION - Allocation of Fair Values of Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Sep. 30, 2019 | Nov. 15, 2018 |
Fair values of assets acquired and liabilities assumed [Abstract] | |||
Goodwill | $ 717,313 | $ 710,071 | |
KMG | |||
Fair values of assets acquired and liabilities assumed [Abstract] | |||
Cash | $ 23,217 | ||
Accounts receivable | 63,950 | ||
Inventories | 68,087 | ||
Prepaid expenses and other current assets | 14,694 | ||
Property, plant and equipment | 147,170 | ||
Intangible assets | 844,800 | ||
Other long-term assets | 5,805 | ||
Accounts payable | (28,835) | ||
Accrued expenses and other current liabilities | (44,216) | ||
Deferred income taxes liabilities | (156,474) | ||
Other long-term liabilities | (15,080) | ||
Total identifiable net assets acquired | 923,118 | ||
Goodwill | 613,334 | ||
Total consideration transferred | $ 1,536,452 |
BUSINESS COMBINATION - Identifi
BUSINESS COMBINATION - Identifiable Intangible Assets Acquired (Details) - KMG - USD ($) $ in Thousands | Nov. 15, 2018 | Dec. 31, 2019 |
Fair Value | ||
Intangible assets | $ 844,800 | |
Trade name - Flowchem | ||
Acquired Indefinite-lived Intangible Assets [Line Items] | ||
Fair value, indefinite lived intangible assets | 46,000 | |
Customer relationships - Flowchem | ||
Fair Value | ||
Fair value, finite lived intangible assets | 315,000 | |
Estimated useful live, finite lived intangible asset | 20 years | |
Customer relationships - Electronic chemicals | ||
Fair Value | ||
Fair value, finite lived intangible assets | 280,000 | |
Estimated useful live, finite lived intangible asset | 19 years | |
Customer relationships - all other | ||
Fair Value | ||
Fair value, finite lived intangible assets | 109,000 | |
Customer relationships - all other | Minimum | ||
Fair Value | ||
Estimated useful live, finite lived intangible asset | 15 years | |
Customer relationships - all other | Maximum | ||
Fair Value | ||
Estimated useful live, finite lived intangible asset | 16 years | |
Technology and know-how | ||
Fair Value | ||
Fair value, finite lived intangible assets | 85,500 | |
Technology and know-how | Minimum | ||
Fair Value | ||
Estimated useful live, finite lived intangible asset | 9 years | |
Technology and know-how | Maximum | ||
Fair Value | ||
Estimated useful live, finite lived intangible asset | 11 years | |
Trade name - all other | ||
Fair Value | ||
Fair value, finite lived intangible assets | 7,000 | |
Trade name - all other | Minimum | ||
Fair Value | ||
Estimated useful live, finite lived intangible asset | 1 year | |
Trade name - all other | Maximum | ||
Fair Value | ||
Estimated useful live, finite lived intangible asset | 15 years | |
EPA product registration rights | ||
Fair Value | ||
Fair value, finite lived intangible assets | $ 2,300 | |
Estimated useful live, finite lived intangible asset | 15 years |
BUSINESS COMBINATION - Pro Form
BUSINESS COMBINATION - Pro Forma Information (Details) - KMG $ / shares in Units, $ in Thousands | 3 Months Ended |
Dec. 31, 2018USD ($)$ / shares | |
Business Acquisition, Pro Forma Information [Abstract] | |
Revenue | $ | $ 283,756 |
Net income | $ | $ 38,038 |
Earnings per share - basic (in dollars per share) | $ / shares | $ 1.32 |
Earnings per share - diluted (in dollars per share) | $ / shares | $ 1.29 |
FAIR VALUE OF FINANCIAL INSTR_3
FAIR VALUE OF FINANCIAL INSTRUMENTS (Details) - Recurring - USD ($) $ in Thousands | Dec. 31, 2019 | Sep. 30, 2019 |
Assets: | ||
Cash and cash equivalents | $ 194,328 | $ 188,495 |
Other long-term investments | 1,176 | 980 |
Derivative financial instruments | 78 | |
Total assets | 195,582 | 189,475 |
Liabilities: | ||
Derivative financial instruments | 18,916 | 24,244 |
Total liabilities | 18,916 | 24,244 |
Level 1 | ||
Assets: | ||
Cash and cash equivalents | 194,328 | 188,495 |
Other long-term investments | 1,176 | 980 |
Derivative financial instruments | 0 | |
Total assets | 195,504 | 189,475 |
Liabilities: | ||
Derivative financial instruments | 0 | 0 |
Total liabilities | 0 | 0 |
Level 2 | ||
Assets: | ||
Cash and cash equivalents | 0 | 0 |
Other long-term investments | 0 | 0 |
Derivative financial instruments | 78 | |
Total assets | 78 | 0 |
Liabilities: | ||
Derivative financial instruments | 18,916 | 24,244 |
Total liabilities | 18,916 | 24,244 |
Level 3 | ||
Assets: | ||
Cash and cash equivalents | 0 | 0 |
Other long-term investments | 0 | 0 |
Derivative financial instruments | 0 | |
Total assets | 0 | 0 |
Liabilities: | ||
Derivative financial instruments | 0 | 0 |
Total liabilities | $ 0 | $ 0 |
INVENTORIES (Details)
INVENTORIES (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Sep. 30, 2019 |
Inventory, Net, Items Net of Reserve Alternative [Abstract] | ||
Raw materials | $ 66,225 | $ 60,157 |
Work in process | 14,209 | 12,940 |
Finished goods | 75,706 | 72,181 |
Total | $ 156,140 | $ 145,278 |
GOODWILL AND OTHER INTANGIBLE_3
GOODWILL AND OTHER INTANGIBLE ASSETS - Goodwill Rollforward (Details) $ in Thousands | 3 Months Ended |
Dec. 31, 2019USD ($) | |
Goodwill [Roll Forward] | |
Goodwill, beginning balance | $ 710,071 |
Foreign currency translation impact | 6,037 |
Other | 1,205 |
Goodwill, ending balance | 717,313 |
Electronic Materials | |
Goodwill [Roll Forward] | |
Goodwill, beginning balance | 352,797 |
Foreign currency translation impact | 5,487 |
Other | 0 |
Goodwill, ending balance | 358,284 |
Performance Materials | |
Goodwill [Roll Forward] | |
Goodwill, beginning balance | 357,274 |
Foreign currency translation impact | 550 |
Other | 1,205 |
Goodwill, ending balance | $ 359,029 |
GOODWILL AND OTHER INTANGIBLE_4
GOODWILL AND OTHER INTANGIBLE ASSETS - Intangible Assets (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Sep. 30, 2019 |
Other intangible assets subject to amortization: | ||
Other intangible assets subject to amortization, gross carrying amount | $ 822,971 | $ 817,735 |
Other intangible assets subject to amortization, accumulated amortization | 133,065 | 110,861 |
Other intangible assets not subject to amortization: | ||
Other intangible assets not subject to amortization | 47,170 | 47,170 |
Other intangible assets | 870,141 | 864,905 |
Other indefinite-lived intangibles | ||
Other intangible assets not subject to amortization: | ||
Other intangible assets not subject to amortization | 47,170 | 47,170 |
Product technology, trade secrets and know-how | ||
Other intangible assets subject to amortization: | ||
Other intangible assets subject to amortization, gross carrying amount | 124,534 | 123,948 |
Other intangible assets subject to amortization, accumulated amortization | 41,077 | 37,993 |
Acquired patents and licenses | ||
Other intangible assets subject to amortization: | ||
Other intangible assets subject to amortization, gross carrying amount | 9,023 | 9,023 |
Other intangible assets subject to amortization, accumulated amortization | 8,462 | 8,397 |
Customer relationships, trade names, and distribution rights | ||
Other intangible assets subject to amortization: | ||
Other intangible assets subject to amortization, gross carrying amount | 689,414 | 684,764 |
Other intangible assets subject to amortization, accumulated amortization | $ 83,526 | $ 64,471 |
GOODWILL AND OTHER INTANGIBLE_5
GOODWILL AND OTHER INTANGIBLE ASSETS - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Amortization of intangible assets | $ 21,364 | $ 9,356 |
GOODWILL AND OTHER INTANGIBLE_6
GOODWILL AND OTHER INTANGIBLE ASSETS - Amortization Expense (Details) $ in Thousands | Dec. 31, 2019USD ($) |
Estimated Amortization Expense | |
Remainder of 2020 | $ 64,441 |
2021 | 83,139 |
2022 | 74,628 |
2023 | 62,781 |
2024 | $ 55,481 |
OTHER LONG-TERM ASSETS (Details
OTHER LONG-TERM ASSETS (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Sep. 30, 2019 |
Other long-term assets [Abstract] | ||
Long-term right of use asset | $ 29,662 | |
Long-term contract assets | 1,721 | $ 1,164 |
Long-term SERP investment | 1,176 | 980 |
Prepaid unamortized debt issuance cost - revolver | 666 | 709 |
Other long-term assets | 2,594 | 2,858 |
Total | $ 35,819 | $ 5,711 |
ACCRUED EXPENSES, INCOME TAXE_3
ACCRUED EXPENSES, INCOME TAXES PAYABLE AND OTHER CURRENT LIABILITIES (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Sep. 30, 2019 |
Payables and Accruals [Abstract] | ||
Accrued compensation | $ 23,817 | $ 33,809 |
Income taxes payable | 20,070 | 15,725 |
Dividends payable | 12,817 | 12,953 |
Taxes, other than income taxes | 9,490 | 6,281 |
Current portion of operating lease liability | 5,461 | |
Interest rate swap liability | 5,398 | 5,351 |
Contract liabilities (current) | 5,064 | 5,008 |
Goods and services received, not yet invoiced | 4,519 | 3,075 |
KMG - Bernuth warehouse fire related (See Note 13) | 700 | 7,998 |
Accrued interest | 125 | 3,739 |
Other | 10,561 | 9,679 |
Total | $ 98,022 | $ 103,618 |
DEBT - Narrative (Details)
DEBT - Narrative (Details) - USD ($) | Nov. 15, 2018 | Dec. 31, 2019 | Sep. 30, 2019 | Mar. 31, 2019 |
Long-term Debt, Unclassified [Abstract] | ||||
Current portion of long-term debt | $ 10,650,000 | $ 13,313,000 | ||
Prepaid debt issuance cost | 17,159,000 | $ 17,900,000 | ||
Percentage of debt hedged by interest rate swaps | 70.00% | |||
Credit Agreement | Revolving credit facility | Term loan facility | ||||
Long-term Debt, Unclassified [Abstract] | ||||
Debt, term | 7 years | |||
Percentage of initial principal payment amount | 0.25% | |||
Current portion of long-term debt | 10,650,000 | |||
Prepaid debt issuance cost | 17,159,000 | |||
Credit Agreement | Revolving credit facility | Term loan facility | Level 2 | ||||
Long-term Debt, Unclassified [Abstract] | ||||
Fair value of debt | $ 954,350,000 | |||
Credit Agreement | Revolving credit facility | Term loan facility | LIBOR Floor | ||||
Long-term Debt, Unclassified [Abstract] | ||||
Basis spread on variable rate | 0.00% | |||
Credit Agreement | Revolving credit facility | Term loan facility | LIBOR | ||||
Long-term Debt, Unclassified [Abstract] | ||||
Basis spread on variable rate | 2.00% | |||
Credit Agreement | Revolving credit facility | Term loan facility | Base rate | ||||
Long-term Debt, Unclassified [Abstract] | ||||
Basis spread on variable rate | 1.00% | |||
Credit Agreement | Revolving credit facility | Line of credit | ||||
Long-term Debt, Unclassified [Abstract] | ||||
Debt, term | 5 years | |||
Debt requirements, annual excess cash flow | 50.00% | |||
Debt requirements, net cash proceeds of recovery events and non-ordinary course asset sales | 100.00% | |||
Credit Agreement | Revolving credit facility | Line of credit | LIBOR | ||||
Long-term Debt, Unclassified [Abstract] | ||||
Basis spread on variable rate | 1.50% | |||
Credit Agreement | Revolving credit facility | Line of credit | Base rate | ||||
Long-term Debt, Unclassified [Abstract] | ||||
Basis spread on variable rate | 0.50% | |||
Commitment fee percentage | 0.25% | |||
Credit Agreement | JPMorgan Chase Bank, N.A. | Revolving credit facility | ||||
Long-term Debt, Unclassified [Abstract] | ||||
Debt, term | 7 years | |||
Line of credit facility, borrowing capacity | $ 1,265,000,000 | |||
Revolving Credit Facility, outstanding | $ 0 | |||
Credit Agreement | JPMorgan Chase Bank, N.A. | Revolving credit facility | Term loan facility | ||||
Long-term Debt, Unclassified [Abstract] | ||||
Debt, term | 7 years | |||
Debt, face amount | $ 1,065,000,000 | |||
Credit Agreement | JPMorgan Chase Bank, N.A. | Revolving credit facility | Line of credit | ||||
Long-term Debt, Unclassified [Abstract] | ||||
Line of credit facility, borrowing capacity | 200,000,000 | |||
Credit Agreement | JPMorgan Chase Bank, N.A. | Letter of credit sub-facility | Line of credit | ||||
Long-term Debt, Unclassified [Abstract] | ||||
Line of credit facility, borrowing capacity | $ 50,000,000 |
DEBT - Principal Repayments (De
DEBT - Principal Repayments (Details) - Term loan facility $ in Thousands | Dec. 31, 2019USD ($) |
Principal Repayments | |
Remainder of 2020 | $ 7,987 |
2021 | 10,650 |
2022 | 10,650 |
2023 | 10,650 |
2024 | 10,650 |
Greater than 5 years | 903,763 |
Total | $ 954,350 |
LEASES - Narrative (Details)
LEASES - Narrative (Details) $ in Thousands | 3 Months Ended |
Dec. 31, 2019USD ($) | |
Leases [Abstract] | |
Weighted average lease term for operating leases | 7 years |
Lease cost | $ 2,486 |
Operating lease cost | 1,983 |
Short-term and variable lease costs | 503 |
Operating lease, right of use asset | 29,662 |
Current portion of lease liability for operating leases | 5,461 |
Long-term portion of lease liability for operating leases | $ 25,095 |
Weighted average discount rate for operating leases | 3.02% |
LEASES - Maturities of Operatin
LEASES - Maturities of Operating Lease Liabilities (Details) $ in Thousands | Dec. 31, 2019USD ($) |
Lessee, Operating Lease, Liability, Payment, Due [Abstract] | |
January 2020 through September 30, 2020 | $ 4,888 |
2021 | 4,845 |
2022 | 4,505 |
2023 | 4,331 |
2024 | 4,069 |
2025 and future years | 11,538 |
Total future lease payments | 34,176 |
Less: Imputed interest | 3,620 |
Operating lease liability | 30,556 |
Less: Current portion of operating lease liability | 5,461 |
Long-term portion of operating lease liability | $ 25,095 |
LEASES - Minimum Lease Payments
LEASES - Minimum Lease Payments Under Operating Leases (Details) $ in Thousands | Sep. 30, 2019USD ($) |
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract] | |
2020 | $ 6,984 |
2021 | 4,941 |
2022 | 4,291 |
2023 | 4,122 |
2024 | 3,710 |
Thereafter | 12,010 |
Total future minimum lease payments | $ 36,058 |
DERIVATIVE FINANCIAL INSTRUME_3
DERIVATIVE FINANCIAL INSTRUMENTS - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Dec. 31, 2019 | Sep. 30, 2019 | |
Derivative Instruments [Abstract] | ||
Unrealized gain (loss) on cash flow hedging instruments | $ 3,350 | |
Gain (loss) reclassified from accumulated other comprehensive income into interest expense, estimated time to transfer | 12 months | |
Foreign contracts | Buy | ||
Derivative Instruments [Abstract] | ||
Derivative notional amount | $ 9,762 | $ 6,239 |
Foreign contracts | Sell | ||
Derivative Instruments [Abstract] | ||
Derivative notional amount | 21,115 | $ 24,270 |
Interest rate swap | ||
Derivative Instruments [Abstract] | ||
Derivative notional amount | 699,000 | |
Unrealized gain (loss) on cash flow hedging instruments | 3,350 | |
Reclassified from accumulated other comprehensive income into interest expense | 5,398 | |
Interest rate swap | Interest expense | ||
Derivative Instruments [Abstract] | ||
Realized gain (loss) on cash flow hedging instruments | $ (909) |
DERIVATIVE FINANCIAL INSTRUME_4
DERIVATIVE FINANCIAL INSTRUMENTS - Fair Value of Derivative Instruments in the Consolidated Balance Sheet (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Sep. 30, 2019 |
Derivatives designated as hedging instruments | Interest rate swap | Accrued expenses, income taxes payable and other current liabilities | ||
Derivatives, Fair Value [Line Items] | ||
Derivative assets | $ 0 | $ 0 |
Derivative liabilities | 5,398 | 5,351 |
Derivatives designated as hedging instruments | Interest rate swap | Other long-term liabilities | ||
Derivatives, Fair Value [Line Items] | ||
Derivative assets | 0 | 0 |
Derivative liabilities | 13,308 | 18,841 |
Derivatives not designated as hedging instruments | Foreign contracts | Accrued expenses, income taxes payable and other current liabilities | ||
Derivatives, Fair Value [Line Items] | ||
Derivative assets | 0 | 0 |
Derivative liabilities | 210 | 52 |
Derivatives not designated as hedging instruments | Foreign contracts | Prepaid expenses and other current assets | ||
Derivatives, Fair Value [Line Items] | ||
Derivative assets | 78 | 0 |
Derivative liabilities | $ 0 | $ 0 |
DERIVATIVE FINANCIAL INSTRUME_5
DERIVATIVE FINANCIAL INSTRUMENTS - Effect of Derivative Instruments on the Consolidated Statement of Income (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Derivatives not designated as hedging instruments | Foreign contracts | Other income (expense), net | ||
Derivative, Gain (Loss) on Derivative, Net [Abstract] | ||
Other income (loss), net | $ 6 | $ 311 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details) $ in Thousands | 1 Months Ended | 3 Months Ended | 12 Months Ended |
Sep. 30, 2016USD ($)party | Dec. 31, 2019USD ($) | Sep. 30, 2019USD ($) | |
Postretirement Obligations in Foreign Jurisdictions [Abstract] | |||
Expected term for benefit payments of all unfunded plans | 10 years | ||
Expected future benefit payments | $ 7,872 | ||
Abrasive particle supply agreement | |||
Unrecorded Unconditional Purchase Obligation, Fiscal Year Maturity [Abstract] | |||
Purchase obligation | 31,715 | ||
Non-water-based carrier fluid | |||
Unrecorded Unconditional Purchase Obligation, Fiscal Year Maturity [Abstract] | |||
Purchase obligation | 7,586 | ||
Abrasive particles | |||
Unrecorded Unconditional Purchase Obligation, Fiscal Year Maturity [Abstract] | |||
Purchase obligation | 3,900 | ||
KMG-Bernuth | |||
Environmental Exit Cost [Line Items] | |||
Remediation expense recognized | 381 | $ 9,494 | |
Loss contingency | 700 | ||
Estimated remediation cost | $ 22,000 | ||
Number of other parties in agreement | party | 7 | ||
Estimated reserve, remaining | $ 728 |
ACCUMULATED OTHER COMPREHENSI_3
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||
Balance at beginning of period | $ 980,377 | $ 666,692 |
Foreign currency translation adjustments | 15,851 | 2,425 |
Change in fair value, net of tax | 3,350 | |
Reclassification adjustment into earnings, net of tax | 909 | |
Change in pension and other postretirement, net of tax of $0 | 0 | (251) |
Balance at end of period | 1,029,999 | 1,008,167 |
Other Comprehensive Income (Loss), Tax, Portion Attributable to Parent, Parenthetical Disclosures [Abstract] | ||
Foreign currency translation adjustment, tax | 32 | 608 |
Change in fair value, tax | 964 | |
Reclassification adjustment into earnings, tax | 261 | |
Change in pension and other postretirement, tax | 0 | |
Accumulated Other Comprehensive Income (Loss) | ||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||
Balance at beginning of period | (23,238) | 4,539 |
Foreign currency translation adjustments | 15,851 | 2,425 |
Effect of the adoption of the stranded tax effect accounting standards | (488) | |
Change in pension and other postretirement, net of tax of $0 | (251) | |
Balance at end of period | (3,616) | 6,713 |
Foreign Currency Translation | ||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||
Balance at beginning of period | (2,630) | 5,918 |
Foreign currency translation adjustments | 15,851 | 2,425 |
Effect of the adoption of the stranded tax effect accounting standards | (497) | |
Balance at end of period | 12,724 | 8,343 |
Cash Flow Hedges | ||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||
Balance at beginning of period | (18,797) | |
Change in fair value, net of tax | 3,350 | |
Reclassification adjustment into earnings, net of tax | 909 | |
Effect of the adoption of the stranded tax effect accounting standards | 9 | |
Balance at end of period | (14,529) | |
Cash Flow Hedges | ||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||
Balance at beginning of period | (17) | |
Balance at end of period | (17) | |
Pension and Other Postretirement Liabilities | ||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||
Balance at beginning of period | (1,811) | (1,362) |
Change in pension and other postretirement, net of tax of $0 | (251) | |
Balance at end of period | $ (1,811) | $ (1,613) |
SHARE-BASED COMPENSATION PLAN_2
SHARE-BASED COMPENSATION PLANS - Narrative (Details) $ in Thousands | 3 Months Ended | |
Dec. 31, 2019USD ($)installment | Dec. 31, 2018USD ($) | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Share-based compensation expense | $ 4,763 | $ 8,170 |
Restricted Stock Units | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Number of vesting 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% | |
Stock Option and Restricted Stock | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Share-based compensation expense | $ 3,253 |
SHARE-BASED COMPENSATION PLAN_3
SHARE-BASED COMPENSATION PLANS - Share-Based Compensation Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Total share-based compensation expense | $ 4,763 | $ 8,170 |
Tax benefit | (938) | (1,691) |
Total share-based compensation expense, net of tax | 3,825 | 6,479 |
Cost of sales | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Total share-based compensation expense | 912 | 1,055 |
Research, development and technical | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Total share-based compensation expense | 804 | 901 |
Selling, general and administrative | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Total share-based compensation expense | $ 3,047 | $ 6,214 |
INCOME TAXES (Details)
INCOME TAXES (Details) | 3 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | ||
Effective tax rate | 22.00% | 20.40% |
EARNINGS PER SHARE (Details)
EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Numerator: | ||
Net income available to common shares | $ 38,549 | $ 13,443 |
Denominator: | ||
Weighted average common shares (Denominator for basis calculation) (in shares) | 29,137,483 | 27,156,882 |
Weighted average effect of dilutive securities | ||
Weighted average effect of dilutive securities (in shares) | 556,211 | 604,954 |
Diluted weighted average common shares (Denominator for diluted calculation) (in shares) | 29,693,694 | 27,761,836 |
Earnings per share: | ||
Basic (in dollars per share) | $ 1.32 | $ 0.50 |
Diluted (in dollars per share) | $ 1.30 | $ 0.48 |
Stock options | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Outstanding stock options excluded from calculation of diluted earnings per share (in shares) | 36,000 | 120,000 |
SEGMENT REPORTING - Narrative (
SEGMENT REPORTING - Narrative (Details) - segment | Nov. 14, 2018 | Dec. 31, 2019 |
Segment Reporting [Abstract] | ||
Number of operating segments | 1 | |
Number of reportable segments | 2 |
SEGMENT REPORTING - Revenue fro
SEGMENT REPORTING - Revenue from External Customers (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Segment Reporting Information [Line Items] | ||
Revenue | $ 283,143 | $ 221,778 |
Electronic Materials | ||
Segment Reporting Information [Line Items] | ||
Revenue | 220,721 | 190,617 |
Performance Materials | ||
Segment Reporting Information [Line Items] | ||
Revenue | $ 62,422 | $ 31,161 |
SEGMENT REPORTING - Capital Exp
SEGMENT REPORTING - Capital Expenditures (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Segment Reporting Information [Line Items] | ||
Capital expenditures | $ 26,366 | $ 7,885 |
Operating segment | Electronic Materials | ||
Segment Reporting Information [Line Items] | ||
Capital expenditures | 8,485 | 6,399 |
Operating segment | Performance Materials | ||
Segment Reporting Information [Line Items] | ||
Capital expenditures | 16,369 | 260 |
Unallocated corporate expenses | ||
Segment Reporting Information [Line Items] | ||
Capital expenditures | $ 1,512 | $ 1,226 |
SEGMENT REPORTING - Reconciliat
SEGMENT REPORTING - Reconciliation from Segment Adjusted EBITDA (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Segment Reporting Information [Line Items] | ||
Interest expense | $ (11,920) | $ (6,890) |
Interest income | 315 | 1,019 |
Depreciation and amortization | (31,642) | (16,541) |
Acquisition and integration-related expenses | (2,204) | (27,294) |
Charge for fair value write-up of acquired inventory sold | 0 | (10,261) |
Costs related to KMG-Bernuth warehouse fire (See Note 13) and restructuring of wood treatment business | (392) | 0 |
Income before income taxes | 49,430 | 16,883 |
Operating segment | Electronic Materials | ||
Segment Reporting Information [Line Items] | ||
Adjusted EBITDA | 81,198 | 74,825 |
Operating segment | Performance Materials | ||
Segment Reporting Information [Line Items] | ||
Adjusted EBITDA | 27,478 | 13,067 |
Unallocated corporate expenses | ||
Segment Reporting Information [Line Items] | ||
Unallocated corporate expenses | $ (13,403) | $ (11,042) |
Uncategorized Items - ccmp-2019
Label | Element | Value |
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ (933,000) |
Retained Earnings [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ (933,000) |