Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
_______________________________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported):
August 7, 2019
Cabot Microelectronics Corporation
(Exact name of registrant as specified in its charter)
Delaware
 
000-30205
 
36-4324765
(State or other jurisdiction of incorporation)
 
(Commission File Number)
 
(IRS Employer Identification No.)
870 North Commons Drive, Aurora, Illinois
 
60504
(Address of principal executive offices)
 
(Zip Code)
(630) 375-6631
(Registrant’s telephone number, including area code)
Not applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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 is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). 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. 






Item 2.02    Results of Operations and Financial Condition.

On August 7, 2019, Cabot Microelectronics Corporation issued a press release entitled “Cabot Microelectronics Corporation Reports Results for the Third Quarter of Fiscal 2019,” and made available on the Company’s website a presentation entitled “Third Quarter of Fiscal 2019 Earnings Call, August 8, 2019,” copies of which are attached hereto as Exhibit 99.1 and Exhibit 99.2, respectively, and incorporated herein by reference. The press release and presentation contain financial and other information including that related to the Company’s third quarter of fiscal 2019, which ended June 30, 2019.

This information contained in the press release and presentation attached hereto as Exhibit 99.1 and Exhibit 99.2, respectively, and incorporated herein by reference is being furnished pursuant to Item 2.02 of Form 8-K and shall not be deemed "filed" for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01
Financial Statements and Exhibits.
(d)
Exhibits
 
 
 
 
The following exhibits are being furnished, not filed, herewith pursuant to Item 2.02 of Form 8-K:
 
 
 
 
99.1
Press release, dated August 7, 2019, entitled “Cabot Microelectronics Corporation Reports Results for the Third Quarter of Fiscal 2019.”
 
99.2
Presentation entitled “Third Quarter of Fiscal 2019 Earnings Call, August 8, 2019.”





SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
CABOT MICROELECTRONICS CORPORATION
 
 
 
[Registrant]
 
 
 
 
 
Date: August 7, 2019
By:
/s/ SCOTT D. BEAMER
 
 
 
Scott D. Beamer
 
 
 
Vice President and Chief Financial Officer
 
 
 
[Principal Financial Officer]
 





INDEX TO EXHIBITS
Exhibit Number
 
Title
 
Press release, dated August 7, 2019, entitled “Cabot Microelectronics Corporation Reports Results for Third Quarter of Fiscal 2019.”
 
Presentation entitled “Third Quarter of Fiscal 2019 Earnings Call, August 8, 2019.”


Exhibit


EXHIBIT 99.1
PRESS RELEASE



Cabot Microelectronics Corporation Reports Record Revenue for The Third Quarter of Fiscal 2019

Record Revenue of $271.9 Million, $121.4 Million or 80.7% Higher Than Last Year; Essentially Flat Compared with Adjusted Pro Forma Revenue of $272.6 Million Last Year

Net Income of $18.9 Million, $16.3 Million or 46.3% Lower Than Last Year; Adjusted Pro Forma Net Income of $46.9 Million, $0.4 Million or 0.9% Higher Than Last Year1 

Diluted Earnings Per Share of $0.64, $0.70 or 52.2% Lower Than Last Year; Adjusted Pro Forma Diluted Earnings Per Share of $1.59, $0.02 or 1.3% Higher Than Last Year1 

Adjusted Pro Forma EBITDA of $85.8 Million, $5.5 Million or 6.9% Higher Than Last Year1; Adjusted Pro Forma EBITDA of 31.5% of Revenue, 210 Basis Points Higher Than Last Year

Expecting Full Year Fiscal 2019 Adjusted EBITDA Between $325 Million and $335 Million

AURORA, IL, August 7, 2019 - Cabot Microelectronics Corporation (Nasdaq: CCMP), a leading global supplier of consumable materials to semiconductor manufacturers and pipeline companies, today reported financial results for its third quarter of fiscal 2019, which ended June 30, 2019.

Key Quarter Highlights
During the third fiscal quarter, the company delivered total revenue of $271.9 million, essentially flat compared with the adjusted pro forma revenue of $272.6 million in the same quarter last year. The company’s year-over-year growth in CMP pads, electronic chemicals and pipeline performance products was offset by lower CMP slurries revenue. Adjusted pro forma gross margin was 45.3%, and adjusted pro forma EBITDA was $85.8 million, or 31.5% of revenue, in the quarter. The company generated $63.5 million in cash flow from operations during the quarter, and ended the quarter with $168.7 million of cash on hand and $943.7 million in total debt.

“We are proud of our strong results this quarter, which we believe demonstrate the resiliency of our core CMP business as well as the strength of our acquired businesses. In particular, it is encouraging to see the continued growth in electronic chemicals and pipeline performance in addition to signs of broader semiconductor industry stabilization,” said David Li, President and CEO of Cabot Microelectronics Corporation. “We continue to focus on execution and managing our business within this challenging environment and feel that we are well positioned to continue to profitably grow in the future.”






1 Adjusted pro forma results, including adjusted pro forma gross margin, adjusted pro forma net income, adjusted pro forma EBITDA and adjusted pro forma diluted EPS, are considered as non-GAAP financial measures by the U.S. Securities and Exchange Commission (SEC). These adjusted pro forma results are presented as if the company’s acquisition of KMG Chemicals, Inc. (“KMG”) had been consummated on October 1, 2017, and exclude the impact of non-recurring acquisition and integration related costs, acquisition-related amortization expenses, the effect of the enactment of the Tax Cuts and Jobs Act in December 2017 in the United States (“tax act”) and the newly issued final regulations related to the tax act and certain costs related to a warehouse fire at KMG-Bernuth in Tuscaloosa, Alabama. See “Use of Certain GAAP and Non-GAAP Adjusted Pro Forma Financial Information” below for more information about these measures. In addition, reconciliations of these non-GAAP measures to their most comparable GAAP measures and reconciliations of pro forma financial information to adjusted pro forma financial information are included in the financial statements portion of this press release.

Key Financial Information for Third Quarter of Fiscal 2019
Revenue was $271.9 million, which is $121.4 million, or 80.7% higher than the revenue reported in the same quarter last year. Adjusted pro forma revenue of $271.9 million was $0.7 million, or 0.3%, lower compared to the same quarter last year. Year-over-year results benefited from revenue growth in CMP pads, electronic chemicals and pipeline performance products, while CMP slurries revenue declined due to soft semiconductor industry demand, primarily from memory and foundry customers, while advanced logic demand remained strong.

Net income for the quarter was $18.9 million, which is $16.3 million, or 46.3%, lower than in the same quarter last year. Excluding the impact of acquisition-related expenses, an adjustment related to newly issued final regulations for the tax act and cleanup costs related to a wood treatment business warehouse fire in Tuscaloosa, Alabama, adjusted pro forma net income was $46.9 million, which is $0.4 million, or 0.9%, higher than in the prior year.

Diluted EPS was $0.64 this quarter, which is $0.70, or 52.2%, lower than in the third quarter of fiscal 2018. Adjusted pro forma EPS was $1.59, which is $0.02, or 1.3%, higher than in the same quarter last year.

Adjusted pro forma EBITDA was $85.8 million, which is $5.5 million, or 6.9%, higher than in the same quarter last year, primarily due to lower selling, general and administrative expenses. Adjusted pro forma EBITDA margin for the quarter was 31.5%, compared to 29.4% in the same quarter last year.






Segment Results for Third Quarter of Fiscal 2019
Electronic Materials - Revenue was $212.1 million, which is $10.0 million, or 4.5%, lower than pro forma revenue in the same quarter last year. CMP pads delivered another quarter of strong revenue, which was 11.9% higher than in the same quarter last year. Electronic chemicals revenue increased 2.3% over the prior year’s quarter, driven by higher demand for products consumed in advanced logic applications. CMP slurries revenue declined 11.6% from last year’s quarter, primarily due to softer industry conditions that resulted in lower demand for the company’s products from memory and foundry customers, which offset strong demand from advanced logic customers. The Electronic Materials segment adjusted EBITDA was $70.9 million, or 33.4% of revenue.

Performance Materials - Revenue was $59.8 million for the quarter, which is $9.3 million, or 18.4%, higher than pro forma revenue in the prior year’s quarter. The increase was driven by higher revenue from the company’s pipeline performance and QED businesses. The Performance Materials segment adjusted EBITDA was $27.4 million, or 45.9% of revenue.

Guidance Update
For the fourth quarter of fiscal 2019, the company currently expects total revenue to be approximately flat compared to the company’s revenue for the third quarter of fiscal 2019. Electronic Materials revenue is expected to be approximately flat sequentially. Performance Materials revenue is expected to be approximately flat sequentially due to the timing impact of QED revenue, with strong demand for the company’s pipeline performance products expected to continue.

The company now expects full fiscal year 2019 adjusted EBITDA to be between $325 million and $335 million. Additional current expectations are provided on slide 9 in the related slide presentation.







RELATED SLIDE PRESENTATION
A slide presentation related to this press release will be available at ir.cabotcmp.com in the Quarterly Results section of the Investor Relations center at approximately the same time that this press release is issued.

CONFERENCE CALL
Cabot Microelectronics Corporation’s quarterly earnings conference call will be held at 10:00 a.m. Eastern Time (9:00 a.m. Central Time) on Thursday, August 8. The conference call will be available via live webcast and replay from the company’s website, www.cabotcmp.com, or by phone at (844) 825-4410. Callers outside the U.S. may dial (973) 638-3236. The conference code for the call is 4888912. A transcript of the formal comments made during the conference call will also be available in the Investor Relations section of the company’s website.

ABOUT CABOT MICROELECTRONICS CORPORATION
Cabot Microelectronics Corporation, headquartered in Aurora, Illinois, is a leading global supplier of consumable materials to semiconductor manufacturers and pipeline companies. The company’s products play a critical role in the production of advanced semiconductor devices, helping to enable the manufacture of smaller, faster and more complex devices by its customers. Cabot Microelectronics Corporation is also a leading provider of performance materials to pipeline operators. The company's mission is to create value by delivering high-performing and innovative solutions that solve its customers’ challenges. The company has approximately 1,900 employees globally. For more information about Cabot Microelectronics Corporation, visit www.cabotcmp.com, or contact Colleen Mumford, Director of Investor Relations, at 630-499-2600.






USE OF CERTAIN GAAP AND NON-GAAP ADJUSTED PRO FORMA FINANCIAL INFORMATION The company presented the following measures considered as non-GAAP by the SEC: adjusted pro forma EBITDA (earnings before interest, taxes, depreciation and amortization), adjusted pro forma EBITDA margin, adjusted pro forma net income and adjusted pro forma diluted earnings per share. These adjusted pro forma results are presented as if the company’s acquisition of KMG Chemicals, Inc. (“KMG”), had been consummated on October 1, 2017 and exclude the impact of non-recurring acquisition and integration related costs, acquisition related amortization expenses, the adjustments related to the effect of the enactment of the Tax Cuts and Jobs Act in December 2017 in the United States (“tax act”) and the newly issued final regulations related to the tax act and certain costs related to a warehouse fire at KMG-Bernuth in Tuscaloosa, Alabama. The non-GAAP adjusted pro forma financial information provided in this press release is a supplement to, and not a substitute for, the company’s financial results presented in accordance with U.S. GAAP. These non-GAAP adjusted pro forma financial measures are provided to enhance the investor's understanding about the company's ongoing operations. Specifically, the company believes the impact of the adjustments related to the effect of the enactment of the Tax Cuts and Jobs Act in December 2017 in the United States (“tax act”) and the newly issued final regulations related to the tax act, KMG acquisition and integration-related expenses, certain costs related to a warehouse fire at KMG-Bernuth in n Tuscaloosa, Alabama, and acquisition related amortization expenses are not indicative of its core operating results, and thus presents these certain metrics excluding these effects. The presentation of non-GAAP adjusted pro forma financial information is not meant to be considered in isolation or as a substitute for results prepared and presented in accordance with U.S. GAAP. Reconciliations of non-GAAP measures to their most comparable GAAP measures and reconciliations of pro forma financial information to adjusted pro forma financial information are included in the financial statements portion of this press release.
The company has not quantitatively reconciled its guidance for adjusted EBITDA to its most comparable GAAP measure because the company does not provide specific guidance for the various reconciling items as certain items that impact this measure have not occurred, are out of the company’s control, or cannot be reasonably predicted. Accordingly, a reconciliation to the nearest GAAP financial metric is not available without unreasonable effort. Please note that the unavailable reconciling items could significantly impact the company’s results.
Adjusted EBITDA for the Electronic Materials and Performance Materials segments is presented in conformity with Accounting Standards Codification Topic 280, Segment Reporting. This measure is reported to the chief operating decision maker for purposes of making decisions about allocating resources to the segments and assessing their performance. For these reasons, this measure is excluded from the definition of non-GAAP financial measures under the SEC Regulation G and Item 10(e) of Regulation S-K.






FORWARD LOOKING STATEMENTS
This press release contains forward-looking statements, which address a variety of subjects including, for example, future sales and operating results; growth or contraction, and trends in the industry and markets in which the Company participates; the acquisition of, investment in, or collaboration with other entities, including the Company’s acquisition of KMG Chemicals, Inc. (“KMG”), and the expected benefits and synergies of such acquisition; new product introductions; development of new products, technologies and markets; product performance; the financial conditions of the Company's customers; competitive landscape; the Company's supply chain; natural disasters; various economic or political factors and international or national events, including related to the enactment of trade sanctions, tariffs, or other similar matters; the generation, protection and acquisition of intellectual property, and litigation related to such intellectual property or third party intellectual property; environmental, health and safety laws and regulations, and related compliance; the operation of facilities by Cabot Microelectronics; the Company's management; foreign exchange fluctuation; the Company's current or future tax rate, including the effects of the Tax Cuts and Jobs Act in the United States (“tax act”); cybersecurity threats; financing facilities and related debt, pay off or payment of principal and interest, and compliance with covenants and other terms; and, uses and investment of the Company's cash balance, including dividends and share repurchases, which may be suspended, terminated or modified at any time for any reason by the Company, based on a variety of factors. Statements that are not historical facts, including statements about Cabot Microelectronics’ beliefs, plans and expectations, are forward-looking statements. Such statements are based on current expectations of Cabot Microelectronics’ management and are subject to a number of factors and uncertainties, which could cause actual results to differ materially from those described in the forward-looking statements. For information about factors that could cause actual results to differ materially from those described in the forward-looking statements, please refer to Cabot Microelectronics’ filings with the Securities and Exchange Commission (“SEC”), including the risk factors contained in Cabot Microelectronics’ Annual Report on Form 10-K, its Quarterly Report on Form 10-Q for the quarter ended March 31, 2019, and its Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, which is expected to be filed by August 9, 2019. Except as required by law, Cabot Microelectronics undertakes no obligation to update forward-looking statements made by it to reflect new information, subsequent events or circumstances.

Contact:
Colleen Mumford
Corporate Relations Director
Cabot Microelectronics Corporation    
(630) 499-2600







CABOT MICROELECTRONICS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited and amounts in thousands, except per share amounts)
 
Quarter Ended
 
Six Months Ended
 
June 30, 2019
 
March 31, 2019
 
June 30, 2018
 
June 30, 2019
 
June 30, 2018
Revenue
$
271,882

 
$
265,391

 
$
150,437

 
$
759,051

 
$
433,394

 
 
 
 
 
 
 
 
 
 
Cost of sales
156,492

 
150,571

 
69,737

 
429,508

 
203,635

 
 
 
 
 
 
 
 
 
 
Gross profit
115,390

 
114,820

 
80,700

 
329,543

 
229,759

 
 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Research, development & technical
12,191

 
12,778

 
13,059

 
39,009

 
38,578

 
 
 
 
 
 
 
 
 
 
Selling, general & administrative
50,959

 
50,328

 
25,711

 
162,415

 
75,051

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total operating expenses
63,150

 
63,106

 
38,770

 
201,424

 
113,629

 
 
 
 
 
 
 
 
 
 
Operating income
52,240

 
51,714

 
41,930

 
128,119

 
116,130

 
 
 
 
 
 
 
 
 
 
Interest expense
12,757

 
13,331

 
513

 
32,978

 
2,803

 
 
 
 
 
 
 
 
 
 
Interest income
417

 
568

 
1,141

 
2,004

 
3,248

 
 
 
 
 
 
 
 
 
 
Other income (expense), net
(472
)
 
(1,014
)
 
486

 
(2,897
)
 
113

 
 
 
 
 
 
 
 
 
 
Income before income taxes
39,428

 
37,937

 
43,044

 
94,248

 
116,688

 
 
 
 
 
 
 
 
 
 
Provision for income taxes
20,550

 
10,800

 
7,873

 
34,790

 
54,863

 
 
 
 
 
 
 
 
 
 
Net income
$
18,878

 
$
27,137

 
$
35,171

 
$
59,458

 
$
61,825

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic earnings per share
$
0.65

 
$
0.94

 
$
1.37

 
$
2.09

 
$
2.42

 
 
 
 
 
 
 
 
 
 
Weighted average basic shares outstanding
29,064

 
28,998

 
25,612

 
28,399

 
25,479

 
 
 
 
 
 
 
 
 
 
Diluted earnings per share
$
0.64

 
$
0.92

 
$
1.34

 
$
2.06

 
$
2.35

 
 
 
 
 
 
 
 
 
 
Weighted average diluted shares outstanding
29,568

 
29,479

 
26,319

 
28,924

 
26,222












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

 
$
352,921

Accounts receivable, net
135,235

 
75,886

Inventories, net
145,783

 
71,926

Other current assets
25,296

 
22,048

Total current assets
474,992

 
522,781

 
 
 
 
Property, plant and equipment, net
266,391

 
111,403

Other long-term assets
1,557,694

 
146,789

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
930,370

 

Other long-term liabilities
188,042

 
13,127

Total liabilities
1,273,744

 
114,281

 
 
 
 
Stockholders' equity
1,025,333

 
666,692

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

 
$
780,973












CABOT MICROELECTRONICS CORPORATION
Reconciliation of GAAP Net income to Non-GAAP Adjusted EBITDA
(Unaudited and amounts in thousands, except per share and percentage amounts)
 
Quarter Ended
 
Six Months Ended
 
June 30, 2019
 
June 30, 2018
 
June 30, 2019
 
June 30, 2018
Net income
$
18,878

 
$
35,171

 
$
59,458

 
$
61,825

Interest expense
12,757

 
513

 
32,978

 
2,803

Interest income
(417
)
 
(1,141
)
 
(2,004
)
 
(3,248
)
Income taxes
20,550

 
7,873

 
34,790

 
54,863

Depreciation & amortization
26,587

 
6,410

 
70,476

 
19,548

EBITDA*
$
78,355

 
$
48,826

 
$
195,698

 
$
135,791

Acquisition and integration-related expenses
2,910

 

 
33,108

 

Charge for fair value write-up of acquired inventory sold
42

 

 
14,869

 

Cost related to KMG-Bernuth warehouse fire
$
4,450

 
$

 
$
4,450

 
$

Adjusted EBITDA**
$
85,757

 
$
48,826

 
$
248,125

 
$
135,791

Adjusted EBITDA margin
31.5
%
 
32.5
%
 
32.7
%
 
31.3
%
*  EBITDA represents earnings before interest, taxes, depreciation and amortization.
** Adjusted EBITDA is calculated by excluding items from EBITDA that are believed to be infrequent or not indicative of the company's continuing operating performance.











SUPPLEMENTAL UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following Unaudited Pro Forma Condensed Combined Financial Information is presented to illustrate the estimated effects of the company’s acquisition of KMG (the “Acquisition”), which was consummated on November 15, 2018 (the “Acquisition Date”), based on the historical results of operations of Cabot Microelectronics and KMG. See Note 1, Background and Basis of Presentation, and Note 4, Business Combination, to the consolidated financial statements for additional information on the Acquisition. The following Unaudited Pro Forma Condensed Combined Statements of Income for the three and nine months ended June 30, 2019 and 2018 are based on the historical financial statements of Cabot Microelectronics and KMG after giving effect to the Acquisition, and the assumptions and adjustments described in the accompanying notes to these Unaudited Pro Forma Condensed Combined Statements of Income.
The historical Cabot Microelectronics Consolidated Statements of Income for the three and nine months ended June 30, 2019 and 2018 were derived from the consolidated financial statements included elsewhere in this Form 10-Q. The historical KMG Consolidated Statements of Income for the nine months ended June 30, 2019, as well as the historical KMG Consolidated Statements of Income for the three and nine months ended June 30, 2018 includes information derived from KMG’s books and records. Prior to the Acquisition, KMG was on a July 31st fiscal year end reporting cycle. These pro forma financials include actual KMG’s pre-acquisition results with the months aligned to Cabot Microelectronics’ fiscal periods, and therefore, they do not align with consolidated financial statements included in KMG’s Quarterly Reports on Form 10-Q.
The Unaudited Pro Forma Condensed Combined Statements of Income are presented as if the Acquisition had been consummated on October 1, 2017, the first business day of our 2018 fiscal year, and combine the historical results of Cabot Microelectronics and KMG, which is consistent with internal management reporting, after primarily giving effect to the following assumptions and adjustments:
• Application of the acquisition method of accounting;
• Elimination of transaction costs incurred in connection with the Acquisition;
• Adjustments to reflect the new financing arrangements entered into and legacy financing arrangements retired in connection with the Acquisition;
• The exchange of 0.2000 share(s) of Cabot Microelectronics common stock for each share of KMG common stock; and
• Conformance of accounting policies.
The Unaudited Pro Forma Condensed Combined Financial Information was prepared using the acquisition method of accounting, which requires, among other things, that assets acquired and liabilities assumed in a business combination be recognized at their fair values as of the completion of the acquisition. We utilized estimated fair values at the Acquisition Date to allocate the total consideration exchanged to the net tangible and intangible assets acquired and liabilities assumed. This allocation was initially completed as of November 15, 2018.  The allocation may be adjusted for up to one-year post closing.
The Unaudited Pro Forma Condensed Combined financial information has been prepared on the basis of SEC Regulation S-X Article 11 and is not necessarily indicative of the results of operations that would have been realized had the transactions been completed as of the dates indicated, nor are they meant to be indicative of our anticipated combined future results. In addition, the accompanying Unaudited Pro Forma Condensed Combined Statements of Income do not reflect any additional anticipated synergies, operating efficiencies, cost savings, or any integration costs that may result from the Acquisition.
The historical consolidated financial information has been adjusted in the accompanying Unaudited Pro Forma Condensed Combined Statements of Income to give effect to unaudited pro forma events that are (1) directly attributable to the transaction, (2) factually supportable and (3) are expected to have a continuing impact on the results of operations of the combined company. As a result, under SEC Regulation S-X Article 11, certain non-recurring expenses such as deal costs and compensation expenses related to severance or accelerated stock compensation and certain non-cash costs related to the fair value step-up of inventory are eliminated from pro forma results in the periods presented. Certain recurring historical KMG expenses related to depreciation, amortization, financing costs and costs of sales have been adjusted as if the Acquisition had occurred on October 1, 2017.
In contrast, under the ASC 805 presentation in Note 4, Business Combination, to the consolidated financial statements, these expenses are required to be included in prior year pro forma results.
The Unaudited Pro Forma Condensed Combined Financial Information, including the related notes included herein, should be read in conjunction with Cabot Microelectronics’ Current Report on Form 8-K/A filed on January 30, 2019, as well as our consolidated financial statements included in this Form 10-Q and the historical consolidated financial statements and related notes of Cabot Microelectronics and KMG, which are available to the public at the SEC’s website at www.sec.gov.





CABOT MICROELECTRONICS CORPORATION
Unaudited Pro Forma Condensed Combined Statement of Income
For the Three and Nine Months Ended June 30, 2019 and June 30, 2018
(in thousands, except per share data)
 
Three Months Ended
June 30,
 
Nine Months Ended
June 30,
 
2019
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
Revenue
$
271,882

 
$
272,589

 
 
$
821,029

 
$
784,694

Cost of sales
156,450

 
152,414

 
 
457,372

 
443,059

Gross profit
115,432

 
120,175

 
 
363,657

 
341,635

Operating expenses:
 
 
 
 
 
 
 
 
Research, development and technical
12,191

 
13,059

 
 
39,009

 
38,578

Selling, general and administrative expenses
54,655

 
53,024

 
 
166,189

 
155,695

Total operating expenses
66,846

 
66,083

 
 
205,198

 
194,273

Operating income
48,586

 
54,092

 
 
158,459

 
147,362

Interest expense
12,759

 
13,350

 
 
38,372

 
41,391

Interest income
417

 
1,150

 
 
2,055

 
3,260

Other income (expense), net
(472
)
 
396

 
 
(3,155
)
 
(890
)
Income before income taxes
35,772

 
42,288

 
 
118,987

 
108,341

Provision for income taxes
19,695

 
7,585

 
 
30,049

 
37,462

Net income
$
16,077

 
34,703

 
 
88,938

 
70,879

 
 
 
 
 
 
 
 
 
Basic earnings per share
$
0.55

 
1.20

 
 
3.07

 
2.47

 
 
 
 
 
 
 
 
 
Weighted average basic shares outstanding
29,064

 
28,849

 
 
28,944

 
28,716

 
 
 
 
 
 
 
 
 
Diluted earnings per share
$
0.54

 
1.17

 
 
3.02

 
2.41

 
 
 
 
 
 
 
 
 
Weighted average diluted shares outstanding
29,568

 
29,556

 
 
29,469

 
29,459







CABOT MICROELECTRONICS CORPORATION
Unaudited Pro Forma Condensed Combined Statement of Income
For the Three Months Ended June 30, 2019
(in thousands, except per share data)
 
Cabot Microelectronics
 
 
 
 
 
Three Months Ended June 30, 2019
 
Pro Forma
Adjustments (1)
 
Pro Forma
Combined
 
 
 
 
 
 
Revenue
$
271,882

 
$
 
 
$
271,882

Cost of sales
156,492

 
(42
)
 
156,450

Gross profit
115,390

 
42
 
 
115,432

Operating expenses:
 
 
 
 
 
Research, development and technical
12,191

 
 
 
12,191

Selling, general and administrative expenses
50,959

 
3,696
 
 
54,655

Total operating expenses
63,150

 
3,696
 
 
66,846

Operating income
52,240

 
(3,654
)
 
48,586

Interest expense
12,757

 
2
 
 
12,759

Interest income
417

 
 
 
417

Other income (expense), net
(472
)
 
 
 
(472
)
Income before income taxes
39,428

 
(3,656
)
 
35,772

Provision for income taxes
20,550

 
(855
)
 
19,695

Net income
$
18,878

 
$
(2,801
)
 
$
16,077

 
 
 
 
 
 
Basic earnings per share
$
0.65

 
 
 
$
0.55

 
 
 
 
 
 
Weighted average basic shares outstanding
29,064

 
 
 
29,064

 
 
 
 
 
 
Diluted earnings per share
$
0.64

 
 
 
$
0.54

 
 
 
 
 
 
Weighted average diluted shares outstanding
29,568

 
 
 
29,568

1 Pro forma adjustments are related to non-recurring items directly attributable to the transaction as well as recurring differences related to amortization or financing costs that were included as if the companies were combined as of October 1, 2017.





CABOT MICROELECTRONICS CORPORATION
Unaudited Pro Forma Condensed Combined Statement of Income
For the Nine Months Ended June 30, 2019
(in thousands, except per share data)
 
Cabot Microelectronics (1)
 
KMG Chemicals (2)
 
 
 
 
 
 
 
Nine Months Ended June 30, 2019
 
October 1, 2018 to
November 14, 2018
 
Presentation Reclassification
(3)
 
Pro Forma
Adjustments (4)
 
Pro Forma
Combined
 
 
 
 
 
 
 
 
 
 
Revenue
$
759,051

 
$
61,978

 
$

 
$

 
$
821,029

Cost of sales
429,508

 
36,534

 
4,741

 
(13,411
)
 
457,372

Gross profit
329,543

 
25,444

 
(4,741
)
 
13,411

 
363,657

Operating expenses:
 
 
 
 
 
 
 
 
 
Distribution expenses

 
4,741

 
(4,741
)
 

 

Research, development and technical
39,009

 

 

 

 
39,009

Selling, general and administrative expenses
162,415

 
40,504

 

 
(36,730
)
 
166,189

Amortization of intangibles

 
1,943

 

 
(1,943
)
 

Total operating expenses
201,424

 
47,188

 
(4,741
)
 
(38,673
)
 
205,198

Operating income
128,119

 
(21,744
)
 

 
52,084

 
158,459

Interest expense
32,978

 
8,537

 

 
(3,143
)
 
38,372

Interest income
2,004

 
51

 

 

 
2,055

Derivative fair value gain

 
567

 

 
(567
)
 

Other income (expense), net
(2,897
)
 
(258
)
 

 

 
(3,155
)
Income before income taxes
94,248

 
(29,921
)
 

 
54,660

 
118,987

Provision for income taxes (benefit)
34,790

 
(6,847
)
 

 
2,106

 
30,049

Net income
$
59,458

 
$
(23,074
)
 
$

 
$
52,554

 
$
88,938

 
 
 
 
 
 
 
 
 
 
Basic earnings per share
$
2.09

 
 
 
 
 
 
 
$
3.07

 
 
 
 
 
 
 
 
 
 
Weighted average basic shares outstanding
28,399

 
 
 
 
 
 
 
28,944

 
 
 
 
 
 
 
 
 
 
Diluted earnings per share
$
2.06

 
 
 
 
 
 
 
$
3.02

 
 
 
 
 
 
 
 
 
 
Weighted average diluted shares outstanding
28,924

 
 
 
 
 
 
 
29,469

1 Includes heritage Cabot Microelectronics from October 1, 2018 to June 30, 2019 and heritage KMG from November 15, 2018 to June 30, 2019. On November 15, 2018, the Acquisition was completed and actual combined company results are included.
2 Heritage KMG results that occurred prior to the Acquisition on November 15, 2018.
3 Represents the reclassification of KMG distribution expenses from operating expenses to cost of sales, in order to conform with Cabot Microelectronics’ accounting policies.
4 Certain pro forma adjustments related to depreciation, amortization, financing costs and costs of sales have been made for the October 1, 2018 to June 30, 2019 period assuming that the Acquisition occurred on October 1, 2017. Additionally, nonrecurring pro forma adjustments have been made for deal costs, compensation expenses related to severance or accelerated stock compensation, and the fair value step-up of inventory directly attributable throughout the nine-month period.





CABOT MICROELECTRONICS CORPORATION
Unaudited Pro Forma Condensed Combined Statement of Income
For the Three Months Ended June 30, 2018
(in thousands, except per share data)
 
Cabot Microelectronics
 
KMG Chemicals (1)
 
 
 
 
 
 
 
Three Months Ended June 30, 2018
 
Three Months Ended June 30, 2018
 
Presentation Reclassification
(2)
 
Pro Forma
Adjustments (3)
 
Pro Forma
Combined
 
 
 
 
 
 
 
 
 
 
Revenue
$
150,437

 
$
122,152

 
$

 
$

 
$
272,589

Cost of sales
69,737

 
69,964

 
9,308

 
3,405

 
152,414

Gross profit
80,700

 
52,188

 
(9,308
)
 
(3,405
)
 
120,175

Operating expenses:
 
 
 
 
 
 
 
 
 
Distribution expenses

 
9,308

 
(9,308
)
 

 

Research, development and technical
13,059

 

 

 

 
13,059

Selling, general and administrative expenses
25,711

 
15,043

 

 
12,270

 
53,024

Amortization of intangibles

 
3,863

 

 
(3,863
)
 

Total operating expenses
38,770

 
28,214

 
(9,308
)
 
8,407

 
66,083

Operating income
41,930

 
23,974

 

 
(11,812
)
 
54,092

Interest expense
513

 
4,196

 

 
8,641

 
13,350

Interest income
1,141

 
9

 

 

 
1,150

Loss on the extinguishment of debt

 
194

 

 
(194
)
 

Derivative fair value gain

 
1,450

 

 
(1,450
)
 

Other income (expense), net
486

 
(90
)
 

 

 
396

Income before income taxes
43,044

 
20,953

 

 
(21,709
)
 
42,288

Provision for income taxes (benefit)
7,873

 
4,795

 

 
(5,083
)
 
7,585

Net income
$
35,171

 
$
16,158

 
$

 
$
(16,626
)
 
$
34,703

 
 
 
 
 
 
 
 
 
 
Basic earnings per share
$
1.37

 
$
1.04

 
 
 
 
 
$
1.20

 
 
 
 
 
 
 
 
 
 
Weighted average basic shares outstanding
25,612

 
15,505

 
 
 
 
 
28,849

 
 
 
 
 
 
 
 
 
 
Diluted earnings per share
$
1.34

 
$
1.02

 
 
 
 
 
$
1.17

 
 
 
 
 
 
 
 
 
 
Weighted average diluted shares outstanding
26,319

 
15,905

 
 
 
 
 
29,556

1 Shares outstanding for KMG are from KMG's filed 10-Q for the three months ended April 30, 2018. They are intended for illustrative purposes only and do not impact pro forma EPS calculations at right. Three months ended June 30, 2018 KMG share calculations were not available.
2 Represents the reclassification of KMG distribution expenses from operating expenses to cost of sales, in order to conform with Cabot Microelectronics’ accounting policies.
3 Pro forma adjustments are related to items directly attributable to the transaction, such as recurring differences related to depreciation, amortization or financing costs that were included as if the companies were combined as of October 1, 2017.





CABOT MICROELECTRONICS CORPORATION
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Nine Months Ended June 30, 2018
(in thousands, except per share data)
 
Cabot Microelectronics
 
KMG Chemicals (1)
 
 
 
 
 
 
 
Nine Months Ended June 30, 2018
 
Nine Months Ended June 30, 2018
 
Presentation
Reclassification (2)
 
Pro Forma Adjustments
(3)
 
Pro Forma
 Combined
 
 
 
 
 
 
 
 
 
 
Revenue
$
433,394

 
$
351,300

 
$

 
$

 
$
784,694

Cost of sales
203,635

 
202,182

 
26,983

 
10,259

 
443,059

Gross profit
229,759

 
149,118

 
(26,983
)
 
(10,259
)
 
341,635

Operating expenses:
 
 
 
 
 
 
 
 
 
Distribution expenses

 
26,983

 
(26,983
)
 

 

Research, development and technical
38,578

 

 

 

 
38,578

Selling, general and administrative expenses
75,051

 
43,823

 

 
36,821

 
155,695

Amortization of intangibles

 
10,835

 

 
(10,835
)
 

Total operating expenses
113,629

 
81,641

 
(26,983
)
 
25,986

 
194,273

Operating income
116,130

 
67,477

 

 
(36,245
)
 
147,362

Interest expense
2,803

 
14,733

 

 
23,855

 
41,391

Interest income
3,248

 
12

 

 

 
3,260

Loss on the extinguishment of debt

 
6,503

 

 
(6,503
)
 

Derivative fair value gain

 
5,332

 

 
(5,332
)
 

Other income (expense), net
113

 
(1,003
)
 

 

 
(890
)
Income before income taxes
116,688

 
50,582

 

 
(58,929
)
 
108,341

Provision for income taxes (benefit)
54,863

 
(3,604
)
 

 
(13,797
)
 
37,462

Net income
$
61,825

 
$
54,186

 
$

 
$
(45,132
)
 
$
70,879

 
 
 
 
 
 
 
 
 
 
Basic earnings per share
$
2.42

 
$
3.75

 
 
 
 
 
$
2.47

 
 
 
 
 
 
 
 
 
 
Weighted average basic shares outstanding
25,479

 
14,439

 
 
 
 
 
28,716

 
 
 
 
 
 
 
 
 
 
Diluted earnings per share
$
2.35

 
$
3.66

 
 
 
 
 
$
2.41

 
 
 
 
 
 
 
 
 
 
Weighted average diluted shares outstanding
26,222

 
14,814

 
 
 
 
 
29,459

1 Shares outstanding for KMG are from KMG's filed 10-Q for the nine months ended April 30, 2018. They are intended for illustrative purposes only and do not impact pro forma EPS calculations at right. Nine months ended June 30, 2018 KMG share calculations were not available.
2 Represents the reclassification of KMG distribution expenses from operating expenses to cost of sales, in order to conform with Cabot Microelectronics’ accounting policies.

3 Pro forma adjustments are related to items directly attributable to the transaction, such as recurring differences related to depreciation, amortization, compensation or financing costs that were included as if the companies were combined as of October 1, 2017.







CABOT MICROELECTRONICS CORPORATION
Summary of Pro Forma Adjustments
(in thousands, except per share data)
 
Three Months Ended June 30, 2019
 
Three Months Ended June 30, 2018
 
Nine Months Ended June 30, 2019
 
Nine Months Ended June 30, 2018
Impact to cost of sales:
 
 
 
 
 
 
 
Depreciation and amortization, net(a)
$

 
$
3,405

 
$
1,459

 
$
10,259

Inventory step-up(b)
(42
)
 

 
(14,870
)
 

Impact to cost of sales
$
(42
)
 
$
3,405

 
$
(13,411
)
 
$
10,259

 
 
 
 
 
 
 
 
Impact to operating expense:
 
 
 
 
 
 
 
Depreciation and amortization step up(a)
6,488

 
12,204

 
24,416

 
36,624

Compensation expense(c)

 
66

 
33

 
197

Deal costs(d)
(2,792
)
 

 
(61,179
)
 

Historical KMG amortization in other operating expenses removal(a)

 
(3,863
)
 
(1,943
)
 
(10,835
)
Impact to operating expense
$
3,696

 
$
8,407

 
$
(38,673
)
 
$
25,986

 
 
 
 
 
 
 
 
Impact to other expense:
 
 
 
 
 
 
 
Loss on the extinguishment of debt(e)

 
(194
)
 

 
(6,503
)
Derivative fair value gain(e)

 
1,450

 
567

 
5,332

Impact to other expense
$

 
$
1,256

 
$
567

 
$
(1,171
)
 
 
 
 
 
 
 
 
Impact to interest, net:
 
 
 
 
 
 
 
Interest expense(f)
2

 
8,641

 
(3,143
)
 
23,855

Impact to interest
$
2

 
$
8,641

 
$
(3,143
)
 
$
23,855

Adjustments included in the accompanying Unaudited Pro Forma Condensed Combined Statements of Income are as follows:
(a)
Depreciation and amortization expense are adjusted by removing depreciation and amortization associated with legacy KMG assets and assigning a pro forma expense based on the fair value of the assets on the date of the Acquisition. For periods after the date of the Acquisition, there is no pro forma adjustment for Depreciation and actual booked depreciation is reflected on a straight line basis. Depreciation costs are allocated to costs of sales and selling, general and administrative expenses based on historical KMG allocations. Amortization costs are allocated to costs of sales or selling, general and administrative expense based on the use of the asset, where applicable.
(b)
Cost of sales is impacted by increased inventory balance caused by the non-cash impact of the step up to fair value of the inventory. The incremental costs of sales driven by the inventory step-up during the period have been removed.
(c)
Directly attributable and non-recurring compensation expense related to non-recurring retention expenses and stock award vesting directly attributable to the Acquisition are removed for pro forma purposes. For KMG stock awards that were replaced by Cabot stock awards in connection with the Acquisition, the vesting for on-going service expenses are added as a pro forma adjustment.
(d)
The elimination of non-recurring deal costs incurred in connection with the Acquisition.
(e)
As a result of the Acquisition, there were non-recurring costs incurred by KMG as a result of retiring old debt. The costs associated with retiring the old debt facility and other financial instruments are removed for pro forma purposes. These instruments were retired as a result of the Acquisition and are not included in the pro forma results, which are presented as if the Acquisition had occurred on October 1, 2017.
(f)
Changes in interest expense as a result of financing associated with the Acquisition. The adjustments remove legacy KMG interest costs, including unused revolver fees and adds the costs associated with the new financing facilities as if the Acquisition occurred on October 1, 2017.





We calculated the income tax effect of the pro forma adjustments using a 22.1% and 23.4% tax rate, which represent the weighted average statutory tax rate for nine-month period ended June 30, 2019 and year-ended September 30, 2018, respectively.
Additionally, for the 2018 periods presented, we calculated the unaudited pro forma weighted average number of basic shares outstanding by adding the Cabot Microelectronics weighted average number of basic shares outstanding from the share amounts disclosed in the historical Quarterly Report on Form 10-Q to the amount of shares issued in connection with the Acquisition, as if the shares were held for the entire period.

We calculated the unaudited pro forma weighted average number of diluted shares outstanding by adding the number of shares issued in the Acquisition to the amount disclosed in the historical Cabot Microelectronics Quarterly Report on Form 10-Q.

The basic and diluted EPS calculation takes pro forma net income divided by the applicable number of shares outstanding.







Cabot Microelectronics Corporation
Reconciliation of Pro Forma and Non-GAAP Adjusted Pro Forma Information
The company reports its financial results in accordance with U.S. GAAP.  However, management believes that certain non-GAAP financial measures that reflect the way that management evaluates the business may provide investors with additional information regarding the company’s results, trends and ongoing performance on a comparable basis.  We refer to these measures “Adjusted Pro Forma”, which begin with Pro Forma results that are prepared in accordance with SEC Regulation S-X Article 11 and are included above.  These results are then adjusted for the following additional items:
Removal of amortization of acquisition related intangibles, since management believes that these costs are not indicative of the company’s core operating performance.
Removal of integration expenses, as they are non-recurring in nature.
Adjustment for U.S. Tax Reform, which represents a significant non-recurring item affecting comparability among periods.
Removal of certain costs related to a warehouse fire at KMG-Bernuth.
Reconciliations for these items are provided in the tables below.





CABOT MICROELECTRONICS CORPORATION
Unaudited Reconciliation of Pro Forma Condensed Combined
Statement of Income to Non-GAAP Adjusted Pro Forma Condensed
Combined Statement of Income
For the Three Months Ended June 30, 2019
(in thousands, except per share data)
 
 
 
Non-GAAP Adjustments
 
 
 
Pro Forma
 
Amortization of Acquisition Related Intangibles
 
Integration Expenses
 
U.S Tax Reform
 
Costs Related to KMG-Bernuth Warehouse Fire
 
Adjusted Pro forma
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
$
271,882

 
$

 
$

 
$

 
$
 
 
$
271,882
 
Cost of Sales
156,450

 
(3,470
)
 

 

 
(4,200
)
 
148,780
 
Gross Profit
115,432

 
3,470

 

 
 
 
4,200
 
 
123,102
 
Gross Profit, % of Revenue
42.5
%
 
1.3
%
 

 
%
 
1.5
%
 
45.3
%
 
 
 
 
 
 
 
 
 
 
 
 
Operating Expenses
 
 
 
 
 
 
 
 
 
 
 
Research, development and technical
12,191

 

 

 
 
 
 
 
12,191
 
Selling, general and administrative
54,655

 
(19,942
)
 
(117
)
 
 
 
(250
)
 
34,346
 
Total Operating Expenses
66,846

 
(19,942
)
 
(117
)
 
 
 
(250
)
 
46,537
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Income
48,586

 
23,412

 
117

 
 
 
4,450
 
 
76,565
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest Expense
12,759

 

 

 
 
 
 
 
12,759
 
Interest Income
417

 

 

 
 
 
 
 
417
 
Other Income (Expense), net
(472
)
 

 

 
 
 
 
 
(472
)
Income before income taxes
35,772

 
23,412

 
117

 
 
 
4,450
 
 
63,751
 
 
 
 
 
 
 
 
 
 
 
 
 
Provision for income taxes
19,695

 
5,273

 
26

 
(9,128
)
 
1,002
 
 
16,868
 
Net Income
$
16,077

 
$
18,139

 
$
91

 
$
9,128

 
$
3,448
 
 
$
46,883
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted Earnings per share
$
0.54

 
$
0.62

 
$

 
$
0.31

 
$
0.12
 
 
$
1.59
 
Weighted Average Diluted Shares Outstanding
29,568

 
29,568

 
29,568

 
29,568

 
29,568
 
 
29,568
 
 
 
 
 
 
 
 
 
 
 
 
 
Depreciation & amortization
$
33,076

 
$
(23,412
)
 
$

 
$

 
$
 
 
$
9,664
 
EBITDA
$
81,190

 
$

 
$
117

 
 
 
$
4,450
 
 
$
85,757
 
EBITDA Margin
29.9
%
 
 
 
%
 
 
 
1.6
%
 
31.5
%






CABOT MICROELECTRONICS CORPORATION
Unaudited Reconciliation of Pro Forma Condensed Combined
Statement of Income to Non-GAAP Adjusted Pro Forma Condensed
Combined Statement of Income
For the Nine Months Ended June 30, 2019
(in thousands, except per share data)
 
 
 
Non-GAAP Adjustments
 
 
 
Pro Forma
 
Amortization of Acquisition Related Intangibles
 
Integration Expenses
 
U.S. Tax Reform
 
Costs Related to KMG-Bernuth Warehouse Fire
 
Adjusted Pro forma
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
$
821,029

 
$

 
$

 
 
 
$

 
$
821,029

Cost of Sales
457,372

 
(10,410
)
 

 
 
 
(4,200
)
 
442,762

Gross Profit
363,657

 
10,410

 

 

 
4,200

 
378,267

Gross Profit, % of Revenue
44.3
%
 
1.3
%
 

 

 
0.5
%
 
46.1
%
 
 
 
 
 
 
 
 
 
 
 
 
Operating Expenses
 
 
 
 
 
 
 
 
 
 
 
Research, development and technical
39,009

 

 

 
 
 

 
39,009

Selling, general and administrative
166,189

 
(59,826
)
 
(2,208
)
 
 
 
(250
)
 
103,905

Total Operating Expenses
205,198

 
(59,826
)
 
(2,208
)
 

 
(250
)
 
142,914

 
 
 
 
 
 
 
 
 
 
 
 
Operating Income
158,459

 
70,236

 
2,208

 

 
4,450

 
235,353

 
 
 
 
 
 
 
 
 
 
 
 
Interest Expense
38,372

 

 

 
 
 

 
38,372

Interest Income
2,055

 

 

 
 
 

 
2,055

Other Income (Expense), net
(3,155
)
 

 

 
 
 

 
(3,155
)
Income before income taxes
118,987

 
70,236

 
2,208

 

 
4,450

 
195,881

 
 
 
 
 
 
 
 
 
 
 
 
Provision for income taxes
30,049

 
15,818

 
497

 
(8,869
)
 
1,002

 
38,497

Net Income
$
88,938

 
$
54,418

 
$
1,711

 
$
8,869

 
$
3,448

 
$
157,384

 
 
 
 
 
 
 
 
 
 
 
 
Diluted Earnings per share
$
3.02

 
$
1.84

 
$
0.06

 
$
0.30

 
$
0.12

 
$
5.34

Weighted Average Diluted Shares Outstanding
29,469

 
29,469

 
29,469

 
29,469

 
29,469

 
29,469

 
 
 
 
 
 
 
 
 
 
 
 
Depreciation & amortization
$
100,100

 
$
(70,236
)
 
$

 
 
 
$

 
$
29,864

EBITDA
$
255,404

 
$

 
$
2,208

 
$

 
$
4,450

 
$
262,062

EBITDA Margin
31.1
%
 

 
0.3
%
 
 
 
0.5
%
 
31.9
%






CABOT MICROELECTRONICS CORPORATION
Unaudited Reconciliation of Pro Forma Condensed Combined
Statement of Income to Non-GAAP Adjusted Pro Forma Condensed
Combined Statement of Income
For the Three Months Ended June 30, 2018
(in thousands, except per share data)
 
 
 
Non-GAAP Adjustments
 
 
 
Pro Forma
 
Amortization of Acquisition
Related Intangibles
 
U.S. Tax Reform
 
Adjusted Pro forma
 
 
 
 
 
 
 
 
Revenue
$
272,589

 
$

 
$

 
$
272,589

Cost of Sales
152,414

 
(3,470
)
 

 
148,944

Gross Profit
120,175

 
3,470

 
 
 
123,645

Gross Profit, % of Revenue
44.1
%
 
1.3
%
 
%
 
45.4
%
 
 
 
 
 
 
 
 
Operating Expenses
 
 
 
 
 
 
 
Research, development and technical
13,059

 

 

 
13,059

Selling, general and administrative
53,024

 
(12,380
)
 

 
40,644

Total Operating Expenses
66,083

 
(12,380
)
 

 
53,703

 
 
 
 
 
 
 
 
Operating Income
54,092

 
15,850

 

 
69,942

 
 
 
 
 
 
 
 
Interest Expense
13,350

 

 

 
13,350

Interest Income
1,150

 

 

 
1,150

Other Income (Expense), net
396

 

 

 
396

Income before income taxes
42,288

 
15,850