The following “Management’s Discussion and Analysis of Financial Condition and
Results of Operations,” as well as disclosures included elsewhere in this Report
on Form 10-Q, include “forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995 (“the Act”). The Act provides a
safe harbor for forward-looking statements to encourage companies to provide
prospective information about themselves so long as they identify these
statements as forward-looking and provide meaningful cautionary statements
identifying important factors that could cause actual results to differ from the
projected results. All statements other than statements of historical fact we
make in this Report on Form 10-Q are forward-looking and 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, and the
expected benefits and synergies of such transactions; 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 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 the Company;
the Company’s management; foreign exchange fluctuation; the Company’s current or
future tax rate, including the effects of changes to tax laws in the
jurisdictions in which the Company operates; cybersecurity threats and
vulnerabilities; 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 CMC’s beliefs, plans and
expectations, are forward-looking statements. Such statements are based on
current expectations of CMC’s 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 CMC’s filings with the SEC,
including the risk factors contained in our Annual Report on Form 10-K for the
fiscal year ended September 30, 2020 and this Report on Form 10-Q. Except as
required by law, CMC undertakes no obligation to update forward-looking
statements made by it to reflect new information, subsequent events or
circumstances. The section entitled “Risk Factors” describes some, but not all,
the factors that could cause these differences.
The following discussion and analysis should be read in conjunction with our
Annual Report on Form 10-K for the fiscal year ended September 30, 2020,
including the Consolidated Financial Statements and related notes thereto.
RECENT EVENTS
On April 1, 2021, CMC acquired ITS, which designs and produces high-performance
consumables used to optimize critical semiconductor testing processes, thus
expanding the product offerings that are part of our Electronic Materials
business segment. The Consolidated Financial Statements included in this Report
on Form 10-Q include the financial results of ITS from the Acquisition Date. See
Note 4 of “Notes to the Consolidated Financial Statements” of this Report on
Form 10-Q for a discussion of the Acquisition.
THIRD QUARTER OF FISCAL 2021 OVERVIEW
While the Pandemic continues to cause global macroeconomic uncertainty worldwide
and in the countries and locations in which we and our customers and suppliers
operate, our business in our fiscal third quarter of 2021 showed continued
resiliency overall, as well as increased demand in each of our business segments
over the prior fiscal quarter. In our Electronic Materials business segment,
which represents approximately 80% of our revenue, we continue to experience
solid demand from our semiconductor customers, as certain sectors such as cloud,
PCs and servers continued to show strength, driven by the ongoing economic
recovery from the Pandemic, particularly in the industrial and automotive
sectors. In addition, during the third fiscal quarter our Performance Materials
business segment showed improved demand in the PIM business unit, as the oil and
gas sectors showed recovery, as well as resilience in our wood treatment and QED
business units. Throughout the Pandemic, our primary focus has been and
continues to be on the health and well-being of our employees and the ongoing
operation of our facilities worldwide according to our business continuity
plans, which we refine on an ongoing basis.
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To date, we have not seen a meaningful impact from the Pandemic on our ability
to manufacture and deliver products to our customers, but, although improving,
the Pandemic has negatively impacted some of the industries we serve, primarily
the oil and gas industry, and as a result we took an impairment charge in our
PIM business unit in our second fiscal quarter. However, as the industry
recovers, we expect to drive growth in our PIM business, as we saw in our third
fiscal quarter.
The extent to which the Pandemic may further impact our business, operations,
results of operations and financial condition going forward is uncertain and
difficult to estimate, and depends on numerous evolving and potentially unknown
factors.
Third Quarter Key Financial Results
Our consolidated results of operations are as follows:
Dollars in thousands Three Months Ended June 30,
2021 2020
Revenue $ 309,516$ 274,727
Net income $ 33,642$ 34,525
Adjusted EBITDA $ 96,003$ 92,041
Adjusted EBITDA Margin 31.0 % 33.5 %
Our third quarter of 2021 consolidated revenue benefited from stronger demand
for the Company’s CMP slurry products, selected price increases for the
Company’s electronic chemicals products, and revenue from the Acquisition, which
closed on April 1, 2021. Consolidated net income declined in the current year
primarily due to the wood treatment impairment charge and higher Selling,
general and administrative expenses, offset by higher gross profit as a result
of increased revenue. Adjusted EBITDA margin decreased due to inflationary
pressure on raw materials, and higher freight and fixed costs.
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RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the changes in
balances on the Consolidated Statement of Income (Loss):
Three Months Ended June 30, Nine Months Ended June 30,
(Dollars In thousands) 2021 2020 $ Change % Change 2021 2020 $ Change % Change
Revenue $ 309,516$ 274,727$ 34,789 12.7 % $ 887,907$ 842,063$ 45,844 5.4 %
Cost of sales 180,320 152,973 27,347 17.9 % 512,061 470,525 41,536 8.8 %
Gross profit 129,196 121,754 7,442 6.1 % 375,846 371,538 4,308 1.2 %
Research, development and
technical 13,654 12,165 1,489 12.2 % 39,007 38,206 801 2.1 %
Selling, general and
administrative 56,242 51,847 4,395 8.5 % 170,700 162,495 8,205 5.0 %
Impairment charges 3,090 – 3,090 218,658 – 218,658
Total operating expenses 72,986 64,012 8,974 14.0 % 428,365 200,701 227,664
113.4 %
Operating income (loss) 56,210 57,742 (1,532) (2.7 %) (52,519) 170,837 (223,356) (130.7 %)
Interest expense 9,551 10,406 (855) (8.2 %) 28,667 33,079 (4,412) (13.3 %)
Interest income 11 131 (120) (91.6 %) 47 589 (542) (92.0 %)
Other (expense) income, net (427) (201) (226) (112.4 %) 541 (1,608) 2,149 133.6 %
Income (loss) before income
taxes 46,243 47,266 (1,023) (2.2 %) (80,598) 136,739 (217,337) (158.9 %)
Provision for income taxes 12,601 12,741 (140) (1.1 %) 4,038 30,766 (26,728) (86.9 %)
Net income (loss) $ 33,642$ 34,525$ (883) (2.6 %) $ (84,636)$ 105,973$ (190,609) (179.9 %)
Most of CMC’s foreign operations maintain their accounting records in their
local currencies. As a result, period to period comparability of results of
operations is affected by fluctuations in exchange rates. The impact on
comparability is not material in any given period.
REVENUE
Revenue was $309.5 million for the three months ended June 30, 2021, which
represented an increase of 12.7%, or $34.8 million, from the three months ended
June 30, 2020, primarily due to stronger demand for the Company’s CMP slurry
products, selected price increases for the Company’s electronic chemicals
products, and revenue from the Acquisition, which closed on April 1, 2021.
Revenue was $887.9 million for the nine months ended June 30, 2021, which
represented an increase of 5.4%, or $45.8 million, from the nine months ended
June 30, 2020, primarily due to stronger demand for the Company’s CMP slurry
products, selected price increases for the Company’s electronic chemicals
products and wood treatment products, and revenue from the Acquisition, which
closed on April 1, 2021. This was partially offset by lower demand for PIM
products due to the impact of the Pandemic.
COST OF SALES
Cost of sales was $180.3 million for the three months ended June 30, 2021, which
represented an increase of 17.9%, or $27.3 million, from the three months ended
June 30, 2020. Cost of sales was $512.1 million for the nine months ended June
30, 2021, which represented an increase of 8.8%, or $41.5 million, from the nine
months ended June 30, 2020. The increases were primarily due to increases in
revenue, inflationary raw material costs, and higher freight and manufacturing
fixed costs.
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GROSS MARGIN
Our gross margin was 41.7% for the three months ended June 30, 2021, compared to
44.3% for the three months ended June 30, 2020. Our gross margin was 42.3% for
the nine months ended June 30, 2021, compared to 44.1% for the nine months ended
June 30, 2020. The decrease was primarily due to inflationary raw material
costs, and higher freight and manufacturing fixed costs.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses were $56.2 million for the three
months ended June 30, 2021, which represented an increase of 8.5%, or $4.4
million, from the three months ended June 30, 2020. This was primarily due to a
$1.3 million increase in staffing related expenses.
Selling, general and administrative expenses were $170.7 million for the nine
months ended June 30, 2021, which represented an increase of 5.0%, or $8.2
million, from the nine months ended June 30, 2020. This was primarily due to a
$4.9 million increase in professional fees, a $3.3 million increase in
share-based compensation expense, a $2.2 million increase in staffing related
expenses, a $1.7 million increase in depreciation expense, and a $0.9 million
increase in IT expense. This was partially offset by a $3.7 million decrease in
amortization expense, a $2.0 million decrease in STIP expense, and a $2.0
million decrease in travel expenses.
IMPAIRMENT CHARGES
Impairment charges were $3.1 million for the three months ended June 30, 2021
due to impairment of goodwill in the wood treatment business as a result of the
previously announced strategic decision to exit this business. Impairment
charges were $218.7 million for the nine months ended June 30, 2021 due to
impairment of goodwill in the PIM reporting unit, as well as the impairment of
long-lived assets, intangible assets and goodwill of the wood treatment
business. There were no impairment charges during the three and nine months
ended June 30, 2020. See Notes 7 and 8 of “Notes to the Consolidated Financial
Statements” of this Report on Form 10-Q for additional discussion.
INTEREST EXPENSE
Interest expense was $9.6 million for the three months ended June 30, 2021,
which represented a decrease of $0.9 million from the three months ended June
30, 2020. Interest expense was $28.7 million for the nine months ended June 30,
2021, which represented a decrease of $4.4 million from the nine months ended
June 30, 2020. The decreases were primarily due to a decline in the LIBOR rate
for the unhedged portion of the Term Loan Facility and a lower outstanding term
loan balance due to repayments.
OTHER (EXPENSE) INCOME, NET
Other expense was $0.4 million for the three months ended June 30, 2021,
compared to Other expense of $0.2 million for the three months ended June 30,
2020. Other income was $0.5 million for the nine months ended June 30, 2021,
compared to Other expense of $1.6 million for the nine months ended June 30,
2020. The changes were primarily due to foreign currency transaction gains and
losses.
PROVISION FOR INCOME TAXES
The Company recorded income tax expense of $12.6 million for the three months
ended June 30, 2021, compared to $12.7 million for the three months ended June
30, 2020. The Company’s effective income tax rate for the third quarter of
fiscal 2021 was 27.2%, compared to 27.0% in the same quarter last year. The
change in our effective tax rate is primarily driven by the unfavorable impact
of the wood treatment impairment and foreign tax law changes, partially offset
by higher tax benefit related to foreign derived intangible income.
The Company recorded income tax expense of $4.0 million for the nine months
ended June 30, 2021, compared to $30.8 million for the nine months ended June
30, 2020. The Company’s effective income tax rate was (5.0)% for the nine months
ended June 30, 2021, compared to 22.5% for the nine months ended June 30, 2020.
The change in our effective income tax rate is primarily driven by the
unfavorable impact of the impairment related to the PIM and wood treatment
reporting units, partially offset by higher tax benefit related to foreign
derived intangible income.
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NET INCOME (LOSS)
Net income was $33.6 million for the three months ended June 30, 2021, which
represented a decrease of 2.6%, or $0.9 million from the three months ended June
30, 2020. The change was primarily due to the wood treatment impairment charge
and higher Selling, general and administrative expenses, offset by higher gross
profit as a result of increased revenue.
Net loss was $84.6 million for the nine months ended June 30, 2021, compared to
Net income of $106.0 million for the nine months ended June 30, 2020. The
change was primarily due to the PIM and wood treatment impairment charges and
higher Selling, general and administrative expenses, offset by higher gross
profit as a result of increased revenue.
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SEGMENT ANALYSIS
The segment data should be read in conjunction with our unaudited Consolidated
Financial Statements and related notes included in Part 1, Item 1 of this Report
on Form 10-Q.
Dollars in thousands Three Months Ended June 30, Nine Months Ended June 30,
2021 2020 $ Change % Change 2021 2020 $ Change % Change
Segment Revenue:
Electronic Materials $ 251,069$ 220,367$ 30,702 13.9 % $ 730,414$ 659,997$ 70,417 10.7 %
Performance Materials 58,447 54,360 4,087 7.5 % 157,493 182,066 (24,573) (13.5 %)
Total Revenue $ 309,516$ 274,727$ 34,789 12.7 % $ 887,907$ 842,063$ 45,844 5.4 %
Adjusted EBITDA:
Electronic Materials $ 82,521$ 76,855$ 5,666 7.4 % $ 244,592$ 227,662$ 16,930 7.4 %
Performance Materials 25,465 26,959 (1,494) (5.5 %) 67,190 84,370 (17,180) (20.4 %)
Unallocated corporate expenses (11,983) (11,773) (210) (1.8 %) (39,419) (38,226) (1,193) (3.1 %)
Consolidated Adjusted EBITDA $ 96,003$ 92,041$ 3,962
4.3 % $ 272,363$ 273,806$ (1,443) (0.5 %)
Adjusted EBITDA margin:
Electronic Materials 32.9 % 34.9 % -200 bpts 33.5 % 34.5 % -100 bpts
Performance Materials 43.6 % 49.6 % -600 bpts 42.7 % 46.3 % -360 bpts
ELECTRONIC MATERIALS
For the three months ended June 30, 2021 compared to the three months ended June
30, 2020, the $30.7 million increase in Electronic Materials revenue was
primarily due to stronger demand for the Company’s CMP slurry products, selected
price increases for the Company’s electronic chemicals products, and revenue
from the Acquisition, which closed on April 1, 2021. The $5.7 million increase
in Electronic Materials adjusted EBITDA was primarily driven by the EBITDA
associated with the increase in revenue, partially offset by higher fixed costs.
The 200 bpts decrease in Electronic Materials adjusted EBITDA margin was
primarily driven by inflationary raw material costs, higher freight and fixed
costs, and higher expenses to support current operations and future growth
opportunities.
For the nine months ended June 30, 2021 compared to the nine months ended June
30, 2020, the $70.4 million increase in Electronic Materials revenue was driven
by increased demand for the Company’s CMP slurry and CMP pads products, selected
price increases for the Company’s electronic chemicals products, and revenue
from the Acquisition, which closed on April 1, 2021. The $16.9 million increase
in Electronic Materials adjusted EBITDA was driven by the EBITDA associated with
the increase in revenue, partially offset by higher fixed manufacturing costs.
The 100 bpts decrease in Electronic Materials adjusted EBITDA margin was
primarily due to inflationary raw material costs, higher freight and fixed
costs, and higher expenses to support current operations and future growth
opportunities, partially offset by favorable product mix.
PERFORMANCE MATERIALS
For the three months ended June 30, 2021 compared to the three months ended June
30, 2020, the $4.1 million increase in Performance Materials revenue was
primarily driven by increased demand for the Company’s PIM and QED products. The
$1.5 million decrease in adjusted EBITDA was primarily driven by inflationary
raw material costs and higher fixed costs, partially offset by the EBITDA
associated with the increase in revenue. The 600 bpts decrease in adjusted
EBITDA margin was primarily driven by inflationary raw material costs and higher
costs in PIM related to underutilization of the previously completed plant
expansion.
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For the nine months ended June 30, 2021 compared to the nine months ended June
30, 2020, Performance Materials revenue decreased $24.6 million and adjusted
EBITDA decreased $17.2 million. These decreases were driven by lower demand for
the Company’s PIM products due to the Pandemic, partially offset by higher
selling prices for wood treatment products. The 360 bpts decrease in adjusted
EBITDA margin was primarily driven by inflationary raw material costs and higher
costs in PIM related to underutilization of the previously completed plant
expansion, partially offset by higher selling prices for wood treatment
products.
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USE OF CERTAIN GAAP AND NON-GAAP FINANCIAL INFORMATION
We provide certain non-GAAP financial measures, such as adjusted EBITDA and
adjusted EBITDA margin, in addition to reported GAAP results because we believe
that analysis of our financial performance is enhanced by an understanding of
these non-GAAP financial measures. We exclude certain items from earnings when
presenting adjusted EBITDA because we believe they will be incurred infrequently
and/or are otherwise not indicative of the Company’s regular, ongoing operating
performance. Accordingly, we believe that they aid in evaluating the underlying
operational performance of our business, and facilitate comparisons between
periods. In addition, adjusted EBITDA is used as one of the performance goals of
our fiscal 2021 STIP. A similar adjusted EBITDA calculation is also used by our
lenders for a key debt compliance ratio.
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
acquisitions, such as Acquisition and integration-related expenses, impairment
charges, costs of restructuring and related adjustments related to the wood
treatment business, costs related to the KMG-Bernuth warehouse fire net of
insurance recovery, and costs related to the Pandemic net of grants received.
The non-GAAP financial measures provided are a supplement to, and not a
substitute for, the Company’s financial results presented in accordance with
U.S. GAAP. Management strongly encourages investors to review the Company’s
Consolidated Financial Statements in their entirety and to not rely on any
single financial measure. A reconciliation table of GAAP to non-GAAP financial
measures is below.
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 SEC Regulation
G and Item 10(e) of Regulation S-K.
RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA
In thousands Three Months Ended June 30, Nine Months Ended June 30,
2021 2020 2021 2020
Net income (loss) $ 33,642$ 34,525$ (84,636)$ 105,973
Interest expense 9,551 10,406 28,667 33,079
Interest income (11) (131) (47) (589)
Income taxes 12,601 12,741 4,038 30,766
Depreciation and amortization 33,927 31,324 98,107 95,516
EBITDA 89,710 88,865 46,129 264,745
Impairment charges 3,090 – 218,658 –
Acquisition and integration-related expenses 3,353 2,735 7,889 7,785
Costs related to the Pandemic, net of grants received (200) 112 641 349
Net costs related to restructuring of the wood
treatment business 24 (293) 96 (293)
Costs related to KMG-Bernuth warehouse fire, net of
insurance recovery 26 622 (1,050) 1,220
Adjusted EBITDA $ 96,003$ 92,041$ 272,363$ 273,806
In thousands Three Months Ended June 30, Nine Months Ended June 30,
2021 2020 2021 2020
Adjusted EBITDA:
Electronic Materials $ 82,521$ 76,855$ 244,592$ 227,662
Performance Materials 25,465 26,959 67,190 84,370
Unallocated corporate expenses (11,983) (11,773) (39,419) (38,226)
Consolidated Adjusted EBITDA $ 96,003$ 92,041$ 272,363$ 273,806
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LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2021, we had $228.5 million of cash and cash equivalents compared
with $257.4 million as of September 30, 2020. On June 30, 2021, $133.7 million
of cash and cash equivalents was held in foreign subsidiaries. Our total
liquidity as of June 30, 2021 was $428.5 million compared to $457.4 million as
of September 30, 2020 (including $200.0 million of borrowing availability under
our Revolving Credit Facility in both periods, which includes our letter of
credit sub-facility). The decrease in liquidity reflects the $126.1 million cash
used for the Acquisition, additions of property, plant and equipment, the
repurchases of our common stock and payments of quarterly cash dividends,
partially offset by the cash flow provided by operating activities. On July 2,
2021, the Company amended the Amended Credit Agreement to increase the aggregate
amount of the Revolving Credit Facility from $200.0 million to $350.0 million
and to extend the maturity to July 2026. The interest rates and other material
terms applicable to the Amended Credit Agreement are unchanged.
Total debt, consisting of principal outstanding on our Term Loan Facility,
amounted to $915.6 million ($928.4 million in aggregate principal amount less
$12.8 million of debt issuance costs) as of June 30, 2021 and $921.4 million
($936.4 million in aggregate principal amount less $14.9 million of debt
issuance costs) as of September 30, 2020. During the three months ended June 30,
2021 there were no borrowings under our Revolving Credit Facility and no balance
was outstanding as of June 30, 2021.
The Revolving Credit Facility requires that the Company maintain a maximum first
lien secured net leverage ratio, as defined in the Amended Credit Agreement, of
4.00 to 1.00 as of the last day of each fiscal quarter. As of June 30, 2021, our
maximum first lien secured net leverage ratio was 1.85 to 1.00. Additionally,
the Amended Credit Agreement contains certain affirmative and negative covenants
that limit the ability of the Company, among other things and subject to certain
significant exceptions, to incur debt or liens, make investments, enter into
certain mergers, consolidations, asset sales and acquisitions, pay dividends and
make other restricted payments and enter into transactions with affiliates. We
are in compliance with these covenants as of June 30, 2021 and we expect to
remain in compliance with our debt covenants during fiscal 2021 and beyond.
In March 2021, our Board of Directors authorized an increase in the amount
available under our share repurchase program to $150.0 million. During the third
quarter of fiscal 2021, we repurchased 35 thousand shares under this program,
and $144.8 million authorization remained at the end of the quarter. The timing,
manner, price and amounts of repurchases are determined at the Company’s
discretion, and the share repurchase program may be suspended, terminated or
modified at any time for any reason. The repurchase program does not obligate
the Company to acquire any specific number of shares. To date, we have funded
share purchases under our share repurchase program from our available cash on
hand, and anticipate we will continue to do so.
Our Board of Directors authorized the initiation of our regular quarterly cash
dividend program in January 2016, and since that time has increased the dividend
to its current level of $0.46 per share. The declaration and payment of future
dividends is subject to the discretion and determination of the Board of
Directors and management, based on a variety of factors, and the program may be
suspended, terminated or modified at any time for any reason.
We believe that cash on hand, cash available from future operations, and
available borrowing capacity under our Amended Credit Agreement will be
sufficient to fund our operations, expected capital expenditures, dividend
payments, and share repurchases for at least the next twelve months. However,
ongoing Pandemic-created uncertainty in worldwide economic conditions and in
those of the industries in which we participate remains, and whether with
respect to the impact of the Pandemic or in pursuit of corporate development or
other initiatives, we may need to raise additional funds in the future through
equity or debt financing, or other arrangements. Depending on future conditions
in the capital and credit markets, we could encounter difficulty securing
additional financing in the type or amount necessary to pursue these objectives.
Operating Activities
We generated $179.8 million in cash flows from operating activities in the first
nine months of fiscal 2021, compared to $204.1 million in the first nine months
of fiscal 2020. The decrease in operating cash flows was due to $32.0 million of
changes in operating assets and liabilities, partially offset by a $7.7 million
increase of Net income adjusted for non-cash reconciling items.
Investing Activities
In the first nine months of fiscal 2021, net cash used in investing activities
was $155.1 million, compared to $105.4 million in the first nine months of
fiscal 2020. The increase in net cash used for investing activities was driven
by the $126.1 million net cash used for the Acquisition, partially offset by a
decrease in capital expenditures of $75.4 million, which was driven by the plant
expansion in the first nine months of fiscal 2020 in our Performance Materials
segment.
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Financing Activities
In the first nine months of fiscal 2021, cash flows used in financing activities
were $55.1 million, compared to cash flows provided by financing activities of
$67.2 million in the first nine months of fiscal 2020. This was mainly driven by
the temporary draw on the Company’s revolving credit facility for $150.0 million
during the first nine months of fiscal 2020 as a precautionary measure to
preserve financial flexibility at the onset of the Pandemic, which we then
repaid before the end of fiscal 2020. This was partially offset by cash paid for
repurchases of common stock under the Share Repurchase Program of $15.2 million
in the first nine months of fiscal 2021 compared to $35.0 million in the first
nine months of fiscal 2020, as well as repayments under the Term Loan Facility
of $8.0 million in the first nine months of fiscal 2021 compared to
$18.0 million in the first nine months of fiscal 2020.
OFF-BALANCE SHEET ARRANGEMENTS
At June 30, 2021 and September 30, 2020, we did not have any unconsolidated
entities or financial partnerships.
CONTRACTUAL OBLIGATIONS
There have been no material changes to the Company’s contractual obligations
during fiscal 2021, except as discussed below.
We have been operating under a multi-year supply agreement for the purchase of
certain raw materials, which runs through December 2022. As of June 30, 2021,
purchase obligations include an aggregate amount of $12.9 million of contractual
commitments related to this agreement. In addition, we have a purchase
commitment of $11.3 million through December 2021 for non-water based carrier
fluid.
Refer to Item 7 of Part II of our Annual Report on Form 10-K for the fiscal year
ended September 30, 2020, for additional information regarding our contractual
obligations.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES AND EFFECTS OF RECENT ACCOUNTING
PRONOUNCEMENTS
We discuss our critical accounting estimates and effects of recent accounting
pronouncements in “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” included in Item 7 of Part II of our Annual Report on
Form 10-K for the fiscal year ended September 30, 2020. See Note 2 of “Notes to
the Consolidated Financial Statements” of this Report on Form 10-Q for updates.
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