HOUSTON, Oct. 1, 2002 (PRIMEZONE) -- KMG Chemicals, Inc. (Nasdaq:KMGB), a global provider of specialty chemicals in carefully focused markets, today announced its unaudited financial results for the fiscal fourth quarter and year ended July 31, 2002.
Net income was $1.08 million or $0.14 per diluted share in the fourth fiscal 2002 quarter, compared to $0.87 million or $0.11 per diluted share in the same quarter of 2001. Fiscal fourth quarter net sales were $10.0 million, off from $11.2 million in the year earlier quarter. However, the fourth fiscal 2002 quarter was favorably impacted by a gain on the sale of securities held for resale, and by the reversal of certain accrued liabilities related primarily to expenses that were recognized in fiscal 2001. Together these items increased fiscal fourth quarter and 2002 earnings by $.04 per diluted share.
For the 2002 fiscal year, net income was $2.7 million or $.36 per diluted share, up slightly from $2.6 million or $.35 per diluted share in fiscal 2001. Net sales for the 2002 fiscal year were $34.4 million, down 3.8 percent from $35.8 million in the prior year. The year-to-year decline in sales is attributable to weaker demand in 2002 for penta-treated utility poles, and to a slump in sales of MSMA, which is mainly used to protect cotton crops from weed growth.
At the end of the fourth fiscal 2002 quarter, KMG had total assets of $28.7 million and long-term debt of $1.7 million. Long-term debt to total assets was 6.0 percent on July 31, 2002. Cash and cash equivalents at that date totaled approximately $1.4 million.
David Hatcher, chairman and president of KMG Chemicals, said, "We are not satisfied with our fiscal 2002 results -- not with our earnings per share, nor with our lack of success in closing an acquisition. The main reason earnings were disappointing is that MSMA sales were weaker than anticipated. Our domestic cotton market suffered this year -- first from a drought (the hottest summer since the Dust Bowl of the 1930s), and also from low cotton prices. Competitive pressures and excessive distribution-chain inventory levels exacerbated the situation. If it were not for the gain on the sale of securities and the positive impact of prior period adjustments in the fourth quarter, earnings would have declined to $.32 per diluted share for fiscal 2002.
"We are striving to improve our performance in a variety of ways," continued Hatcher. "Nothing short of an improvement in earnings in fiscal 2003 is acceptable to us. Cost containment is the watchword this year in our existing businesses. We will continue to implement various strategies -- in plant operations, administrative and business practices -- to positively impact earnings. We expect the biggest hurdle will be raw material cost increases, which are already appearing, and we do not anticipate being able to completely pass these along to our customers at this time."
Hatcher said, "Over the last 14 months, our 'deal flow' of acquisition prospects has increased substantially, and we reviewed a record number of deals in fiscal 2002. We came very close to finalizing a major acquisition that would have significantly enlarged the company. Unfortunately that one did not work out. As we have said many times, all acquisitions must be accretive to earnings, and they must make good business sense. We have smart and seasoned managers here and we are continuing with a very active acquisitions program. Unfortunately, the timing of acquisitions doesn't always fit neatly into our financial reporting periods. The last thing we will do with our shareholders' money, however, is to make an acquisition just for the sake of making an acquisition. We are building a company and are in this for the long haul."
Even in a year such as this one, Hatcher said he sees a number of positives. He said KMG's common stock has demonstrated resilience in this recessionary environment. According to Multex Investor, KMG's stock has outperformed both the S&P 500 and 94% of the publicly traded chemical manufacturers since January 1, 2002. The company also pays a modest dividend that has increased steadily over time. KMG has cash, very little debt and the financial flexibility for acquisitions. He added that the company's niche markets have softened, but continue to be quite profitable, and that the company remains the number one or two player in each of its markets.
The company currently anticipates that per share earnings in the first fiscal 2003 quarter will be between $0.06 and $0.07. Due to the seasonality of the agricultural markets, earnings remain skewed toward the last half of the company's fiscal year.
KMG Chemicals, Inc., through its subsidiaries, produces and distributes specialty chemicals to carefully focused markets. The company grows by acquiring and managing stable chemical product lines and businesses with established production processes. Its wholly owned subsidiary, KMG Bernuth, Inc. is a global provider of wood preservation chemicals to the lumber treatment industry and herbicides to the agricultural industry. For more information, visit the company's web site at www.kmgchemicals.com.
The information in this news release includes certain forward-looking statements that are based upon assumptions that in the future may prove not to have been accurate and are subject to significant risks and uncertainties, including statements as to the future performance of the company. Although the company believes that the expectations reflected in its forward-looking statements are reasonable, it can give no assurance that such expectations or any of its forward-looking statements will prove to be correct. Factors that could cause results to differ include, but are not limited to, successful performance of internal plans, product development acceptance, the impact of competitive services and pricing and general economic risks and uncertainties.
KMG Chemicals, Inc.
Selected Financial Data
(In thousands, except share data)
(UNAUDITED)
Three Months Ended Twelve Months Ended
July 31, July 31,
2002 2001 2002 2001
----------- ----------- ----------- -----------
Net sales $ 9,986,140 $11,197,683 $34,438,034 $35,790,990
Gross profit 3,526,291 3,418,003 12,041,080 12,004,737
Pre-tax income 1,736,326 1,404,590 4,329,898 4,258,612
Net income 1,076,469 870,847 2,684,537 2,640,340
EBITDA (a) 2,127,629 1,728,882 5,805,793 5,381,356
Earnings per
diluted
share (b) $ 0.14 $ 0.11 $ 0.36 $ 0.35
Weighted average
diluted shares
outstanding (b) 7,551,155 7,543,772 7,548,545 7,592,232
Working capital 9,106,866 6,840,130 9,106,866 6,840,130
Total assets 28,744,388 27,760,288 28,744,388 27,760,288
Long-term debt 1,716,003 1,614,513 1,716,003 1,614,513
Shareholders'
equity 21,520,650 19,276,113 21,520,650 19,276,113
(a) A $283 million gain on the sale of securities is included in
EBITDA for the three and twelve months ended July 31, 2002.
(b) Restated for March 2001 stock dividend.