Cabot Microelectronics Corporation Reports Higher Revenue and Diluted EPS Compared to Prior Year

8/6, 1:00 AM (Source: GlobeNewswire)
  • Revenue of $274.7 Million, 1.0% Higher than Last Year Primarily Due to Growth in CMP Slurries and Wood Treatment
     
  • Diluted EPS of $1.17, 82.8% Higher than Last Year; Adjusted Diluted EPS1 of $1.80, 13.2% Higher than Last Year
     
  • Expecting Total Revenue for the Fourth Quarter of Fiscal 2020 to be Up Low Single Digits Sequentially
     
  • Provides Full Year Fiscal 2020 Outlook

AURORA, Ill., Aug. 05, 2020 (GLOBE NEWSWIRE) -- 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 2020, which ended June 30, 2020.

Key Highlights

Total company revenue increased 1.0% over the prior year driven by stronger demand for CMP slurries and CMP pads, as well as higher wood treatment business revenue, which more than offset lower revenue in pipeline performance products, primarily due to softer industry conditions. Net income for the quarter was $34.5 million. Adjusted EBITDA was $92.0 million in the quarter, up 7.3% compared with the prior year. Year to date, the company generated $204.1 million in cash flow from operations, and had $354.7 million of cash on hand and $1,076.0 million in total debt as of June 30, 2020, which includes the $150 million drawn from the company’s revolving credit facility in the second quarter.

“We are pleased with our results this quarter, which demonstrate the continued strength and resiliency of our businesses as well as our team’s ability to execute, despite the unprecedented business environment.  I am proud of and thankful for the efforts and dedication of our employees globally, who continue to maintain our essential operations and support our customers despite these challenges,” said David Li, President and CEO of Cabot Microelectronics Corporation. “Although near-term outlook remains uncertain across our end markets, we see steady demand from our semiconductor customers as well as improving conditions in our pipeline performance business in the fourth quarter. We expect to continue to drive growth and best in class profitability by leveraging our positions in the most advanced and challenging technologies as well as our deep customer relationships.”

Key Financial Information for the Third Quarter of Fiscal 2020

  • Revenue was $274.7 million, 1.0% higher than the revenue reported in the same quarter last year. Revenue was down 3.3% compared to the prior quarter primarily due to softer oil and gas industry conditions that negatively impacted revenue in pipeline performance products.
     
  • Net income was $34.5 million, 82.9% higher than last year. Adjusted net income was $53.1 million, 13.3% higher compared to adjusted net income in the prior year. Adjusted net income benefited from higher revenue, lower operating expenses, and lower interest expense in the quarter compared to last year.
     
  • Diluted earnings per share (EPS) was $1.17, 82.8% higher than last year.  Adjusted diluted EPS was $1.80, 13.2% higher than adjusted EPS in the same quarter last year.
     
  • Adjusted EBITDA was $92.0 million, up 7.3% compared to adjusted EBITDA in the same quarter last year.  Adjusted EBITDA margin for the quarter was 33.5%, compared to adjusted EBITDA margin of 31.5% in the same quarter last year.

       
Electronic Materials – Revenue was $220.4 million for the quarter, 3.9% higher than revenue in the same quarter last year. Higher revenue for CMP slurries and CMP pads offset slightly lower revenue for electronic chemicals.  Adjusted EBITDA was $76.9 million, or 34.9% of revenue.

Performance Materials – Revenue was $54.4 million for the quarter, 9.0% lower than revenue in the same quarter last year. The decrease was driven by lower demand for pipeline performance products, which more than offset higher revenue in the wood treatment and QED businesses. Adjusted EBITDA was $27.0 million, or 49.6% of revenue.

Guidance for the Fourth Quarter and Full Year of Fiscal 2020

With continued uncertainty as to the ongoing macroeconomic and industry impact of the COVID-19 pandemic, the company currently expects fiscal fourth quarter revenue to be up low single digits compared to the company’s revenue in the third quarter of fiscal 2020. Sequentially, Electronic Materials revenue is expected to be approximately flat to up low single digits and Performance Materials revenue is expected to be up low to mid-single digits.

The company currently expects full fiscal year 2020 adjusted EBITDA to be between $357 million and $362 million. Additional current expectations are provided on slide 8 in the related slide presentation.

[1] Refer to financial tables and “Use of Certain GAAP, non-GAAP Adjusted Financial Information” in the press release below for information about these non-GAAP financial measures and reconciliations of these non-GAAP measures to their most comparable GAAP measure.

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 6.  The conference call will be available via live webcast and replay from the company’s website, www.cabotcmp.com, or by phone at (833) 714-0937.  Callers outside the U.S. may dial (778) 560-2685. The conference code for the call is 1775053.  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 2,000 employees globally. For more information about Cabot Microelectronics Corporation, visit www.cabotcmp.com, or contact Colleen Mumford, Vice President, Communications and Marketing, at 630-499-2600.

USE OF CERTAIN GAAP AND NON-GAAP ADJUSTED FINANCIAL INFORMATION

The company presented the following measures considered as non-GAAP by the SEC: adjusted net income, adjusted diluted earnings per share, adjusted EBITDA, adjusted EBITDA margin, free cash flow, and net debt. Adjusted EBITDA margin is defined as adjusted EBITDA as a percentage of revenue. Adjusted EBITDA is defined as earnings before interest, income taxes, depreciation and amortization, adjusted for certain items that affect comparability from period to period.  These adjustments include items related to the company’s acquisition of KMG Chemicals, Inc.  (“KMG”) (“Acquisition”), such as expenses incurred to complete the Acquisition and related integration, costs of restructuring related to the wood treatment business and related adjustments in 2020, costs related to the KMG-Bernuth warehouse fire net of insurance recovery, costs incurred in 2020 related to the Pandemic net of grants received and, in 2019, impact of fair value adjustments to inventory acquired from KMG.  The non-GAAP adjusted 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 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 Acquisition, such as expenses incurred to complete the Acquisition and related integration, acquisition-related amortization expenses, costs of restructuring related to the wood treatment business and related adjustments in 2020, costs related to the KMG-Bernuth warehouse fire net of insurance recovery, costs incurred in 2020 related to the Pandemic net of grants received, the effects of Tax Cuts and Jobs Act in December 2017 in the United States (“Tax Act”) and the issued final regulations related to the Tax Act, and in 2019, impact of fair value adjustments to inventory acquired from KMG are not indicative of its core operating results and thus presents these certain metrics excluding these effects. The presentation of non-GAAP adjusted 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 are included in the financial statements portion of this press release.

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 industries and markets in which the company participates such as the semiconductor, and oil and gas, industries; the acquisition of, investment in, or collaboration with other entities, including the company’s acquisition of KMG, and the expected benefits and synergies of such acquisitions; divestment or disposition, or cessation of investment in certain, of the company’s businesses; new product introductions; development of new products, technologies and markets; product performance; the financial conditions of the company's customers; the competitive landscape that relates to the company’s business; the company's supply chain; natural disasters; various economic or political factors and international or national events, including related to global public health crises such as the COVID-19 pandemic, and 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 for the fiscal year ended September 30, 2019 and its Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 to be filed by August 10, 2020.  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
Vice President, Communications and Marketing
Cabot Microelectronics Corporation
(630) 499-2600

CABOT MICROELECTRONICS CORPORATION    
CONSOLIDATED STATEMENTS OF INCOME    
(Unaudited and amounts in thousands, except per share amounts)    
            
        
  Quarter Ended Nine Months Ended 
  June 30, 2020 March 31, 2020 June 30, 2019 June 30, 2020 June 30, 2019 
       
            
Revenue $274,727  $284,193  $271,882  $842,063  $759,051  
            
Cost of sales  152,973   163,091   156,492   470,525   429,508  
            
Gross profit  121,754   121,102   115,390   371,538   329,543  
            
Operating expenses:           
            
Research, development and technical  12,165   13,230   12,191   38,206   39,009  
            
Selling, general and administrative  51,847   56,209   50,959   162,495   162,415  
            
Total operating expenses  64,012   69,439   63,150   200,701   201,424  
            
Operating income  57,742   51,663   52,240   170,837   128,119  
            
Interest expense  10,406   10,753   12,757   33,079   32,978  
            
Interest income  131   143   417   589   2,004  
            
Other income (expense), net  (201)  (1,010)  (472)  (1,608)  (2,897) 
            
Income before income taxes  47,266   40,043   39,428   136,739   94,248  
            
Provision for income taxes  12,741   7,144   20,550   30,766   34,790  
            
Net income $34,525  $32,899  $18,878  $105,973  $59,458  
            
            
Basic earnings per share $1.19  $1.12  $0.65  $3.63  $2.09  
            
Diluted earnings per share $1.17  $1.11  $0.64  $3.58  $2.06  
            
Weighted average basic shares outstanding  29,079   29,287   29,064   29,157   28,399  
            
Weighted average diluted shares outstanding 29,456   29,725   29,568   29,603   28,924  
            

 

CABOT MICROELECTRONICS CORPORATION     
CONSOLIDATED CONDENSED BALANCE SHEETS     
(Unaudited and amounts in thousands)       
           
       June 30, 2020 September 30, 2019 
         
   ASSETS:       
           
Current assets:       
Cash and cash equivalents   $354,708 $188,495 
Accounts receivable, net    137,736  146,113 
Inventories    161,805  145,278 
Prepaid expenses and other current assets    24,623  28,670 
Total current assets    678,872  508,556 
           
Property, plant and equipment, net    356,022  276,818 
Other long-term assets    1,450,479  1,476,392 
Total assets   $2,485,373 $2,261,766 
           
           
   LIABILITIES AND STOCKHOLDERS' EQUITY:      
           
Current liabilities:       
Accounts payable   $50,211 $54,529 
Short-term debt    150,000  - 
Current portion of long-term debt    13,313  13,313 
Accrued expenses, income taxes payable and other current liabilities  126,399  103,618 
Total current liabilities    339,923  171,460 
           
Long-term debt, net of current portion    912,691  928,463 
Other long-term liabilities    207,725  181,466 
Total liabilities    1,460,339  1,281,389 
           
Stockholders' equity    1,025,034  980,377 
Total liabilities and stockholders' equity   $2,485,373 $2,261,766 
           

 

 CABOT MICROELECTRONICS CORPORATION      
 Unaudited Reconciliation of Certain GAAP Financial Measures to Certain Non-GAAP Financial Measures   
 (Unaudited and amounts in thousands, except per share and percentage amounts)     
        
        
 Reconciliation of GAAP Net Income to Non-GAAP Adjusted Net Income  
   Three Months Ended  
   June 30, 2020 June 30, 2019  
 GAAP Net income $34,525  $18,878   
        
 Amortization of acquisition related intangibles  20,786   16,923   
 Acquisition and integration-related expenses  2,735   2,910   
 Costs related to KMG-Bernuth warehouse fire, net of insurance recovery  622   4,450   
 Net costs related to restructuring of wood treatment business1  (293)  -   
 Costs related to COVID -19 (Pandemic), net of grants received  112   -   
 Charges for fair value write-up of acquired inventory sold  -   42   
 U.S. tax reform  18   9,128   
 Tax effect on adjustments to net income2  (5,356)  (5,431)  
 Adjusted Net income $53,149  $46,900   
        
 1 Represents adjustments to previously recorded severance liability related to the wood treatment business.   
 2 Tax effect on the adjustments was calculated using the U.S. Federal and state blended tax rate for the respective periods as the related adjustments are mainly U.S. driven.  
        
 Reconciliation of GAAP Diluted Earnings Per Share to Non-GAAP Adjusted Diluted Earnings Per Share  
        
   Three Months Ended  
   June 30, 2020 June 30, 2019  
 GAAP Diluted earnings per share $1.17  $0.64   
 Adjustments (net of tax)3 :      
 Amortization of acquisition related intangibles  0.55   0.44   
 Acquisition and integration-related expenses  0.07   0.08   
 Costs related to KMG-Bernuth warehouse fire, net of insurance recovery  0.02   0.12   
 Net costs related to restructuring of wood treatment business1  (0.01)  -   
 U.S. tax reform  -   0.31   
 Adjusted Diluted earnings per share $1.80  $1.59   
        
 3 Tax effect on the adjustments was calculated using the U.S. Federal and state blended tax rate for the respective periods as the related adjustments are mainly U.S. driven.  
        
 Reconciliation of GAAP Revenue to Non-GAAP Adjusted Gross Profit and Gross Margin 
   Three Months Ended 
   June 30, 2020
  June 30, 2019
   
        
 GAAP revenue $274,727  $271,882   
 Cost of sales  152,973   156,492   
 Gross profit and gross margin $121,754 44.3%$115,390 42.4% 
 Adjustments:      
 Amortization of acquisition related intangibles  3,347   3,469   
 Costs related to KMG-Bernuth warehouse fire, net of insurance recovery  622   4,200   
 Net costs related to restructuring of wood treatment business1  (293)  -   
 Costs related to the Pandemic, net of grants received  198   -   
 Charges for fair value write-up of acquired inventory sold  -   42   
 Adjusted gross profit and gross margin $125,628 45.7%$123,101 45.3% 
        
 Reconciliation of GAAP Operating expenses to Non-GAAP Adjusted Operating expenses 
   Three Months Ended 
   June 30, 2020
  June 30, 2019
   
        
 GAAP Research, development and technical $12,165  $12,191   
 GAAP Selling, general, and administrative  51,847   50,959   
 Operating expenses $64,012  $63,150   
 Adjustments4 :      
 Amortization of acquisition related intangibles  (17,439)  (13,454)  
 Acquisition and integration-related expenses  (2,735)  (2,910)  
 Costs related to KMG-Bernuth warehouse fire, net of insurance recovery  -   (250)  
 Costs related to the Pandemic, net of grants received  86   -   
 Adjusted operating expenses $43,924  $46,536   
        
 4 All the adjustments are related to the Selling, general and administrative expenses.    
        
 Reconciliation of GAAP Net Income to Non-GAAP Adjusted EBITDA and EBITDA Margin 
        
   Three Months Ended 
   June 30, 2020
  June 30, 2019
   
        
 GAAP net income $34,525  $18,878   
 Interest expense  10,406   12,757   
 Interest income  (131)  (417)  
 Provision for income taxes  12,741   20,550   
 Depreciation & amortization  31,324   26,587   
 EBITDA and EBITDA margin5 $88,865 32.3%$78,355 28.8% 
 Adjustments (pre-tax):      
 Acquisition and integration-related expenses  2,735   2,910   
 Costs related to KMG-Bernuth warehouse fire, net of insurance recovery  622   4,450   
 Net costs related to restructuring of wood treatment business1  (293)  -   
 Costs related to the Pandemic, net of grants received  112   -   
 Charges for fair value write-up of acquired inventory sold  -   42   
 Adjusted EBITDA and EBITDA margin6 $92,041 33.5%$85,757 31.5% 
        
 5 EBITDA represents earnings before interest, taxes, depreciation and amortization.     
 6 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. 
        
        
 Fiscal Year 2020 Guidance Reconciliation7  
   Fiscal Year 2020 Low
  Fiscal Year 2020 High  
        
 Net income $134,000  $138,100   
 Interest expense, net8  43,500   43,500   
 Provision for income taxes8  38,000   38,900   
 Depreciation8  42,500   42,500   
 Amortization  90,000   90,000   
 EBITDA (Consolidated) $348,000  $353,000   
 Acquisition and integration-related expenses  7,800   7,800   
 Costs related to KMG-Bernuth warehouse fire, net of insurance recovery  1,200   1,200   
 Net costs related to restructuring of wood treatment business1  (300)  (300)  
 Costs related to the Pandemic, net of grants received  300   300   
 Adjusted EBITDA Guidance (Consolidated) $357,000  $362,000   
        
 7 This is a reconciliation of our indicated full year net income to our adjusted EBITDA. The amounts above may not reflect certain future charges costs and/or gains that are inherently difficult to predict and estimate due to their unknown timing, effect and/or significance, including impairment charges associated with the anticipated closure of our wood treatment business.   
 8 Amounts represent the mid-point of the current financial guidance provided on August 5, 2020.  
        
 Reconciliation of Cash Flow From Operations to Free Cash Flow  
        
   Nine months ended  
   June 30, 2020 June 30, 2019  
        
 Net cash provided by operating activities $204,083  $117,045   
 Less: Capital expenditures  107,015   32,691   
 Free cash flow $97,068  $84,354   
        
 Net cash used in investing activities  ($105,428)  ($1,209,708)  
        
 Net cash provided by financing activities $67,201  $908,678   
        
 Reconciliation of GAAP Debt to Net Debt  
      
   June 30, 2020 September 30, 2019  
        
 Total short-term and long-term debt $1,076,004  $941,776   
 Less: Cash and cash equivalents  354,708   188,495   
 Total net debt $721,296  $753,281   
        

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