SEGMENT REPORTING

6 Months Ended

Mar. 31, 2020

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 had operated predominantly in one industry segment – the development, manufacture and sale of Chemical Mechanical Planarization (CMP) consumables products. In connection with the Acquisition, we reassessed our operating and reportable segments, and determined that we 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 pads, 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, wood treatment products, and products and equipment used in the precision optics industry.

Beginning in fiscal 2019 and with the Acquisition, 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 the Acquisition, such as expenses incurred to complete the Acquisition, integration-related expenses and the impact of fair value adjustments to inventory acquired from KMG, and certain costs related to the KMG-Bernuth warehouse fire, asset impairment and restructuring charges related to the wood treatment reporting unit. 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 2020 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 by segment are as follows:


	Three Months Ended March 31,						Six Months Ended March 31,
	2020		2019		2020		2019
Segment Revenue:
Electronic Materials:
CMP Slurries	$	119,822	$	110,299	$	242,148	$	236,627
Electronic Chemicals	78,497		78,549		156,079		118,371
CMP Pads	20,590		23,998		41,403		48,464
Total Electronic Materials	218,909		212,846		439,630		403,462

Performance Materials	65,284		52,545		127,706		83,707

Total	$	284,193	$	265,391	$	567,336	$	487,169

Capital expenditures by segment are as follows:


	Three Months Ended March 31,						Six Months Ended March 31,
	2020		2019		2020		2019
Capital Expenditures:
Electronic Materials	$	5,094	$	10,150	$	13,579	$	16,549
Performance Materials	29,328		1,363		45,697		1,623
Corporate	3,555		1,018		5,067		2,244
Total	$	37,977	$	12,531	$	64,343	$	20,416

Adjusted EBITDA by segment are as follows:


	Three Months Ended March 31,						Six Months Ended March 31,
	2020		2019		2020		2019
Segment adjusted EBITDA:
Electronic Materials	$	69,603	$	74,910	$	150,807	$	149,735
Performance Materials	29,932		22,660		57,411		35,727
Unallocated corporate expenses	(13,604)		(12,052)		(26,453)		(23,094)
Interest expense	(10,753)		(13,331)		(22,673)		(20,221)
Interest income	143		568		458		1,587
Depreciation and amortization	(32,550)		(27,348)		(64,192)		(43,889)
Acquisition and integration-related expenses	(2,285)		(2,904)		(5,050)		(30,198)
Charge for fair value write-up of acquired inventory sold	—		(4,566)		—		(14,827)
Costs related to KMG-Bernuth warehouse fire (See Note 13) and restructuring of wood treatment business	(206)		—		(598)		—
Costs related to the Pandemic	(237)		—		(237)		—
Income before income taxes	$	40,043	$	37,937	$	89,473	$	54,820

We began to manage and report our results under the new organizational structure in conjunction with the 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. The adjustments to segment EBITDA for the three and six months ended March 31, 2020 represent addbacks of the Acquisition and integration-related expenses, as well as costs related to KMG-Bernuth warehouse fire, restructuring of the wood treatment business, and the Pandemic. The adjustments to segment EBITDA for the three and six months ended March 31, 2019 represent addbacks of 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. The unallocated portions of corporate functions, including finance, legal, human resources, information technology, and corporate development, are not directly attributable to a reportable segment.