BUSINESS COMBINATION

12 Months Ended

Sep. 30, 2020

On the Acquisition Date, the Company completed the Acquisition, and KMG’s results of operations have been included in our Consolidated Statements of Income and Consolidated Statements of Comprehensive Income (Loss) from that date. The Acquisition was accounted for using the acquisition method of accounting and the total purchase consideration was $1,513,235, including consideration transferred of $1,536,452, less cash acquired of $23,217. See below for a summary of the different components that comprise the total consideration.


	Amount
Total cash consideration paid for KMG outstanding common stock and equity awards	$	900,756
Cash provided to payoff KMG debt	304,648
Total cash consideration paid	1,205,404
Fair value of CMC common stock issued for KMG outstanding common stock and equity awards	331,048
Total consideration transferred	$	1,536,452

The following table sets forth the components of identifiable intangible assets acquired:


	Acquisition Date Fair Value		Estimated Useful Life (years)
Customer relationships - Flowchem	$	315,000	20
Customer relationships - Electronic chemicals	280,000		19
Customer relationships - all other	109,000		15-16
Technology and know-how	85,500		9-11
Trade name - Flowchem	46,000		Indefinite
Trade name - all other	7,000		1-15
EPA product registration rights	2,300		15
Total intangible assets	$	844,800

The intangible assets subject to amortization have a weighted average useful life of 17.9 years. For intangible assets related to the wood treatment business, the remaining useful lives were limited to the end of the calendar year 2021.

The allocation of goodwill to each of the Electronic Materials and Performance Materials segments as a result of the Acquisition was $259,859 and $353,475, respectively.

The following unaudited supplemental pro forma information summarizes the combined results of operations as if the Acquisition had occurred on October 1, 2017.


	Year Ended September 30,
		2019		2018
Revenue		$	1,099,674	$	1,063,563
Net income		67,722		50,055
Earnings per share - basic		$	2.34	$	1.74
Earnings per share - diluted		$	2.30	$	1.70

The following costs are included in the years ended September 30, 2019 and 2018:

•Non-recurring transaction costs of $2,495 and $33,208, respectively.

•Non-recurring transaction-related employee costs, such as accelerated stock compensation costs, retention and severance expense of $427 and $38,132, respectively.

•Non-recurring charge for fair value write-up of inventory sold of $0 and $14,869, respectively.

The historical financial information has been adjusted by applying the Company’s accounting policies and giving effect to the pro forma adjustments, which consist of (i) amortization expense associated with identified intangible assets; (ii) depreciation of fixed asset step-up (for pre-Acquisition periods only); (iii) accretion of inventory step-up value; (iv) the elimination of Interest expense on pre-Acquisition KMG debt and replacement of Interest expense related to the Acquisition-related financing; (v) transaction-related costs; (vi) accelerated share-based compensation expense (pre-Acquisition periods only); (vii) retention and severance expense incurred as a direct result of the Acquisition; and (viii) an adjustment to tax-effect the aforementioned unaudited pro forma adjustments using an estimated weighted-average effective income tax rate of each entity and the jurisdictions to which the above adjustments relate. The pro forma consolidated results are not necessarily indicative of what the consolidated results actually would have been had the Acquisition been completed on October 1, 2017. The pro forma consolidated results do not purport to project future results of combined operations, nor do they reflect the expected realization of any revenue or cost synergies associated with the Acquisition.