10-Q 1 ccmp-20220331.htm 10-Q ccmp-20220331
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File Number 000-30205
CMC Materials, Inc.
(Exact name of registrant as specified in its charter)
Delaware36-4324765
(State of Incorporation)(I.R.S. Employer Identification No.)
870 North Commons Drive60504
Aurora, Illinois
(Zip Code)
(Address of principal executive offices)
Registrant’s telephone number, including area code: (630) 375-6631
Not Applicable
(Former name or former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.001 per shareCCMPNASDAQ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YesNo
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
YesNo
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YesNo
As of April 29, 2022, the Company had 28,610,976 shares of Common Stock, par value $0.001 per share, outstanding.


CMC MATERIALS, INC.
FORM 10-Q
INDEX

2

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CMC MATERIALS, INC.
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(Unaudited and in thousands, except per share amounts)
Three Months Ended March 31,Six Months Ended March 31,
2022202120222021
Revenue$324,127 $290,528 $641,173 $578,391 
Cost of sales195,904 166,782 387,114 331,741 
Gross profit128,223 123,746 254,059 246,650 
Operating expenses:
Research, development and technical12,337 12,925 25,665 25,353 
Selling, general and administrative47,111 58,538 103,594 114,458 
Impairment charges 208,221 9,435 215,568 
Entegris Transaction-related expenses12,243  18,293  
Total operating expenses71,691 279,684 156,987 355,379 
Operating income (loss)56,532 (155,938)97,072 (108,729)
Interest expense, net9,537 9,495 19,280 19,080 
Other (expense) income, net(1,445)(484)(1,597)968 
Income (loss) before income taxes45,550 (165,917)76,195 (126,841)
Provision for (benefit from) income taxes10,979 (16,109)14,196 (8,563)
Net income (loss)$34,571 $(149,808)$61,999 $(118,278)
Basic earnings (loss) per share$1.21 $(5.13)$2.17 $(4.06)
Diluted earnings (loss) per share$1.19 $(5.13)$2.14 $(4.06)
Weighted average basic shares outstanding28,609 29,210 28,526 29,164 
Weighted average diluted shares outstanding28,999 29,210 28,909 29,164 
The accompanying notes are an integral part of these Consolidated Financial Statements.
3

CMC MATERIALS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited and in thousands)
Three Months Ended March 31,Six Months Ended March 31,
2022202120222021
Net income (loss)$34,571 $(149,808)$61,999 $(118,278)
Other comprehensive income:
Foreign currency translation adjustment(11,112)(13,763)(13,741)7,780 
Income tax (expense) benefit(305)(52)(268)30 
Total foreign currency translation adjustment, net of tax(11,417)(13,815)(14,009)7,810 
Unrealized gain on cash flow hedges:
Change in fair value26,508 19,361 31,979 12,912 
Reclassification adjustment into earnings3,578 3,595 7,155 6,969 
Income tax expense(6,869)(5,140)(8,935)(4,451)
Total unrealized gain on cash flow hedges, net of tax23,217 17,816 30,199 15,430 
Other comprehensive income, net of tax11,800 4,001 16,190 23,240 
Comprehensive income (loss)$46,371 $(145,807)$78,189 $(95,038)
The accompanying notes are an integral part of these Consolidated Financial Statements.
4

CMC MATERIALS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited and in thousands, except per share amount)
March 31, 2022September 30, 2021
ASSETS
Current assets:
Cash and cash equivalents$237,685 $185,979 
Accounts receivable, less allowance for credit losses of $460 at March 31, 2022 and $527 at September 30, 2021
169,345 150,099 
Inventories184,730 173,464 
Prepaid expenses and other current assets35,460 25,439 
Total current assets627,220 534,981 
Property, plant and equipment, net346,344 354,771 
Goodwill564,279 576,902 
Other intangible assets, net584,657 625,434 
Deferred income taxes6,256 6,813 
Other long-term assets71,850 51,984 
Total assets$2,200,606 $2,150,885 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$55,540 $52,748 
Current portion of long-term debt10,650 13,313 
Accrued expenses and other current liabilities132,738 139,797 
Total current liabilities198,928 205,858 
Long-term debt, net of current portion899,153 903,031 
Deferred income taxes74,016 74,930 
Other long-term liabilities84,428 88,129 
Total liabilities1,256,525 1,271,948 
Commitments and contingencies (Note 13)
Stockholders’ equity:
Common Stock Authorized: 200,000 shares, $0.001 par value; Issued: 40,512 shares at March 31, 2022, and 40,221 shares at September 30, 2021
41 40 
Capital in excess of par value of common stock1,080,599 1,052,869 
Retained earnings467,515 431,968 
Accumulated other comprehensive income20,981 4,791 
Treasury stock at cost, 11,900 shares at March 31, 2022, and 11,795 shares at September 30, 2021
(625,055)(610,731)
Total stockholders’ equity944,081 878,937 
Total liabilities and stockholders’ equity$2,200,606 $2,150,885 
The accompanying notes are an integral part of these Consolidated Financial Statements.
5

CMC MATERIALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and amounts in thousands)
Six Months Ended March 31,
20222021
Cash flows from operating activities:
Net income (loss)$61,999 $(118,278)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization65,464 64,180 
Share-based compensation expense10,897 11,170 
Deferred income tax benefit(9,546)(32,771)
Impairment charges9,435 215,568 
Amortization of terminated interest rate swap contract5,572 3,715 
Amortization of debt issuance costs1,699 1,549 
Accretion on Asset Retirement Obligations300 293 
Non-cash foreign exchange loss (gain)284 (1,392)
Loss on disposal of assets21 560 
Other(608)(1,933)
Changes in operating assets and liabilities:
Accounts receivable(21,454)(12,352)
Inventories(12,752)(1,423)
Prepaid expenses and other assets(1,645)(16,137)
Accounts payable6,097 5,261 
Accrued expenses and other liabilities(5,556)5,498 
Net cash provided by operating activities110,207 123,508 
Cash flows from investing activities:
Additions to property, plant and equipment(23,310)(21,119)
Proceeds from the sale of assets10 363 
Net cash used in investing activities(23,300)(20,756)
Cash flows from financing activities:
Dividends paid(26,524)(26,115)
Proceeds from issuance of stock16,834 10,279 
Repurchases of common stock under Share Repurchase Program(10,600)(10,002)
Repayment of long-term debt(7,987)(5,325)
Repurchases of common stock withheld for taxes(3,724)(5,436)
Other financing activities(264)(72)
Net cash used in financing activities(32,265)(36,671)
Effect of exchange rate changes on cash(2,936)1,401 
Increase in cash and cash equivalents51,706 67,482 
Cash and cash equivalents at beginning of period185,979 257,354 
Cash and cash equivalents at end of period$237,685 $324,836 
Supplemental Cash Flow Information:
Purchases of property, plant and equipment in accrued liabilities and accounts payable at the end of the period$2,177 $4,180 
Cash paid during the period for lease liabilities3,730 4,079 
Right of use asset obtained in exchange for lease liabilities294 2,761 
The accompanying notes are an integral part of these Consolidated Financial Statements.
6

CMC MATERIALS, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited and in thousands, except per share amount)
Three Months Ended March 31,Six Months Ended March 31,
2022202120222021
Shares$Shares$Shares$Shares$
Common Stock:
Beginning balance40,466 $40 40,092 $40 40,221 $40 39,914 $40 
Issuance of common stock under stock plans46 1 95 — 291 1 273 — 
Ending balance40,512 41 40,187 40 40,512 41 40,187 40 
Capital in Excess of Par:
Beginning balance1,072,076 1,030,677 1,052,869 1,019,803 
Share-based compensation expense4,894 5,319 10,897 11,170 
Exercise of stock options3,629 5,256 13,122 6,693 
Issuance of common stock under Employee Stock Purchase Plan— — 3,711 3,371 
Issuance of restricted stock under Deposit Share Program— — — 215 
Ending balance1,080,599 1,041,252 1,080,599 1,041,252 
Retained Earnings:
Beginning balance446,193 572,441 431,968 553,718 
Net income (loss)34,571 (149,808)61,999 (118,278)
Dividends(13,249)(13,650)(26,452)(26,457)
Ending balance467,515 408,983 467,515 408,983 
Accumulated Other Comprehensive Income (Loss):
Beginning balance9,181 5,135 4,791 (14,104)
Foreign currency translation adjustment(11,417)(13,815)(14,009)7,810 
Cash flow hedges23,217 17,816 30,199 15,430 
Ending balance20,981 9,136 20,981 9,136 
Treasury Stock:
Beginning balance11,898 (624,670)10,931 (499,565)11,795 (610,731)10,834 (485,144)
Repurchases of common stock under Share Repurchase Program— — 5 (801)79 (10,600)67 (10,002)
Repurchases of common stock - other2 (385)2 (216)26 (3,724)37 (5,436)
Ending balance11,900 (625,055)10,938 (500,582)11,900 (625,055)10,938 (500,582)
Total Equity$944,081 $958,829 $944,081 $958,829 
Dividends per share of common stock$0.46 $0.46 $0.92 $0.90 
The accompanying notes are an integral part of these Consolidated Financial Statements.
7

CMC MATERIALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and in thousands, except per share amounts)
1. BACKGROUND AND BASIS OF PRESENTATION
CMC Materials, Inc. (“CMC”, “the Company”, “us”, “we”, or “our”) is a leading global supplier of consumable materials, primarily to semiconductor manufacturers. The Company's products play a critical role in the production of advanced semiconductor devices, helping to enable the manufacture of smaller, faster and more complex devices by its customers. On April 1, 2021 (“Acquisition Date”), the Company completed the acquisition of 100% of International Test Solutions, LLC (“ITS”) (“Acquisition”), which has expanded the Company’s portfolio of critical enabling solutions in the semiconductor manufacturing process. The Consolidated Financial Statements included in this Report on Form 10-Q include the financial results of ITS from the Acquisition Date. The Acquisition would not have materially affected the Company’s results of operations or financial position for the prior periods presented.
We operate our business within two reportable segments: Electronic Materials and Performance Materials. The Electronic Materials segment consists of our chemical mechanical planarization (“CMP”) slurries, CMP pads, electronic chemicals, and materials technologies businesses. The Performance Materials segment consists of our pipeline and industrial materials (“PIM”), wood treatment, and QED Technologies International, Inc. (“QED”) businesses.
The unaudited Consolidated Financial Statements have been prepared by CMC pursuant to the rules of the Securities and Exchange Commission (“SEC”) and accounting principles generally accepted in the United States of America (“U.S. GAAP” or “GAAP”) for interim financial information. Accordingly, they do not include all the information and notes required by GAAP for complete financial statements. In the opinion of management, these unaudited Consolidated Financial Statements include all adjustments, consisting of normal recurring adjustments, necessary for the fair statement of CMC’s financial position, cash flows, and results of operations for the periods presented. The results may not be indicative of the results that may be expected for the fiscal year ending September 30, 2022. This Report on Form 10-Q should be read in conjunction with the Consolidated Financial Statements and related notes thereto included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2021.
The Consolidated Financial Statements include the accounts of CMC and its subsidiaries. All intercompany transactions and balances between the companies have been eliminated.
In the Consolidated Statements of Income (Loss) of this Report on Form 10-Q, the presentation for Interest income has been changed for the three and six months ended March 31, 2021 to conform to the current presentation. The amounts for the three and six months ended March 31, 2021 related to Interest income are now presented under “Interest expense, net.”
USE OF ESTIMATES
The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make judgments, assumptions and estimates that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Actual results may differ from these estimates under different assumptions or conditions.
RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS
ASU No. 2019-12 “Income Taxes” (Topic 740): Simplifying the Accounting for Income Taxes, was issued to simplify Topic 740 through improving consistency and removing certain exceptions to general principles. The Company adopted this standard effective October 1, 2021, which did not have a material impact on our results of operations or financial condition.
ACCOUNTING PRONOUNCEMENTS ISSUED BUT NOT YET ADOPTED
ASU No. 2020-04 “Reference Rate Reform” (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting, provides optional guidance for accounting for contracts, hedging relationships, and other transactions affected by the reference rate reform, if certain criteria are met. The provisions of this standard are available for election through December 31, 2022. We are currently evaluating the impact of the reference rate reform on our contracts and the resulting impact of adopting this standard on our financial statements.
8

2. MERGER AGREEMENT
On December 14, 2021, the Company entered into an agreement and plan of merger (“Merger Agreement”) with Entegris, Inc. (“Entegris”) and Yosemite Merger Sub, Inc., a wholly owned subsidiary of Entegris (“Merger Sub”) under which Entegris will acquire the Company in a cash and stock transaction. The Merger Agreement provides that (1) Merger Sub will merge with and into the Company (the “Merger”), with the Company surviving the Merger as a wholly owned subsidiary of Entegris, and (2) at the effective time of the Merger, each issued and outstanding share of CMC common stock (other than (i) shares of CMC common stock owned by the Company, Entegris or any of their respective subsidiaries immediately prior to the effective time of the Merger and (ii) shares of CMC common stock as to which dissenters’ rights have been properly perfected) will be converted into the right to receive $133 in cash and 0.4506 shares of Entegris common stock, plus cash in lieu of any fractional shares (the “Entegris Transaction”). The Merger Agreement was approved by our stockholders at a special meeting held on March 3, 2022.
The Entegris Transaction, which is currently expected to close in the second half of calendar 2022, is subject to the satisfaction of certain customary closing conditions, including, among others, receipt of certain regulatory approvals. The Merger Agreement contains certain termination rights for both CMC and Entegris.
3. REVENUE FROM CONTRACTS WITH CUSTOMERS
The Company disaggregates revenue by product area and segment as it best depicts the nature and amount of the Company’s revenue. See Note 16 of this Report on Form 10-Q for more information.
The following table provides information about contract liability balances:
Consolidated Balance Sheet LocationMarch 31, 2022September 30, 2021
Contract liabilities (current)Accrued expenses and other current liabilities$10,254 $8,883 
Contract liabilities (noncurrent)Other long-term liabilities3,981 1,788 
4. SEVERANCE AND EXIT COSTS
During the first quarter of fiscal 2022, the Company initiated a strategic cost optimization program (“Future Forward”) designed to implement structural changes to enhance operational efficiencies. Future Forward includes targeted position eliminations and other actions to reduce expenses.
As a result of the Future Forward program, the Company recorded the following expenses, which were not allocated to either of the Company’s two reportable segments:
Consolidated Statement of Income (Loss) Location
Three Months Ended March 31, 2022Six Months Ended March 31, 2022
Employee severance expenses:
Cost of sales$2 $971 
Selling, general and administrative43 2,053 
Total$45 $3,024 
As of March 31, 2022, liabilities related to Future Forward were classified as current and presented within Accrued expenses and other current liabilities within the Consolidated Balance Sheets. Liability activity for Future Forward for the six months ended March 31, 2022 is as follows:
Balance at September 30, 2021
$ 
Charge to earnings3,024 
Cash paid(2,516)
Balance at March 31, 2022
$508 
Additional Future Forward initiatives may be implemented during fiscal 2022 that may result in additional expense or charges.
9

5. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company is required to record certain assets and liabilities at fair value. The valuation methods used for determining the fair value of these financial instruments by hierarchy are as follows:
Level 1
Cash and cash equivalents consist of various bank accounts used to support our operations and investments in institutional money-market funds that are traded in active markets.
Other long-term investments represent the fair value of investments under our supplemental employee retirement plan (“SERP”). The fair value of the investments is determined through quoted market prices within actively traded markets.
Level 2
Derivative financial instruments include foreign exchange contracts and an interest rate swap contract. The fair value of our derivative instruments is estimated using standard valuation models and market-based observable inputs over the contractual term, including one-month London Inter-bank Offered Rate (“LIBOR”) based yield curves for the interest rate swap, and forward rates and/or the Overnight Index Swap curve for forward foreign exchange contracts, among others.
Level 3No Level 3 financial instruments
The following table presents financial instruments, other than debt, that we measure at fair value on a recurring basis. See Note 11 of this Report on Form 10-Q for a discussion of our debt. In instances where the inputs used to measure the fair value of an asset fall into more than one level of the hierarchy, we have classified it based on the lowest level input that is significant to the determination of the fair value. 
Level 1Level 2Level 3Total Fair Value
March 31, 2022September 30, 2021March 31, 2022September 30, 2021March 31, 2022September 30, 2021March 31, 2022September 30, 2021
Assets:
Cash and cash equivalents$237,685 $185,979 $ $ $ $ $237,685 $185,979 
Other long-term investments1,541 1,439     1,541 1,439 
Derivative financial instruments  43,027 12,335   43,027 12,335 
Total assets$239,226 $187,418 $43,027 $12,335 $ $ $282,253 $199,753 
Liabilities:
Derivative financial instruments  489 3,383   489 3,383 
Total liabilities$ $ $489 $3,383 $ $ $489 $3,383 
6. INVENTORIES
Inventories consisted of the following:
March 31, 2022September 30, 2021
Raw materials$72,092 $67,969 
Work in process18,705 17,358 
Finished goods93,933 88,137 
Total$184,730 $173,464 
10

7. GOODWILL
Goodwill activity for each of the Company’s reportable segments for the six months ended March 31, 2022 is as follows:
Electronic MaterialsPerformance MaterialsTotal
Balance at September 30, 2021, net of accumulated impairment of $227,126
$444,233 $132,669 $576,902 
Foreign currency translation impact(3,393)205 (3,188)
Impairment (See Note 8)
 (9,435)(9,435)
Balance at March 31, 2022, net of accumulated impairment of $236,561
$440,840 $123,439 $564,279 
The Company recorded non-cash, pre-tax goodwill impairment charges of $9,435 for the six months ended March 31, 2022 and $6,671 and $10,752 for the three and six months ended March 31, 2021, respectively, due to the previously announced planned closure of the wood treatment business, which the Company completed during the second quarter of fiscal 2022, included in the Performance Materials segment. See Note 8 of this Report on Form 10-Q for a discussion of the wood treatment impairments.
During the second quarter of fiscal 2021, the Company recorded a non-cash, pre-tax goodwill impairment charge of $201,550 related to the PIM reporting unit, included in the Performance Materials segment, due to adverse impacts of the COVID-19 Pandemic (“Pandemic”) and higher raw material cost. The goodwill impairment charge and related tax benefit of $23,539 are presented within Impairment charges and the Provision for (benefit from) income taxes, respectively, in the Consolidated Statements of Income (Loss) for the three and six months ended March 31, 2021.
We continue to monitor the industries in which we operate and our businesses’ performance for indicators of potential impairment. We perform an impairment assessment of goodwill and other intangible assets at the reporting unit level annually, or more frequently if circumstances indicate that the carrying value may not be recoverable. As previously disclosed, the estimated fair value of the PIM reporting unit was determined to exceed the carrying value by approximately 5% as of the most recent annual assessment date, July 1, 2021. Potential future impairments could be material to the Company’s Consolidated Balance Sheets and to the Consolidated Statements of Income (Loss), but we do not expect them to affect the Company’s reported Net cash provided by operating activities.
8. WOOD TREATMENT
As a result of our previously announced planned closure of the Company's wood treatment business, the Matamoros, Mexico and the Tuscaloosa, Alabama facilities ceased production during the first and second quarters of fiscal 2022, respectively, and the remaining inventory was sold to customers during the second quarter of fiscal 2022. The exit of the wood treatment business did not meet the criteria to be classified as a discontinued operation in the Company’s financial statements.
During the first quarter of fiscal 2022, the Company recorded a non-cash, pre-tax goodwill impairment charge of $9,435, resulting in no remaining carrying value of goodwill or long-lived assets for the wood treatment business. The Company recorded long-lived asset and goodwill impairment charges of $6,671 and $14,018 for the three and six months ended March 31, 2021, respectively.
The impairment charges, included in the Performance Materials segment, are presented within Impairment charges in the Consolidated Statements of Income (Loss) for the six months ended March 31, 2022 and the three and six months ended March 31, 2021. The goodwill impairment charge is not tax deductible, therefore there is no related tax benefit for the six months ended March 31, 2022 or the three and six months ended March 31, 2021.
9. OTHER LONG-TERM ASSETS
March 31, 2022September 30, 2021
Interest rate swap (See Note 12)
$36,902 $12,335 
Right of use assets25,738 29,302 
Prepaid unamortized debt issuance cost - revolver2,151 2,201 
SERP investments1,541 1,439 
Vendor contract assets732 1,329 
Other long-term assets4,786 5,378 
Total$71,850 $51,984 
11

10. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
March 31, 2022September 30, 2021
Accrued compensation$34,501 $47,360 
Income taxes payable15,585 16,836 
Dividends payable13,755 13,827 
Asset retirement obligation (current)12,163 11,933 
Entegris Transaction-related liabilities11,593  
Contract liabilities (current)10,254 8,883 
Taxes, other than income taxes7,577 6,620 
Current portion of operating lease liability7,328 7,646 
Current portion of terminated swap liability (See Note 12)
5,855 5,855 
Goods and services received, not yet invoiced4,859 3,866 
Accrued interest197 1,846 
Interest rate swap liability (See Note 12)
 2,995 
Other9,071 12,130 
Total$132,738 $139,797 
11. DEBT
March 31, 2022September 30, 2021
Senior Secured Term Loan Facility, one-month LIBOR plus 2.00%
$920,388 $928,375 
Less: Unamortized debt issuance costs(10,585)(12,031)
Total debt909,803 916,344 
Less: Current maturities and short-term debt(10,650)(13,313)
Total long-term debt excluding current maturities$899,153 $903,031 
The Company’s credit agreement as amended (“Amended Credit Agreement”) includes a Senior Secured Term Loan Facility (“Term Loan Facility”) and a revolving credit facility (“Revolving Credit Facility”). As of March 31, 2022, there were no borrowings outstanding under the Revolving Credit Facility and our available credit was $350,000, which includes our letter of credit sub-facility.
At March 31, 2022 and September 30, 2021, the fair value of the Term Loan Facility, using level 2 inputs, approximated its carrying value as the loan bears a floating market rate of interest.
As of March 31, 2022, scheduled principal repayments of the Term Loan Facility were:
Fiscal YearPrincipal Repayments
Remainder of 2022$5,326 
202310,650 
202410,650 
202510,650 
2026883,112 
Total$920,388 
12. DERIVATIVE FINANCIAL INSTRUMENTS
We are exposed to various market risks, including risks associated with interest rates and foreign currency exchange rates.  We enter into certain derivative transactions to mitigate the volatility associated with these exposures. 
12

CASH FLOW HEDGES - INTEREST RATE SWAP CONTRACT
During the first quarter of fiscal 2021, the Company entered into a new interest rate swap agreement to extend the duration of its existing swap arrangement and to take advantage of lower interest rates. At that time, the then existing interest rate swap, which was in a loss position of $35.3 million, was terminated, and the hedging relationship was de-designated. The liability for the terminated interest rate swap is not measured at fair value. The current and long-term portion of the liability for the terminated swap are recorded in Accrued expenses and other current liabilities and Other long-term liabilities, respectively, on the Consolidated Balance Sheet and will be paid over the remaining term of the new swap. The loss amount for the terminated swap is included in Accumulated other comprehensive income and will be amortized on a straight-lined basis into interest expense through January 31, 2024, the remaining term of the original swap.
The new interest rate swap is a floating-to-fixed interest rate swap contract to hedge the variability in LIBOR-based interest payments on a portion of our outstanding variable rate debt. The notional amount is scheduled to decrease quarterly and will expire on January 29, 2027. The new interest rate swap was designated as a cash flow hedge based on certain quantitative and qualitative assessments and we have determined that the hedge is highly effective and qualifies for hedge accounting.
FOREIGN CURRENCY CONTRACTS NOT DESIGNATED AS HEDGES
We enter into forward foreign exchange contracts in an effort to mitigate the risks associated with currency fluctuations on certain foreign currency balance sheet exposures. These foreign exchange contracts do not qualify for hedge accounting.
The notional amounts of our derivative instruments are as follows:
March 31, 2022September 30, 2021
Derivatives designated as hedging instruments:
Interest rate swap contract - new agreement$552,015 $555,210 
Derivatives not designated as hedging instruments:
Foreign exchange contracts to purchase U.S. dollars$4,250 $4,225 
Foreign exchange contracts to sell U.S. dollars29,290 23,235 
The fair values of our derivative instruments included in the Consolidated Balance Sheets are as follows:
Derivative AssetsDerivative Liabilities
Consolidated Balance Sheet LocationMarch 31, 2022September 30, 2021March 31, 2022September 30, 2021
Derivatives designated as hedging instruments:
Interest rate swap contractPrepaid expenses and other current assets$6,001 $ $ $ 
Other long-term assets36,902 12,335   
Accrued expenses and other current liabilities   2,995 
Derivatives not designated as hedging instruments:
Foreign exchange contractsPrepaid expenses and other current assets$124 $ $ $ 
Accrued expenses and other current liabilities  489 388 
13

The following table summarizes the effects of our derivative instruments on our Consolidated Statements of Income (Loss):
Loss Recognized in Statement of Income (Loss)
Consolidated Statement of Income (Loss) LocationThree Months Ended March 31,Six Months Ended March 31,
2022202120222021
Derivatives designated as hedging instruments:
Interest rate swap contractInterest expense, net$(792)$(809)$(1,583)$(3,254)
Terminated interest rate swap contractInterest expense, net(2,786)(2,786)(5,572)(3,715)
Derivatives not designated as hedging instruments:
Foreign exchange contractsOther (expense) income, net$(673)$(759)$(1,385)$(637)
The following table summarizes the effects of our derivative instruments on Accumulated other comprehensive income:
Gain Recognized in Other Comprehensive Income
Three Months Ended March 31,Six Months Ended March 31,
2022202120222021
Derivatives designated as hedging instruments:
Interest rate swap contract$26,508 $19,361 $31,979 $12,912 
We expect approximately $5,143 to be reclassified from Accumulated other comprehensive income into Interest expense, net during the next twelve months related to our interest rate swap based on projected rates of the LIBOR forward curve as of March 31, 2022. This amount includes the amortization of the loss associated with the terminated swap contract.
13. COMMITMENTS AND CONTINGENCIES
In connection with the acquisition of KMG, through our subsidiary KMG-Bernuth, Inc. (“KMG-Bernuth”), as of November 15, 2018, we assumed a contingency related to the Star Lake Canal Superfund Site near Beaumont, Texas (“Star Lake”). In 2014, prior to the acquisition of KMG, the United States Environmental Protection Agency (“EPA”) had notified KMG-Bernuth that the EPA considered it to be a potentially responsible party under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, in connection with Star Lake. Although KMG-Bernuth has not conceded liability with respect to Star Lake, and has asserted to the EPA and other parties its defenses to any liability, KMG-Bernuth and seven other cooperating parties entered into an agreement with the EPA in September 2016 to complete a remedial design of the remediation actions for the site and recorded a reserve at that time. During the fourth quarter of fiscal 2021, an additional reserve for the anticipated remedial action phase, which will be performed under a separate future agreement, was established for $2,508. As of March 31, 2022, the reserve related to Star Lake was $2,711.
Separately, in fiscal 2019, a fire, which involved non-hazardous waste materials and caused no injuries, occurred at a warehouse at the KMG-Bernuth wood treatment facility in Tuscaloosa, Alabama. Although we believe we have completed cleanup efforts related to the fire incident, there are potential other related costs that cannot be reasonably estimated as of this time due to the nature of federally-regulated requirements for the products produced there. During the second quarter of fiscal 2022, the Company received a settlement of $3,500 related to the fire incident, and we continue to work with our insurance carriers on possible recovery of losses and costs related to it. At this point we cannot reasonably estimate whether we will receive any additional insurance recoveries, or if so, the amount of such recoveries.
PURCHASE OBLIGATIONS
We have $6,818 of contractual commitments through December 2022 under an abrasive particle supply agreement and a contractual commitment of $4,478 to purchase non-water based carrier fluid.
14

14. INCOME TAXES
The Company recorded income tax expense of $10,979 and $14,196 for the three and six months ended March 31, 2022, respectively, compared to income tax benefits of $16,109 and $8,563 for the three and six months ended March 31, 2021, respectively. The Company’s effective income tax rate was 24.1% and 18.6% for the three and six months ended March 31, 2022, respectively, compared to 9.7% and 6.8% for the three and six months ended March 31, 2021, respectively. The changes in our effective tax rate for the three and six months ended March 31, 2022 compared to the prior year were primarily attributable to a lower unfavorable impact from the goodwill impairment charges related to PIM and wood treatment and a higher tax benefit related to share-based compensation.
15. EARNINGS (LOSS) PER SHARE
Three Months Ended March 31,Six Months Ended March 31,
2022202120222021
Numerator:
Net income (loss) available to common shares$34,571 $(149,808)$61,999 $(118,278)
Denominator:
Weighted average common shares28,609 29,210 28,526 29,164 
Weighted average effect of dilutive securities390  383  
Diluted weighted average common shares28,999 29,210 28,909 29,164 
Earnings (loss) per share:
Basic$1.21 $(5.13)$2.17 $(4.06)
Diluted$1.19 $(5.13)$2.14 $(4.06)
For the three and six months ended March 31, 2021, no dilutive shares were calculated, as dilutive potential common shares in a net loss situation would be anti-dilutive.
Shares excluded from the calculation of Diluted earnings per share as their inclusion would have been anti-dilutive under the treasury stock method are as follows:
Three Months Ended March 31,Six Months Ended March 31,
2022202120222021
Outstanding stock options427
16. SEGMENT REPORTING
We identify our segments based on our management structure and the financial information used by our chief executive officer, who is our chief operating decision maker, to assess segment performance and allocate resources among our operating units. We have the following two reportable segments:
ELECTRONIC MATERIALS
Electronic Materials includes products and solutions for the semiconductor industry and consists of our CMP slurries, CMP pads, electronic chemicals, and materials technologies businesses.
PERFORMANCE MATERIALS
Performance Materials consists of our PIM, wood treatment, and QED businesses.
15

Our chief operating decision maker evaluates segment performance based upon revenue and segment adjusted EBITDA.  Segment adjusted EBITDA is defined as earnings before interest, income taxes, depreciation and amortization, adjusted for certain items that affect comparability from period to period. These adjustments include impairment charges, Entegris Transaction-related expenses, Future Forward-related expenses, acquisition and integration-related expenses, net costs related to restructuring of the wood treatment business, costs related to the Pandemic, net of grants received, and costs related to the KMG-Bernuth warehouse fire, net of recoveries. We exclude these items from earnings when presenting adjusted EBITDA because we believe they are not indicative of a segment’s regular, ongoing operating performance. Adjusted EBITDA is also a performance metric for our fiscal 2022 Short-Term Incentive Program (“STIP”). Our chief operating decision maker does not use assets by segment to evaluate performance or allocate resources, and therefore, we do not disclose assets by segment.
The two segments operate independently and serve different markets and customers, as a result there are no sales between segments. Revenue from external customers by segment are as follows:
Three Months Ended March 31,Six Months Ended March 31,
2022202120222021
Electronic Materials:
CMP slurries$146,540 $140,194 $292,681 $274,915 
Electronic chemicals95,111 80,098 186,250 160,104 
CMP pads26,815 22,255 50,854 44,326 
Materials technologies6,045  12,377  
Total Electronic Materials274,511 242,547 542,162 479,345 
Performance Materials:
PIM30,394 25,987 57,029 51,894 
Wood treatment10,907 15,546