17. SEGMENT REPORTING

We identify our segments based on our management structure and the financial information used by our chief executive officer, who is our chief operating decision maker, to assess segment performance and allocate resources among our operating units. We historically have operated predominantly in one industry segment – the development, manufacture and sale of Chemical Mechanical Planarization (CMP) consumables products. With our acquisition of KMG, we reassessed our operating and reportable segments and determined that we now have the following two reportable segments:

Electronic Materials

Electronic Materials includes products and solutions for the semiconductor industry. We manufacture and sell CMP consumables, including CMP slurries and polishing pad products, and high-purity process chemicals used to etch and clean silicon wafers in the production of semiconductors, photovoltaics (solar cells) and flat panel displays.

Performance Materials

Performance Materials includes pipeline performance products and services for oilfield energy industries, wood treatment products, and products and equipment used in the precision optics industry.

Beginning in fiscal 2019 and with the acquisition of KMG, our chief operating decision maker evaluates segment performance based upon revenue and segment adjusted EBITDA. Segment adjusted EBITDA is defined as earnings before interest, income taxes, depreciation and amortization, adjusted for certain items that affect comparability from period to period. These adjustments include items related to our acquisition of KMG, such as expenses incurred to complete the acquisition, integration-related expenses and impact of fair value adjustments to inventory acquired from KMG. We exclude these items from earnings when presenting our adjusted EBITDA measure because we believe they will be incurred infrequently and/or are otherwise not indicative of a segment's regular, ongoing operating performance. Adjusted EBITDA is also the basis of a performance metric for our fiscal 2019 Short-Term Incentive Program (STIP). In addition, our chief operating decision maker does not use assets by segment to evaluate performance or allocate resources. Therefore, we do not disclose assets by segment.

Revenue from external customers and segment adjusted EBITDA were (in thousands):

	Three Months Ended
	December 31,
	2018			2017
Segment Revenue
Electronic Materials		$	190,617		$	133,314
Performance Materials			31,161			6,665
Total		$	221,778		$	139,979

	Three Months Ended
	December 31,
	2018			2017
Segment adjusted EBITDA:
Electronic Materials	$	74,825		$	52,897
Performance Materials		13,067			1,288
Unallocated corporate expenses		(11,042	)		(10,852	)
Interest income		1,019			951
Interest expense		(6,890	)		(1,132	)
Depreciation and amortization		(16,541	)		(6,500	)
Charge for fair value write-up of acquired inventory sold		(10,261	)		-
Acquisition and integration related expenses		(27,294	)		-
Income before income taxes	$	16,883		$	36,652

We began to manage and report our results under the new organizational structure in conjunction with the KMG acquisition in fiscal 2019 and have reflected this change for all historical periods presented. Since the two segments operate independently and serve different markets and customers, there are no sales between segments. Revenue from external customers and segment adjusted EBITDA shown for Performance Materials for the quarter ended December 31, 2017 includes Cabot Microelectronics’ legacy QED business and an immaterial business that was sold in March 2018. The adjustments to segment EBITDA for the three months ended December 31, 2018 represent addbacks of KMG acquisition and integration related expenses, and a charge for the write-up of inventory acquired from KMG to fair value, for inventory sold in the period. There were no adjustments to segment EBITDA for the three months ended December 31, 2017. Unallocated corporate expenses include expenses associated with executive leadership and public company costs, and the unallocated portions of corporate functions including finance, legal, human resources, information technology, and corporate development not directly attributable to a reportable segment.