Company Quick10K Filing
Quick10K
Cabot Microelectronics
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$121.78 29 $3,539
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-Q 2018-12-31 Quarter: 2018-12-31
10-K 2018-09-30 Annual: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-Q 2017-12-31 Quarter: 2017-12-31
10-K 2017-09-30 Annual: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-Q 2016-12-31 Quarter: 2016-12-31
10-K 2016-09-30 Annual: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-Q 2015-12-31 Quarter: 2015-12-31
10-K 2015-09-30 Annual: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-Q 2014-12-31 Quarter: 2014-12-31
10-K 2014-09-30 Annual: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-Q 2013-12-31 Quarter: 2013-12-31
10-Q 2013-12-31 Quarter: 2013-12-31
8-K 2019-09-25 Other Events, Exhibits
8-K 2019-08-07 Earnings, Exhibits
8-K 2019-06-18 Earnings, Regulation FD
8-K 2019-06-12 Other Events, Exhibits
8-K 2019-05-08 Earnings, Exhibits
8-K 2019-03-07 Shareholder Vote
8-K 2019-03-06 Regulation FD, Other Events, Exhibits
8-K 2019-02-06 Earnings, Exhibits
8-K 2019-01-24 Officers
8-K 2019-01-24 Officers
8-K 2018-12-07 Other Events, Exhibits
8-K 2018-11-15 Enter Agreement, Leave Agreement, M&A, Off-BS Arrangement, Other Events, Exhibits
8-K 2018-10-24 Earnings, Exhibits
8-K 2018-09-26 Other Events, Exhibits
8-K 2018-08-15 Other Events, Exhibits
8-K 2018-08-14 Enter Agreement, Other Events, Exhibits, Enter Agreement
8-K 2018-07-25 Earnings, Exhibits
8-K 2018-06-12 Other Events, Exhibits
8-K 2018-04-26 Earnings, Exhibits
8-K 2018-04-09 Other Events
8-K 2018-03-07 Shareholder Vote
8-K 2018-03-05 Regulation FD, Other Events, Exhibits
8-K 2018-01-25 Earnings, Exhibits
NXPI NXP Semiconductors 33,383
MRVL Marvell Technology Group 15,996
FNSR Finisar 2,696
MXL Maxlinear 1,358
CEVA CEVA 671
HIMX Himax Technologies 664
QTNA Quantenna Communications 635
MX Magnachip Semiconductor 362
AOSL Alpha & Omega Semiconductor 293
SQNS Sequans Communications 95
CCMP 2019-06-30
Part I. Financial Information
Item 1.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 6. Exhibits
EX-31.1 ccmp-20190630xex311.htm
EX-32.1 ccmp-20190630xex321.htm
EX-32.2 ccmp-20190630xex312.htm

Cabot Microelectronics Earnings 2019-06-30

CCMP 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Document
false--09-30Q320190001102934P15YP20YP11YP1YP15YP9Y190000019230001000000.200.400.400.420.0010.0012000000002000000003586246536470364200000000P7YP5Y18655000023030005640004500000155360009000133000111000P1YP2YP3Y1035614710447011 0001102934 2018-10-01 2019-06-30 0001102934 2019-07-31 0001102934 2019-04-01 2019-06-30 0001102934 2018-04-01 2018-06-30 0001102934 2017-10-01 2018-06-30 0001102934 2018-09-30 0001102934 2019-06-30 0001102934 2017-09-30 0001102934 2018-06-30 0001102934 us-gaap:CommonStockMember 2017-09-30 0001102934 2017-10-01 2017-12-31 0001102934 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2017-12-31 0001102934 us-gaap:CommonStockMember 2018-06-30 0001102934 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-04-01 2018-06-30 0001102934 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-01-01 2018-03-31 0001102934 us-gaap:AdditionalPaidInCapitalMember 2018-03-31 0001102934 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-03-31 0001102934 2018-01-01 2018-03-31 0001102934 us-gaap:RetainedEarningsMember 2018-01-01 2018-03-31 0001102934 us-gaap:AdditionalPaidInCapitalMember 2017-10-01 2017-12-31 0001102934 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2017-09-30 0001102934 us-gaap:CommonStockMember 2017-12-31 0001102934 us-gaap:RetainedEarningsMember 2018-03-31 0001102934 us-gaap:AdditionalPaidInCapitalMember 2017-12-31 0001102934 us-gaap:AdditionalPaidInCapitalMember 2018-01-01 2018-03-31 0001102934 us-gaap:TreasuryStockMember 2017-10-01 2017-12-31 0001102934 us-gaap:TreasuryStockMember 2018-01-01 2018-03-31 0001102934 us-gaap:RetainedEarningsMember 2018-04-01 2018-06-30 0001102934 2018-03-31 0001102934 us-gaap:RetainedEarningsMember 2017-09-30 0001102934 us-gaap:AdditionalPaidInCapitalMember 2018-04-01 2018-06-30 0001102934 us-gaap:RetainedEarningsMember 2017-10-01 2017-12-31 0001102934 us-gaap:TreasuryStockMember 2018-06-30 0001102934 us-gaap:TreasuryStockMember 2017-12-31 0001102934 us-gaap:AdditionalPaidInCapitalMember 2017-09-30 0001102934 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2017-10-01 2017-12-31 0001102934 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-06-30 0001102934 us-gaap:TreasuryStockMember 2018-03-31 0001102934 us-gaap:CommonStockMember 2018-01-01 2018-03-31 0001102934 us-gaap:TreasuryStockMember 2018-04-01 2018-06-30 0001102934 us-gaap:AdditionalPaidInCapitalMember 2018-06-30 0001102934 us-gaap:CommonStockMember 2018-03-31 0001102934 us-gaap:RetainedEarningsMember 2018-06-30 0001102934 2017-12-31 0001102934 us-gaap:RetainedEarningsMember 2017-12-31 0001102934 us-gaap:TreasuryStockMember 2017-09-30 0001102934 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-09-30 0001102934 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-01-01 2019-03-31 0001102934 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-12-31 0001102934 us-gaap:CommonStockMember 2018-10-01 2018-12-31 0001102934 2019-01-01 2019-03-31 0001102934 2018-10-01 2018-12-31 0001102934 us-gaap:AdditionalPaidInCapitalMember 2018-10-01 2018-12-31 0001102934 us-gaap:AdditionalPaidInCapitalMember 2019-01-01 2019-03-31 0001102934 us-gaap:TreasuryStockMember 2019-03-31 0001102934 us-gaap:AdditionalPaidInCapitalMember 2019-04-01 2019-06-30 0001102934 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-10-01 2018-12-31 0001102934 us-gaap:RetainedEarningsMember 2019-04-01 2019-06-30 0001102934 us-gaap:AdditionalPaidInCapitalMember 2019-03-31 0001102934 us-gaap:TreasuryStockMember 2018-10-01 2018-12-31 0001102934 us-gaap:RetainedEarningsMember 2018-10-01 2018-12-31 0001102934 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-03-31 0001102934 us-gaap:RetainedEarningsMember 2019-03-31 0001102934 2018-10-01 0001102934 us-gaap:AdditionalPaidInCapitalMember 2018-09-30 0001102934 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-06-30 0001102934 us-gaap:CommonStockMember 2019-03-31 0001102934 us-gaap:TreasuryStockMember 2019-06-30 0001102934 us-gaap:TreasuryStockMember 2019-04-01 2019-06-30 0001102934 us-gaap:AdditionalPaidInCapitalMember 2018-12-31 0001102934 us-gaap:RetainedEarningsMember 2018-09-30 0001102934 us-gaap:TreasuryStockMember 2018-12-31 0001102934 2018-12-31 0001102934 us-gaap:TreasuryStockMember 2019-01-01 2019-03-31 0001102934 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-04-01 2019-06-30 0001102934 us-gaap:RetainedEarningsMember 2018-12-31 0001102934 2019-03-31 0001102934 us-gaap:RetainedEarningsMember 2019-06-30 0001102934 us-gaap:CommonStockMember 2018-12-31 0001102934 us-gaap:RetainedEarningsMember 2019-01-01 2019-03-31 0001102934 us-gaap:RetainedEarningsMember 2018-10-01 0001102934 us-gaap:CommonStockMember 2018-09-30 0001102934 us-gaap:TreasuryStockMember 2018-09-30 0001102934 us-gaap:CommonStockMember 2019-06-30 0001102934 us-gaap:AdditionalPaidInCapitalMember 2019-06-30 0001102934 us-gaap:CalculatedUnderRevenueGuidanceInEffectBeforeTopic606Member 2018-09-30 0001102934 us-gaap:AccountingStandardsUpdate201409Member us-gaap:DifferenceBetweenRevenueGuidanceInEffectBeforeAndAfterTopic606Member 2018-09-30 0001102934 ccmp:ElectronicChemicalsMember ccmp:ElectronicMaterialsMember 2018-10-01 2019-06-30 0001102934 ccmp:CMPSlurriesMember ccmp:ElectronicMaterialsMember 2018-04-01 2018-06-30 0001102934 ccmp:CMPSlurriesMember ccmp:ElectronicMaterialsMember 2019-04-01 2019-06-30 0001102934 ccmp:CMPPadsMember ccmp:ElectronicMaterialsMember 2017-10-01 2018-06-30 0001102934 ccmp:ElectronicChemicalsMember ccmp:ElectronicMaterialsMember 2017-10-01 2018-06-30 0001102934 ccmp:CMPSlurriesMember ccmp:ElectronicMaterialsMember 2018-10-01 2019-06-30 0001102934 ccmp:ElectronicChemicalsMember ccmp:ElectronicMaterialsMember 2019-04-01 2019-06-30 0001102934 ccmp:CMPPadsMember ccmp:ElectronicMaterialsMember 2018-04-01 2018-06-30 0001102934 ccmp:ElectronicMaterialsMember 2018-04-01 2018-06-30 0001102934 ccmp:ElectronicMaterialsMember 2017-10-01 2018-06-30 0001102934 ccmp:ElectronicChemicalsMember ccmp:ElectronicMaterialsMember 2018-04-01 2018-06-30 0001102934 ccmp:CMPPadsMember ccmp:ElectronicMaterialsMember 2019-04-01 2019-06-30 0001102934 ccmp:PerformanceMaterialsMember 2017-10-01 2018-06-30 0001102934 ccmp:ElectronicMaterialsMember 2019-04-01 2019-06-30 0001102934 ccmp:PerformanceMaterialsMember 2019-04-01 2019-06-30 0001102934 ccmp:CMPSlurriesMember ccmp:ElectronicMaterialsMember 2017-10-01 2018-06-30 0001102934 ccmp:PerformanceMaterialsMember 2018-10-01 2019-06-30 0001102934 ccmp:ElectronicMaterialsMember 2018-10-01 2019-06-30 0001102934 ccmp:PerformanceMaterialsMember 2018-04-01 2018-06-30 0001102934 ccmp:CMPPadsMember ccmp:ElectronicMaterialsMember 2018-10-01 2019-06-30 0001102934 2019-07-01 2019-06-30 0001102934 2022-07-01 2019-06-30 0001102934 2020-07-01 2019-06-30 0001102934 2019-06-30 0001102934 us-gaap:OtherNoncurrentLiabilitiesMember 2019-06-30 0001102934 ccmp:AccruedLiabilitiesTaxesPayableandOtherCurrentLiabilitiesMember 2019-06-30 0001102934 ccmp:KMGMember 2018-11-15 2018-11-15 0001102934 ccmp:KMGMember ccmp:CommonStockAndEquityAwardsMember 2018-11-15 2018-11-15 0001102934 ccmp:KMGMember us-gaap:DevelopedTechnologyRightsMember 2018-11-15 2018-11-15 0001102934 ccmp:KMGMember us-gaap:CustomerRelationshipsMember 2018-11-15 0001102934 ccmp:KMGMember ccmp:TradeNameFlowchemMember 2018-11-15 0001102934 ccmp:KMGMember us-gaap:DevelopedTechnologyRightsMember 2018-11-15 0001102934 ccmp:KMGMember us-gaap:TechnologyBasedIntangibleAssetsMember 2018-11-15 0001102934 ccmp:KMGMember ccmp:TradeNamesOtherMember 2018-11-15 0001102934 ccmp:KMGMember 2018-11-15 0001102934 ccmp:KMGMember 2018-10-01 2019-06-30 0001102934 ccmp:KMGMember 2019-04-01 2019-06-30 0001102934 ccmp:KMGMember 2018-04-01 2018-06-30 0001102934 ccmp:KMGMember 2017-10-01 2018-06-30 0001102934 ccmp:KMGMember us-gaap:AcquisitionRelatedCostsMember 2018-04-01 2018-06-30 0001102934 ccmp:KMGMember us-gaap:SellingGeneralAndAdministrativeExpensesMember 2019-04-01 2019-06-30 0001102934 ccmp:KMGMember 2018-11-15 2019-06-30 0001102934 ccmp:KMGMember us-gaap:AcquisitionRelatedCostsMember 2017-10-01 2018-06-30 0001102934 ccmp:KMGMember ccmp:PerformanceMaterialsMember 2018-11-15 0001102934 ccmp:KMGMember us-gaap:FairValueAdjustmentToInventoryMember 2017-10-01 2018-06-30 0001102934 ccmp:KMGMember ccmp:ElectronicMaterialsMember 2018-11-15 0001102934 ccmp:KMGMember us-gaap:NotesPayableToBanksMember 2018-11-15 0001102934 ccmp:KMGMember us-gaap:RevolvingCreditFacilityMember 2018-11-15 0001102934 ccmp:KMGMember us-gaap:CostOfSalesMember 2019-04-01 2019-06-30 0001102934 ccmp:KMGMember us-gaap:CostOfSalesMember 2018-10-01 2019-06-30 0001102934 ccmp:KMGMember us-gaap:FairValueAdjustmentToInventoryMember 2018-04-01 2018-06-30 0001102934 ccmp:KMGMember us-gaap:SellingGeneralAndAdministrativeExpensesMember 2018-10-01 2019-06-30 0001102934 srt:MinimumMember ccmp:KMGMember us-gaap:TechnologyBasedIntangibleAssetsMember 2018-11-15 2018-11-15 0001102934 srt:MinimumMember ccmp:KMGMember ccmp:TradeNamesOtherMember 2018-11-15 2018-11-15 0001102934 srt:MaximumMember ccmp:KMGMember us-gaap:TechnologyBasedIntangibleAssetsMember 2018-11-15 2018-11-15 0001102934 srt:MinimumMember ccmp:KMGMember us-gaap:CustomerRelationshipsMember 2018-11-15 2018-11-15 0001102934 srt:MaximumMember ccmp:KMGMember ccmp:TradeNamesOtherMember 2018-11-15 2018-11-15 0001102934 srt:MaximumMember ccmp:KMGMember us-gaap:CustomerRelationshipsMember 2018-11-15 2018-11-15 0001102934 us-gaap:FairValueMeasurementsRecurringMember 2019-06-30 0001102934 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2018-09-30 0001102934 us-gaap:FairValueMeasurementsRecurringMember 2018-09-30 0001102934 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2018-09-30 0001102934 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2018-09-30 0001102934 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2019-06-30 0001102934 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2019-06-30 0001102934 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2019-06-30 0001102934 ccmp:ProductTechnologyMember 2018-09-30 0001102934 ccmp:ProductTechnologyMember 2019-06-30 0001102934 ccmp:DistributionRightsCustomerRelationshipsAndOtherMember 2018-09-30 0001102934 ccmp:DistributionRightsCustomerRelationshipsAndOtherMember 2019-06-30 0001102934 ccmp:AcquiredPatentsAndLicensesMember 2018-09-30 0001102934 ccmp:AcquiredPatentsAndLicensesMember 2019-06-30 0001102934 us-gaap:OtherIntangibleAssetsMember 2019-06-30 0001102934 us-gaap:OtherIntangibleAssetsMember 2018-09-30 0001102934 ccmp:ElectronicMaterialsMember 2019-06-30 0001102934 ccmp:PerformanceMaterialsMember 2019-06-30 0001102934 2017-10-01 2018-09-30 0001102934 us-gaap:NotesPayableToBanksMember 2018-11-15 0001102934 us-gaap:RevolvingCreditFacilityMember 2018-10-01 2019-06-30 0001102934 us-gaap:LetterOfCreditMember 2018-11-15 0001102934 2018-11-15 0001102934 us-gaap:NotesPayableToBanksMember ccmp:LIBORFloorMember 2018-10-01 2019-06-30 0001102934 us-gaap:RevolvingCreditFacilityMember us-gaap:BaseRateMember 2018-10-01 2019-06-30 0001102934 srt:MaximumMember ccmp:CreditAgreementMember 2018-10-01 2019-06-30 0001102934 us-gaap:RevolvingCreditFacilityMember us-gaap:LondonInterbankOfferedRateLIBORMember 2018-10-01 2019-06-30 0001102934 us-gaap:NotesPayableToBanksMember 2019-06-30 0001102934 us-gaap:RevolvingCreditFacilityMember 2018-11-15 0001102934 us-gaap:NotesPayableToBanksMember 2019-04-01 2019-06-30 0001102934 us-gaap:NotesPayableToBanksMember 2019-04-30 2019-04-30 0001102934 us-gaap:NotesPayableToBanksMember us-gaap:LondonInterbankOfferedRateLIBORMember 2018-10-01 2019-06-30 0001102934 us-gaap:NotesPayableToBanksMember us-gaap:BaseRateMember 2018-10-01 2019-06-30 0001102934 us-gaap:NotesPayableToBanksMember 2018-10-01 2019-06-30 0001102934 us-gaap:ForeignExchangeContractMember us-gaap:LongMember 2018-09-30 0001102934 us-gaap:InterestRateSwapMember 2019-06-30 0001102934 us-gaap:ForeignExchangeContractMember us-gaap:ShortMember 2018-09-30 0001102934 us-gaap:NetInvestmentHedgingMember 2017-09-30 0001102934 us-gaap:InterestRateSwapMember 2019-04-01 2019-06-30 0001102934 us-gaap:ForeignExchangeContractMember us-gaap:ShortMember 2019-06-30 0001102934 us-gaap:ForeignExchangeContractMember us-gaap:LongMember 2019-06-30 0001102934 ccmp:AccruedExpensesAndOtherCurrentLiabilitiesMember us-gaap:InterestRateSwapMember us-gaap:DesignatedAsHedgingInstrumentMember 2019-06-30 0001102934 us-gaap:OtherNoncurrentLiabilitiesMember us-gaap:InterestRateSwapMember us-gaap:DesignatedAsHedgingInstrumentMember 2019-06-30 0001102934 us-gaap:OtherNoncurrentLiabilitiesMember us-gaap:InterestRateSwapMember us-gaap:DesignatedAsHedgingInstrumentMember 2018-09-30 0001102934 us-gaap:PrepaidExpensesAndOtherCurrentAssetsMember us-gaap:ForeignExchangeContractMember us-gaap:NondesignatedMember 2018-09-30 0001102934 ccmp:AccruedExpensesAndOtherCurrentLiabilitiesMember us-gaap:InterestRateSwapMember us-gaap:DesignatedAsHedgingInstrumentMember 2018-09-30 0001102934 ccmp:AccruedExpensesAndOtherCurrentLiabilitiesMember us-gaap:ForeignExchangeContractMember us-gaap:NondesignatedMember 2018-09-30 0001102934 us-gaap:PrepaidExpensesAndOtherCurrentAssetsMember us-gaap:ForeignExchangeContractMember us-gaap:NondesignatedMember 2019-06-30 0001102934 ccmp:AccruedExpensesAndOtherCurrentLiabilitiesMember us-gaap:ForeignExchangeContractMember us-gaap:NondesignatedMember 2019-06-30 0001102934 us-gaap:ForeignExchangeContractMember us-gaap:NondesignatedMember us-gaap:OtherNonoperatingIncomeExpenseMember 2018-10-01 2019-06-30 0001102934 us-gaap:ForeignExchangeContractMember us-gaap:NondesignatedMember us-gaap:OtherNonoperatingIncomeExpenseMember 2017-10-01 2018-06-30 0001102934 us-gaap:ForeignExchangeContractMember us-gaap:NondesignatedMember us-gaap:OtherNonoperatingIncomeExpenseMember 2018-04-01 2018-06-30 0001102934 us-gaap:ForeignExchangeContractMember us-gaap:NondesignatedMember us-gaap:OtherNonoperatingIncomeExpenseMember 2019-04-01 2019-06-30 0001102934 us-gaap:InterestRateSwapMember 2018-10-01 2019-06-30 0001102934 ccmp:KMGBernuthMember 2019-06-30 0001102934 ccmp:KMGBernuthMember 2019-04-01 2019-06-30 0001102934 ccmp:KMGBernuthMember 2018-11-15 2018-11-15 0001102934 us-gaap:AccumulatedTranslationAdjustmentMember 2019-06-30 0001102934 us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember 2018-10-01 2019-06-30 0001102934 us-gaap:AccumulatedTranslationAdjustmentMember 2018-09-30 0001102934 us-gaap:AccumulatedTranslationAdjustmentMember 2018-10-01 2019-06-30 0001102934 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2018-09-30 0001102934 us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember 2019-06-30 0001102934 us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember 2018-09-30 0001102934 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2019-06-30 0001102934 us-gaap:AccumulatedTranslationAdjustmentMember 2017-09-30 0001102934 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2017-09-30 0001102934 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2018-06-30 0001102934 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2017-09-30 0001102934 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2017-09-30 0001102934 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2017-10-01 2018-06-30 0001102934 us-gaap:AccumulatedTranslationAdjustmentMember 2018-06-30 0001102934 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2018-06-30 0001102934 us-gaap:AccumulatedTranslationAdjustmentMember 2017-10-01 2018-06-30 0001102934 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2017-10-01 2018-06-30 0001102934 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2018-06-30 0001102934 us-gaap:SellingGeneralAndAdministrativeExpensesMember 2018-10-01 2019-06-30 0001102934 us-gaap:CostOfSalesMember 2018-04-01 2018-06-30 0001102934 us-gaap:ResearchAndDevelopmentExpenseMember 2018-04-01 2018-06-30 0001102934 us-gaap:CostOfSalesMember 2019-04-01 2019-06-30 0001102934 us-gaap:CostOfSalesMember 2018-10-01 2019-06-30 0001102934 us-gaap:CostOfSalesMember 2017-10-01 2018-06-30 0001102934 us-gaap:ResearchAndDevelopmentExpenseMember 2017-10-01 2018-06-30 0001102934 us-gaap:ResearchAndDevelopmentExpenseMember 2019-04-01 2019-06-30 0001102934 us-gaap:ResearchAndDevelopmentExpenseMember 2018-10-01 2019-06-30 0001102934 us-gaap:SellingGeneralAndAdministrativeExpensesMember 2018-04-01 2018-06-30 0001102934 us-gaap:SellingGeneralAndAdministrativeExpensesMember 2019-04-01 2019-06-30 0001102934 us-gaap:SellingGeneralAndAdministrativeExpensesMember 2017-10-01 2018-06-30 0001102934 us-gaap:RestrictedStockUnitsRSUMember 2018-10-01 2019-06-30 0001102934 ccmp:StockOptionAndRestrictedStockMember 2018-10-01 2019-06-30 0001102934 2019-06-14 2019-06-14 0001102934 2018-01-01 2018-01-01 0001102934 srt:ScenarioForecastMember 2018-10-01 2019-09-30 0001102934 us-gaap:EmployeeStockOptionMember 2018-04-01 2018-06-30 0001102934 us-gaap:EmployeeStockOptionMember 2019-04-01 2019-06-30 0001102934 us-gaap:EmployeeStockOptionMember 2018-10-01 2019-06-30 0001102934 us-gaap:EmployeeStockOptionMember 2017-10-01 2018-06-30 0001102934 us-gaap:CorporateNonSegmentMember 2018-10-01 2019-06-30 0001102934 us-gaap:CorporateNonSegmentMember 2018-04-01 2018-06-30 0001102934 us-gaap:CorporateNonSegmentMember 2019-04-01 2019-06-30 0001102934 us-gaap:CorporateNonSegmentMember 2017-10-01 2018-06-30 iso4217:USD iso4217:KRW ccmp:segment iso4217:USD xbrli:shares xbrli:shares xbrli:pure ccmp:installment
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
June 30, 2019
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
CABOT MICROELECTRONICS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
36-4324765
(State of Incorporation)
(I.R.S. Employer Identification No.)
870 North Commons Drive
 
60504
Aurora
Illinois
(Zip Code)
(Address of principal executive offices)
 
 
Registrant's telephone number, including area code: (630) 375-6631

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.001 per share
CCMP
NASDAQ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
 
Yes
No
 
 
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 (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
 
Yes
No
 
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.  See definitions of “large accelerated filer,” “accelerated filer,” smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
Accelerated filer
Non-accelerated filer
 
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act         
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 
Yes
No
 
As of July 31, 2019, the Company had 29,036,385 shares of Common Stock, par value $0.001 per share, outstanding.



CABOT MICROELECTRONICS CORPORATION
INDEX
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

2

INDEX

PART I. FINANCIAL INFORMATION
ITEM 1.

CABOT MICROELECTRONICS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited and in thousands, except per share amounts)
 
Three Months Ended June 30,
 
Nine Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Revenue
$
271,882

 
$
150,437

 
$
759,051

 
$
433,394

 
 
 
 
 
 
 
 
Cost of sales
156,492

 
69,737

 
429,508

 
203,635

 
 
 
 
 
 
 
 
Gross profit
115,390

 
80,700

 
329,543

 
229,759

 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
Research, development and technical
12,191

 
13,059

 
39,009

 
38,578

Selling, general and administrative
50,959

 
25,711

 
162,415

 
75,051

Total operating expenses
63,150

 
38,770

 
201,424

 
113,629

 
 
 
 
 
 
 
 
Operating income
52,240

 
41,930

 
128,119

 
116,130

 
 
 
 
 
 
 
 
Interest expense
12,757

 
513

 
32,978

 
2,803

 
 
 
 
 
 
 
 
Interest income
417

 
1,141

 
2,004

 
3,248

 
 
 
 
 
 
 
 
Other income (expense), net
(472
)
 
486

 
(2,897
)
 
113

Income before income taxes
39,428

 
43,044

 
94,248

 
116,688

 
 
 
 
 
 
 
 
Provision for income taxes
20,550

 
7,873

 
34,790

 
54,863

 
 
 
 
 
 
 
 
Net income
$
18,878

 
$
35,171

 
$
59,458

 
$
61,825

 
 
 
 
 
 
 
 
Basic earnings per share (in dollars per share)
$
0.65

 
$
1.37

 
$
2.09

 
$
2.42

 
 
 
 
 
 
 
 
Weighted average basic shares outstanding
29,064

 
25,612

 
28,399

 
25,479

 
 
 
 
 
 
 
 
Diluted earnings per share (in dollars per share)
$
0.64

 
$
1.34

 
$
2.06

 
$
2.35

 
 
 
 
 
 
 
 
Weighted average diluted shares outstanding
29,568

 
26,319

 
28,924

 
26,222

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

3

INDEX

CABOT MICROELECTRONICS CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited and in thousands)
 
Three Months Ended June 30,
 
Nine Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
Net income
$
18,878

 
$
35,171

 
$
59,458

 
$
61,825

 
 
 
 
 
 
 
 
Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
Foreign currency translation adjustments
2,699

 
(8,829
)
 
4,132

 
2,276

Net unrealized loss on available-for-sale securities

 
(48
)
 

 
(48
)
Net unrealized loss on cash flow hedges
(9,044
)
 
(210
)
 
(15,518
)
 
(63
)
 
 
 
 
 
 
 
 
Other comprehensive income (loss), net of tax
(6,345
)
 
(9,087
)
 
(11,386
)
 
2,165

 
 
 
 
 
 
 
 
Comprehensive income
$
12,533

 
$
26,084

 
$
48,072

 
$
63,990

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

4

INDEX

CABOT MICROELECTRONICS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited and in thousands, except share amounts)
 
June 30, 2019
 
September 30, 2018
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
168,678

 
$
352,921

Accounts receivable, less allowance for doubtful accounts of $1,923 at June 30, 2019, and $1,900 at September 30, 2018
135,235

 
75,886

Inventories
145,783

 
71,926

Prepaid expenses and other current assets
25,296

 
22,048

Total current assets
474,992

 
522,781

 
 
 
 
Property, plant and equipment, net
266,391

 
111,403

Goodwill
708,390

 
101,083

Other intangible assets, net
838,034

 
35,202

Deferred income taxes
5,612

 
5,840

Other long-term assets
5,658

 
4,664

Total assets
$
2,299,077

 
$
780,973

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
46,758

 
$
18,171

Current portion of long-term debt
13,313

 

Accrued expenses, income taxes payable and other current liabilities
95,261

 
82,983

Total current liabilities
155,332

 
101,154

 
 
 
 
Long-term debt, net of current portion, less prepaid debt issuance costs of $18,655 at June 30, 2019
930,370

 

Deferred income taxes
144,704

 
81

Other long-term liabilities
43,338

 
13,046

Total liabilities
1,273,744

 
114,281

 
 
 
 
Commitments and contingencies (Note 12)


 


Stockholders’ equity:
 
 
 
Common Stock: Authorized: 200,000,000 shares, $0.001 par value; Issued: 39,470,364 shares at June 30, 2019, and 35,862,465 shares at September 30, 2018
39

 
36

Capital in excess of par value of common stock
979,940

 
622,498

Retained earnings
494,009

 
471,673

Accumulated other comprehensive income (loss)
(6,847
)
 
4,539

Treasury stock at cost, 10,447,011 shares at June 30, 2019, and 10,356,147 shares at September 30, 2018
(441,808
)
 
(432,054
)
Total stockholders’ equity
1,025,333

 
666,692

 
 
 
 
Total liabilities and stockholders’ equity
$
2,299,077

 
$
780,973

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

5

INDEX

CABOT MICROELECTRONICS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and amounts in thousands)
 
Nine Months Ended June 30,
 
2019
 
2018
Cash flows from operating activities:
 
 
 
Net income
$
59,458

 
$
61,825

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
70,476

 
19,527

Provision for doubtful accounts
(75
)
 
80

Share-based compensation expense
15,048

 
14,269

Deemed repatriation transition tax

 
24,641

Deferred income tax (expense) benefit
(16,760
)
 
9,280

Non-cash foreign exchange (gain) loss
907

 
(1,340
)
(Gain) loss on disposal of property, plant and equipment
(59
)
 
45

Realized loss on the sale of available-for-sale securities

 
117

Non-cash charge on inventory step up of acquired inventory sold
14,869

 

Amortization of debt issuance costs
2,086

 
441

(Gain) on sale of assets

 
(956
)
Other
2,201

 
3,589

Changes in operating assets and liabilities:
 
 
 
Accounts receivable
6,187

 
(9,612
)
Inventories
(19,477
)
 
(5,526
)
Prepaid expenses and other assets
10,831

 
(12,482
)
Accounts payable
(1,558
)
 
473

Accrued expenses, income taxes payable and other liabilities
(27,089
)
 
(375
)
Net cash provided by operating activities
117,045

 
103,996

 
 
 
 
Cash flows from investing activities:
 
 
 
Additions to property, plant and equipment
(32,691
)
 
(15,245
)
Acquisition of a business, net of cash acquired
(1,182,186
)
 

Cash settlement of life insurance policy
3,959

 

Proceeds from the sale of assets
1,210

 
3,027

Purchases of available-for-sale securities

 
(178,412
)
Proceeds from the sale and maturities of available-for-sale securities

 
55,194

Settlement of net investment hedge

 
(9,882
)
Net cash used in investing activities
(1,209,708
)
 
(145,318
)
 
 
 
 
Cash flows from financing activities:
 
 
 
Repayment of long-term debt
(102,663
)
 
(144,375
)
Repurchases of common stock
(9,468
)
 
(33,072
)
Proceeds from issuance of long-term debt
1,062,337

 

Debt issuance costs
(18,745
)
 

Proceeds from issuance of stock
11,349

 
20,297

Dividends paid
(34,132
)
 
(20,507
)
Net cash provided by (used in) financing activities
908,678

 
(177,657
)
 
 
 
 
Effect of exchange rate changes on cash
(258
)
 
7,213

Decrease in cash and cash equivalents
(184,243
)
 
(211,766
)
Cash and cash equivalents at beginning of period
352,921

 
397,890

Cash and cash equivalents at end of period
$
168,678

 
$
186,124

 
 
 
 
Supplemental disclosure of non-cash investing and financing activities:
 
 
 
Purchases of property, plant and equipment in accrued liabilities and accounts payable at the end of the period
$
3,085

 
$
1,588

Equity consideration related to the acquisition of KMG Chemicals, Inc
331,048

 

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

6

INDEX

CABOT MICROELECTRONICS CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited and amounts in thousands)
 
Common
Stock
 
Capital
In Excess
Of Par
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income
 
Treasury
Stock
 
Total
Balance at September 30, 2018
$
36

 
$
622,498

 
$
471,673

 
$
4,539

 
$
(432,054
)
 
$
666,692

 
 
 
 
 
 
 
 
 
 
 
 
Share-based compensation expense
 
 
8,170

 
 
 
 
 
 
 
8,170

Repurchases of common stock - other, at cost
 
 
 
 
 
 
 
 
(4,001
)
 
(4,001
)
Exercise of stock options
 
 
3,097

 
 
 
 
 
 
 
3,097

Issuance of common stock in connection with acquisition of KMG Chemicals, Inc.
3

 
331,045

 
 
 
 
 
 
 
331,048

Issuance of Cabot Microelectronics restricted stock under Deposit Share Program
 
 
75

 
 
 
 
 
 
 
75

Net income
 
 
 
 
13,443

 
 
 
 
 
13,443

Dividends ($0.40 per share in dollars)
 
 
 
 
(11,598
)
 
 
 
 
 
(11,598
)
Effect of the adoption of the revenue recognition accounting standards
 
 
 
 
(933
)
 
 
 
 
 
(933
)
Foreign currency translation adjustment
 
 
 
 
 
 
2,425

 
 
 
2,425

Minimum pension liability adjustment
 
 
 
 
 
 
(251
)
 
 
 
(251
)
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2018
39

 
964,885

 
472,585

 
6,713

 
(436,055
)
 
1,008,167

 
 
 
 
 
 
 
 
 
 
 
 
Share-based compensation expense
 
 
3,538

 
 
 
 
 
 
 
3,538

Repurchases of common stock - other, at cost
 
 
 
 
 
 
 
 
(694
)
 
(694
)
Exercise of stock options
 
 
5,080

 
 
 
 
 
 
 
5,080

Issuance of Cabot Microelectronics stock under Employee Stock Purchase Plan
 
 
2,109

 
 
 
 
 
 
 
2,109

Net income
 
 
 
 
27,137

 
 
 
 
 
27,137

Dividends ($0.42 per share in dollars)
 
 
 
 
(12,255
)
 
 
 
 
 
(12,255
)
Foreign currency translation adjustment
 
 
 
 
 
 
(992
)
 
 
 
(992
)
Interest rate swap
 
 
 
 
 
 
(6,474
)
 
 
 
(6,474
)
Minimum pension liability adjustment
 
 
 
 
 
 
251

 
 
 
251

 
 
 
 
 
 
 
 
 
 
 
 
Balance at March 31, 2019
39

 
975,612

 
487,467

 
(502
)
 
(436,749
)
 
1,025,867

 
 
 
 
 
 
 
 
 
 
 
 
Share-based compensation expense
 
 
3,340

 
 
 
 
 
 
 
3,340

Repurchases of common stock under share repurchase plans, at cost
 
 
 
 
 
 
 
 
(5,001
)
 
(5,001
)
Repurchases of common stock - other, at cost
 
 
 
 
 
 
 
 
(58
)
 
(58
)
Exercise of stock options
 
 
988

 
 
 
 
 
 
 
988

Net income
 
 
 
 
18,878

 
 
 
 
 
18,878

Dividends
 
 
 
 
(12,336
)
 
 
 
 
 
(12,336
)
Foreign currency translation adjustment
 
 
 
 
 
 
2,699

 
 
 
2,699

Interest rate swap
 
 
 
 
 
 
(9,044
)
 
 
 
(9,044
)
 
 
 
 
 
 
 
 
 
 
 
 
Balance at June 30, 2019
$
39

 
$
979,940

 
$
494,009

 
$
(6,847
)
 
$
(441,808
)
 
$
1,025,333



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

7

INDEX

CABOT MICROELECTRONICS CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited and amounts in thousands)
 
Common
Stock
 
Capital
In Excess
Of Par
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income
 
Treasury
Stock
 
Total
Balance at September 30, 2017
$
35

 
$
580,938

 
$
397,881

 
$
3,949

 
$
(387,766
)
 
$
595,037

 
 
 
 
 
 
 
 
 
 
 
 
Share-based compensation expense
 
 
5,881

 
 
 
 
 
 
 
5,881

Repurchases of common stock under share repurchase plans, at cost
 
 
 
 
 
 
 
 
(1,591
)
 
(1,591
)
Repurchases of common stock - other, at cost
 
 
 
 
 
 
 
 
(3,160
)
 
(3,160
)
Exercise of stock options
 
 
6,139

 
 
 
 
 
 
 
6,139

Issuance of Cabot Microelectronics restricted stock under Deposit Share Program
 
 
300

 
 
 
 
 
 
 
300

Net loss
 
 
 
 
(3,083
)
 
 
 
 
 
(3,083
)
Dividends ($0.20 per share in dollars)
 
 
 
 
(5,153
)
 
 
 
 
 
(5,153
)
Foreign currency translation adjustment
 
 
 
 
 
 
7,144

 
 
 
7,144

Interest rate swaps
 
 
 
 
 
 
199

 
 
 
199

Unrealized loss in short term available-for-sale securities
 
 
 
 
 
 
(46
)
 
 
 
(46
)
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2017
35

 
593,258

 
389,645

 
11,246

 
(392,517
)
 
601,667

 
 
 
 
 
 
 
 
 
 
 
 
Share-based compensation expense
 
 
4,223

 
 
 
 
 
 
 
4,223

Repurchases of common stock under share repurchase plans, at cost
 
 
 
 
 
 
 
 
(5,005
)
 
(5,005
)
Repurchases of common stock - other, at cost
 
 
 
 
 
 
 
 
(300
)
 
(300
)
Exercise of stock options
1

 
9,611

 
 
 
 
 
 
 
9,612

Issuance of Cabot Microelectronics stock under Employee Stock Purchase Plan
 
 
2,012

 
 
 
 
 
 
 
2,012

Net income
 
 
 
 
29,737

 
 
 
 
 
29,737

Dividends ($0.40 per share in dollars)
 
 
 
 
(10,390
)
 
 
 
 
 
(10,390
)
Foreign currency translation adjustment
 
 
 
 
 
 
3,961

 
 
 
3,961

Interest rate swaps
 
 
 
 
 
 
(52
)
 
 
 
(52
)
Sale of short term available-for-sale securities
 
 
 
 
 
 
46

 
 
 
46

 
 
 
 
 
 
 
 
 
 
 
 
Balance at March 31, 2018
36

 
609,104

 
408,992

 
15,201

 
(397,822
)
 
635,511

 
 
 
 
 
 
 
 
 
 
 
 
Share-based compensation expense
 
 
4,236

 
 
 
 
 
 
 
4,236

Repurchases of common stock under share repurchase plans, at cost
 
 
 
 
 
 
 
 
(23,508
)
 
(23,508
)
Exercise of stock options
 
 
2,203

 
 
 
 
 
 
 
2,203

Net income
 
 
 
 
35,171

 
 
 
 
 
35,171

Dividends
 
 
 
 
(10,345
)
 
 
 
 
 
(10,345
)
Foreign currency translation adjustment
 
 
 
 
 
 
(8,829
)
 
 
 
(8,829
)
Interest rate swaps
 
 
 
 
 
 
(210
)
 
 
 
(210
)
Change in unrealized gain/(loss) in short term available-for-sale securities
 
 
 
 
 
 
(48
)
 
 
 
(48
)
 
 
 
 
 
 
 
 
 
 
 
 
Balance at June 30, 2018
$
36

 
$
615,543

 
$
433,818

 
$
6,114

 
$
(421,330
)
 
$
634,181


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

8

INDEX

CABOT MICROELECTRONICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and in thousands, except share and per share amounts)
1. BACKGROUND AND BASIS OF PRESENTATION
Cabot Microelectronics Corporation (“Cabot Microelectronics”, “the Company”, “us”, “we”, or “our”') is a leading global supplier of consumable materials to semiconductor manufacturers and pipeline operators.  On November 15, 2018 (“Acquisition Date”), we completed our acquisition of KMG Chemicals, Inc. (“KMG”), which produces and distributes specialty chemicals and performance materials for the semiconductor, pipeline operations, energy industries and industrial wood preservation industries (“Acquisition”).  The Acquisition has extended and strengthened our position as one of the leading suppliers of consumable materials to the semiconductor industry and expands our portfolio with the addition of KMG’s businesses, which we believe enables us to be a leading global provider of performance products and services to the pipeline companies and energy industries. The Consolidated Financial Statements included in this Report on Form 10-Q include the financial results of KMG from the Acquisition Date. Subsequent to the Acquisition, we have operated our business within two reportable segments: Electronic Materials and Performance Materials. The Electronic Materials segment consists of our heritage CMP slurries and polishing pads businesses, as well as the KMG electronic chemicals business.  The Performance Materials segment includes KMG’s heritage pipeline performance and wood treatment businesses, and Cabot Microelectronics’ heritage QED business. For additional information, refer to Part 1, Item 1, “Business”, in our and KMG’s Annual Reports on Form 10-K for the fiscal year ended September 30, 2018 and July 31, 2018, respectively.
The unaudited Consolidated Financial Statements have been prepared by Cabot Microelectronics pursuant to the rules of the Securities and Exchange Commission (SEC) and accounting principles generally accepted in the United States of America (U.S. GAAP).  In the opinion of management, these unaudited Consolidated Financial Statements include all adjustments, consisting of normal recurring adjustments, necessary for the fair statement of Cabot Microelectronics’ financial position as of June 30, 2019, cash flows for the nine months ended June 30, 2019 and June 30, 2018, and results of operations for the three and nine months ended June 30, 2019 and June 30, 2018.  The Consolidated Balance Sheets as of September 30, 2018 were derived from audited financial statements. The results of operations for the three and nine months ended June 30, 2019 may not be indicative of results to be expected for future periods, including the fiscal year ending September 30, 2019.  Certain prior period amounts have been reclassified to conform to the current period presentation.  This Report on Form 10-Q does not contain all of the footnote disclosures from our annual financial statements and should be read in conjunction with the Consolidated Financial Statements and related notes thereto included in Cabot Microelectronics’ Annual Report on Form 10-K for the fiscal year ended September 30, 2018.
The Consolidated Financial Statements include the accounts of Cabot Microelectronics and its subsidiaries. All intercompany transactions and balances between the companies have been eliminated as of June 30, 2019.
USE OF ESTIMATES
The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make judgments, assumptions and estimates that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. The accounting estimates that require management's most difficult and subjective judgments include, but are not limited to, those estimates related to bad debt expense, inventory valuation, impairment of long-lived assets, business combinations, goodwill, other intangible assets, share-based compensation, income taxes and contingencies. We base our estimates on historical experience, current conditions and on various other assumptions that we believe are reasonable under the circumstances. However, future events are subject to change and estimates and judgments routinely require adjustment. Actual results may differ from these estimates under different assumptions or conditions.

9

INDEX


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS
Significant Accounting Policies and Estimates
Except for the discussion on revenue recognition below, no material changes have been made to the Company’s significant accounting policies disclosed in Note 2 of the Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended September 30, 2018.
REVENUE RECOGNITION
As of October 1, 2018, the Company began applying the provisions of Accounting Standards Codification 606-10, “Revenue from Contracts with Customers” (“ASC 606”), and all related applicable guidance using the modified retrospective method applied to those contracts that were not completed as of October 1, 2018.  The Company recognizes revenue under the core principle of depicting the transfer of control to the Company’s customers in an amount reflecting the consideration to which the Company expects to be entitled. In order to achieve that core principle, the Company applies the following five step approach: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and, (5) recognize revenue when a performance obligation is satisfied.
Upon adoption of ASC 606, we recognized a $933 decrease to the opening balance of retained earnings, net of tax, due to the cumulative impact of adopting the new revenue standard. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.  The Company changed its accounting policy for revenue recognition for customer incentives that provide free products and tiered pricing.  For free products, the new revenue standard requires that a portion of the transaction price be allocated to the free product and deferred until the product has been delivered.  We previously accrued for undelivered free product as a charge to cost of sales.  In prior fiscal years, in accordance with ASC 605, we did not consider prospective tiered pricing to represent a material right.
The cumulative effect of the changes made to our Consolidated Balance Sheet as of October 1, 2018 for the adoption of the new revenue standard was:
 
Balance at
September 30, 2018
 
Adjustments Due
to ASC 606
 
Balance at October 1,
2018
Deferred income tax assets
$
5,840

 
$
261

 
$
6,101

Accrued expenses, income taxes payable and other current liabilities
82,983

 
(47
)
 
82,936

Other long-term liabilities
13,046

 
1,241

 
14,287

Retained earnings
$
471,673

 
$
(933
)
 
$
470,740


We have determined that the effect of applying the new revenue standard during the three and nine months ended June 30, 2019 was immaterial to our financial statements compared to revenue guidance in effect before the adoption of the new revenue standard.  As a result, for the three and nine months ended June 30, 2019, we are not disclosing the quantitative amount by which each financial statement line item is affected by the application of the new revenue standard.
As part of the adoption of ASU 606, the Company elected to use certain allowed practical expedients. For the Company’s contracts that have an original duration of one year or less as of the adoption date, the Company uses the practical expedient applicable to such contracts and does not consider the time value of money. Further, because of the short duration of these contracts, the Company has not disclosed the transaction price for the future performance obligations as of the end of each reporting period for contracts having an expected duration of one year or less.  See Note 3 of this Report on Form 10-Q for disaggregated revenue, the reconciliation of contract balances and transaction price allocation to remaining performance obligations for contracts expected to remain effective beyond one year.

10

INDEX

Performance Obligations and Material Rights
At contract inception, the Company assesses the goods and services promised in its contracts with customers and identifies a performance obligation for each material promise to the customer.  A performance obligation is a promise in a contract to transfer a distinct good or service, or a bundle of goods or services, to the customer, and is the unit of accounting under ASC 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. A majority of the Company’s contracts have a single performance obligation which represents, in most cases, the products, equipment or services being sold to the customer. Some contracts include multiple performance obligations, including prospective tiered price discounts or delivery of free product that we have concluded represents a material right. Contracts with prospective tiered price discounts require judgment in determining if that discount represents a material right.
Contracts vary in length, and payment terms vary by the type and location of the Company’s customers and the products or services offered. However, the period of time between invoicing and when payment is due is typically not significant and has no significant financing components.  Customers pay in accordance with negotiated terms upon receipt of goods or completion of services.  For these contracts, the transaction price is determined upon establishment of the contract that contains the final terms of the sale, including the description, quantity, and price of goods or services purchased.  In certain instances, we receive consideration from a customer prior to transferring goods or services to the customer under the terms of a sales contract.  In such cases, we record deferred revenue until the performance obligation is satisfied, which represents a contract liability, and is included in the contract liabilities discussed in Note 3 of this Report on Form 10-Q.
The Company recognizes revenue related to product sales at a point in time following the transfer of control of such products to the customer, which generally occurs upon shipment, or delivery depending on the terms of the underlying contracts. The Company considers control to have transferred upon shipment or delivery because the Company has a present right to payment at that time, the customer has legal title to the asset, the Company has transferred physical possession of the asset, and the customer has significant risks and rewards of ownership of the asset.  Revenue is recognized on consignment sales when control transfers to the customer, generally at the point of customer usage of the product. The Company also records revenue for services provided to the pipeline and oilfield energy industries.  These services include preventive maintenance, repair and specialized isolation sealing on pipelines and training. Revenue is recorded at a point in time when the services are completed as this is when right to payment and customer acceptance occurs.
For sales contracts that contain multiple performance obligations, the Company allocates the transaction price to each performance obligation identified in the contract based on relative standalone selling prices or estimates of such prices.  Standalone selling price, once established, is then used to allocate total consideration proportionally to the various performance obligations within a contract. Most contracts where we have determined there to be multiple performance obligations relate to where we have identified the existence of a material right such that we provide prospective tiered pricing discounts or free product. When we invoice for products shipped under these contracts, we defer the revenue associated with these rights on the balance sheet as a contract liability. Revenue is recognized when the customer exercises the option to purchase goods at a discount in the case of the prospective tiered pricing discounts or when we ship the free product.
Variable Consideration
The primary type of variable consideration present in the Company’s contracts are rebates and early payment discounts, both of which are immaterial. Early payment discounts are offered on a limited basis and are not significant.  The Company also offers rebates based upon cumulative volume of purchases within a quarter and accrues for the rebate obligation within the quarter that the rebate is earned.  ASC 606 did not change the accounting for rebates under ASC 605.
Costs to Obtain and Fulfill a Contract
 For certain contracts within the Performance Materials segment, commissions are paid to sales agents based upon a percentage of end-customer invoice value. Agents are paid the commissions after funds are received by the Company from its customers.  Under ASC 340, sales commissions are required to be capitalized and expensed over the associated contract period.  However, as a practical expedient, the Company does not capitalize commissions as the associated contracts are generally one year or less in duration. For shipping and handling activities performed after a customer obtains control of the goods, the Company has elected to account for these costs as activities to fulfill the promise to transfer the goods and included in cost of sales.

11

INDEX

EFFECTS OF RECENT ACCOUNTING PRONOUNCEMENTS
In February 2016, the FASB issued ASU No. 2016-02, "Leases" (Topic 842).  The provisions of ASU 2016-02 require a dual approach for lessee accounting under which a lessee would recognize a right-of-use asset and a corresponding lease liability.  Leases will be classified as either finance or operating leases.  For finance leases, a lessee will recognize interest expense and amortization of the right-of-use asset, and for operating leases, the lessee will recognize a straight-line total lease expense.  The guidance also requires qualitative and specific quantitative disclosures to supplement the amounts recorded in the financial statements, to afford better understanding of an entity's leasing activities, including any significant judgments and estimates.   The guidance was amended through various ASU's subsequent to ASU 2016-02, all of which will be effective for us beginning October 1, 2019, but early adoption is permitted.  We have finished reviewing the population of our lease contracts and are in the process of implementing a new third party lease software system. The Company currently plans to elect the optional package of practical expedients to not reassess prior conclusions related to contracts containing leases, lease classification and initial direct costs and therefore, does not expect the adoption of ASU 2016-02 to have a significant impact on the Consolidated Statements of Income. We expect to adopt the new standard in our first quarter of fiscal 2020 applying the optional transition method upon adoption. We continue to evaluate the amount of right-of-use asset and lease liability that will ultimately be recorded on the Consolidated Balance Sheets and the impact on the Consolidated Statements of Income.
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 us beginning October 1, 2020, but early adoption is permitted as of October 1, 2019. We are currently evaluating the impact of implementation of this standard on our financial statements.
In March 2017, the FASB issued ASU No. 2017-07 "Improving the Presentation of Net Period Pension Cost and Net Period Postretirement Benefit Cost" (Topic 715). The provisions of ASU 2017-07 provided specific guidance on the presentation of the components of net benefit cost.  We adopted this standard ASU 2017-07 effective October 1, 2018 and applied it retrospectively. Pursuant to the adoption, net service costs are recorded as fringe benefit expense under cost of sales and operating expenses, and all other costs are recorded in the Other income (expense), net in our Consolidated Statements of Income. The impact of the retrospective adoption in fiscal year 2018 is not material.
In May 2017, the FASB issued ASU No. 2017-09 "Scope of Modification Accounting" (Topic 718). The provisions of ASU 2017-09 provide specific guidance about which changes to the term or conditions of a share-based payment require an entity to apply modification accounting.  We adopted ASU 2017-09 effective October 1, 2018 and will apply this new standard to our share-based compensation awards, to the extent modified.
In August 2017, the FASB issued ASU No. 2017-12 "Derivatives and Hedging" (Topic 815). The provisions of this standard amend the hedge accounting model in ASC 815 to expand an entity's ability to hedge nonfinancial and financial risk components, reduce complexity in fair value hedges of interest rate risk, eliminate the requirement to separately measure and report hedge ineffectiveness, and generally require the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item. The guidance also eases certain documentation and assessment requirements and modifies the accounting for components excluded from the assessment of hedge effectiveness.  We early adopted this guidance effective January 1, 2019, and we did not have any hedges that existed as of the initial application date.  We applied the new guidance to the interest rate swap that we entered into during our second quarter of fiscal 2019. Pursuant to the guidance, we performed initial quantitative hedge effectiveness testing upon the inception of the hedge, and determined the hedge to be highly effective.  Therefore, unrealized changes in fair value are recorded in other comprehensive income.  In addition, we reclassify the realized gains and losses out of other comprehensive income, and into interest expense in our Consolidated Statements of Income, which is the same financial statement line as the hedged item.  We will perform subsequent assessments of hedge effectiveness qualitatively on a quarterly basis.
In February 2018, the FASB issued ASU No. 2018-02 "Income Statement – Reporting Comprehensive Income (Topic 220)".  The amendments in this standard allow a company to reclassify the stranded tax effects resulting from the Tax Cuts and Jobs Act (the "Tax Act") from accumulated other comprehensive income to retained earnings. ASU 2018-02 will be effective for us beginning October 1, 2019, but early adoption is permitted. We are currently evaluating and quantifying the amount to be reclassified into retained earnings and expect to record the reclassification on October 1, 2019.

12

INDEX

In June 2018, the FASB issued ASU No. 2018-07 " Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting."  The ASU simplified the accounting for share-based payments granted to nonemployees for goods and services, therefore guidance on such payments to nonemployees would be mostly aligned with the requirements for share-based payments granted to employees. ASU 2018-07 will be effective for us beginning October 1, 2019, but early adoption is permitted (but no earlier than the adoption date of Topic 606). We do not expect implementation of this standard to have material impact on our financial statements.
In August 2018, the FASB issued ASU No. 2018-13 " Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement".  The ASU provides specific guidance on various disclosure requirements in Topic 820, including removal, modification and addition to current disclosure requirements. ASU 2018-13 will be effective for us beginning October 1, 2020, but early adoption is permitted. We are currently evaluating the impact of implementation of this standard on our disclosures.
In August 2018, the FASB issued ASU No. 2018-15 " Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force)".  The ASU Requires an entity (customer) in a hosting arrangement that is a service contract to follow the guidance in Subtopic 350-40 to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense. ASU 2018-15 will be effective for us beginning October 1, 2020, but early adoption is permitted. We are currently evaluating the impact of implementation of this standard on our financial statements.

3.  REVENUE FROM CONTRACTS WITH CUSTOMERS
Disaggregation of Revenue
The Company disaggregates revenue by product area and segment as it best depicts the nature and amount of the Company’s revenue.
The following table shows revenue generated by product area during the three and nine months ended June 30, 2019 and 2018:
 
Three Months Ended June 30,
 
Nine Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Revenue:
 
 
 
 
 
 
 
Electronic Materials:
 
 
 
 
 
 
 
CMP Slurries
$
108,617

 
$
122,893

 
$
345,244

 
$
352,414

Electronic Chemicals
80,103

 

 
198,474

 

CMP Pads
23,403

 
20,917

 
71,868

 
60,813

Total Electronic Materials
212,123

 
143,810

 
615,586

 
413,227

 
 
 
 
 
 
 
 
Performance Materials
59,759

 
6,627

 
143,465

 
20,167

 
 
 
 
 
 
 
 
Total revenue
$
271,882

 
$
150,437

 
$
759,051

 
$
433,394


Reconciliation of Contract Liability Balances
The following table provides information about contract liability balances:
 
June 30, 2019
 
October 1, 2018
Contract liabilities (current)
$
3,958

 
$
5,310

Contract liabilities (noncurrent)
1,378

 
1,239



13

INDEX

The contract liability balances as of October 1, 2018 in the table above include the amounts recorded upon the adoption of ASC 606.  At June 30, 2019, the current portion of contract liabilities of $3,958 is included in accrued liabilities, taxes payable and other current liabilities, and the noncurrent portion of $1,378 is included in other long-term liabilities in the Consolidated Balance Sheets.  The amount of revenue recognized during the three and nine months ended June 30, 2019 that was included in the opening current contract liability balances in our Performance Materials segment was $697 and $4,857, respectively.  The amount of revenue recognized during the three and nine months ended June 30, 2019 that was included in our opening contract liability balances in our Electronic Materials segment was not material.
Transaction Price Allocated to Remaining Performance Obligations

The table below discloses (1) the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied (or partially unsatisfied) as of the end of the reporting period for contracts with an original duration of greater than one year and (2) when the Company expects to recognize this revenue.
 
Less Than 1 Year
 
1-3 Years
 
3-5 Years
 
Total
Revenue expected to be recognized on contract liability amounts as of June 30, 2019
$
211

 
$
975

 
$
403

 
$
1,589




4. BUSINESS COMBINATION
On the Acquisition Date, the Company completed its acquisition of 100% of the outstanding stock of KMG, which was a publicly held company headquartered in Fort Worth, Texas. KMG specialized in producing, processing, and distributing electronic chemicals for the semiconductor industry and performance materials for the pipeline operations and energy, and industrial wood preservation industries. 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 products and services to the pipeline operations and energy industries. 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 (the “Credit Agreement”), which provided us with a seven-year, $1,065,000 term loan facility (the “Term Loan Facility”), which we drew on the Acquisition Date to fund the Acquisition along with cash on hand, and a five-year, $200,000 revolving credit facility (the “Revolving Credit Facility”), which has not been drawn. In connection with the borrowing, we incurred $21,408 in debt issuance costs and original issue discount fees, $859 of which relates to the Revolving Credit Facility and is recorded as a prepaid asset, and the remaining $20,549 in debt issuance costs relates to the Term Loan Facility and is presented as a reduction of long-term debt. These debt issuance costs are amortized and recorded in Interest expense in the Consolidated Statements of Income over the life of the Revolving Credit Facility and Term Loan Facility, respectively. 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



14

INDEX

The following table summarizes the preliminary allocation of fair values of assets acquired and liabilities assumed as of the Acquisition Date.
 
Amount
Cash
$
23,217

Accounts receivable
64,711

Inventories
68,963

Prepaid expenses and other current assets
14,798

Property, plant and equipment
147,398

Intangible assets
844,800

Other long-term assets
6,208

Accounts payable
(28,894
)
Accrued expenses and other current liabilities
(43,451
)
Deferred income taxes liabilities
(164,165
)
Other long-term liabilities
(3,754
)
Total identifiable net assets acquired
929,831

Goodwill
606,621

Total consideration transferred
$
1,536,452



The Acquisition was accounted for using the acquisition method of accounting. Tangible and identifiable intangible assets acquired and liabilities assumed are recorded at fair value as of the Acquisition Date. These valuations are preliminary based on the information currently available, and the expectations and assumptions that have been deemed reasonable by the Company’s management.  The Company has not finalized the fair value determinations of the assets acquired and liabilities assumed and expects to finalize such as soon as practicable, but not later than one-year from the Acquisition Date.  As a result, certain adjustments have been made and will continue to be made to the Company’s Consolidated Balance Sheet and Statements of Income.
The fair values of identifiable assets and liabilities acquired were developed with the assistance of a third-party valuation firm. The fair value of acquired property, plant and equipment is primarily valued at its “value-in-use.” The fair value of acquired identifiable intangible assets was determined using the “income approach” on an individual asset basis. The key assumptions used in the calculation of the discounted cash flows include projected revenue, gross margin, operating expenses, discount rate and customer attrition.  The valuations and the underlying assumptions have been deemed reasonable by the Company’s management. There are inherent uncertainties and management judgment required in these determinations.
The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives as of the Acquisition Date:
 
Fair Value
 
Estimated Useful Life
(years)
Customer relationships
$
704,000

 
15-20
Technology and know-how
85,500

 
9-11
Trade name - Flowchem
46,000

 
Indefinite
Trade name - all other