FORT WORTH, Texas, June 11, 2018 (GLOBE NEWSWIRE) -- KMG (NYSE:KMG), a global provider of specialty chemicals and performance materials, today announced financial results for the fiscal 2018 third quarter ended April 30, 2018.
2018 Third Quarter Financial Highlights
- Sales increased 45% from the third quarter of last year to a record $118.6 million.
- GAAP diluted earnings per share doubled to $0.98 from $0.49 per diluted share in the third quarter of fiscal 2017.
- Adjusted diluted earnings per share1 was a record $1.10 compared to $0.53 per share reported in the third quarter of last year.
- GAAP net income increased to $15.6 million, compared to $6.1 million in the third quarter of last year.
- Adjusted EBITDA2 was a record $31.5 million, up 125% from $14.0 million in the third quarter of fiscal 2017.
- Operating cash flow increased to a record $21.5 million, compared to $7.9 million in the third quarter of fiscal 2017.
“KMG achieved outstanding third quarter results, driven by strong organic growth in both our electronic chemicals and performance materials segments, as well as a significant contribution from the acquisition of Flowchem,” said Chris Fraser, KMG chairman and CEO. “Consolidated sales grew 45% year-over-year and 4% sequentially to $118.6 million, setting another quarterly record for KMG. Adjusted EBITDA and adjusted diluted earnings per share also reached record levels, reflecting product volume growth and continued efficiency improvements across our global operations.”
Mr. Fraser continued, “Third quarter sales in our electronic chemicals segment increased 10% year-over-year to a record $74.7 million, benefiting from product volume growth in each of our major geographic regions. Despite higher freight costs, segment operating income grew 28% year-over-year to $10.9 million, aided by increased product volume, operating efficiencies and a favorable product mix.
“Our performance materials segment also generated record results, with third quarter sales increasing 10% on a sequential basis and more than tripling year-over-year to $44 million. Supported by our global capabilities and innovative technology, our pipeline performance business generated strong growth, with favorable energy market dynamics contributing to increased demand for our products and solutions that optimize pipeline throughput and maximize performance and safety. We also experienced continued growth in our wood treating chemicals business, which provides products essential to preserve North America’s expansive wood-based utility pole infrastructure. Overall, performance materials segment operating income grew to $16 million, a new quarterly record for this segment.”
Mr. Fraser concluded, “Considering our strong financial performance through the first nine months of fiscal 2018, as well as our expectations for continued growth in the fourth quarter of our fiscal year, we are increasing our fiscal 2018 sales forecast to $455-465 million, from $445-455 million previously, and increasing our fiscal 2018 adjusted EBITDA guidance to $118-120 million, from $114-118 million.”
Consolidated results
| Third quarter Dollars in thousands, except EPS | Fiscal 2018 | Fiscal 2017 | |||||||||||
| As Reported | Adjusted | As Reported | Adjusted | ||||||||||
| (GAAP) | (non-GAAP)3 | (GAAP) | (non-GAAP)4 | ||||||||||
| Net sales | $118,647 | $118,647 | $81,616 | $81,616 | |||||||||
| Operating income | 23,953 | 27,230 | 9,367 | 10,001 | |||||||||
| Operating margin | 20.2 | % | 23.0 | % | 11.5 | % | 12.3 | % | |||||
| Net income | 15,645 | 17,459 | 6,067 | 6,479 | |||||||||
| Diluted earnings per share | $0.98 | $1.10 | $ 0.49 | $0.53 | |||||||||
| Nine months ended April 30 Dollars in thousands, except EPS | Fiscal 2018 YTD | Fiscal 2017 YTD | |||||||||||
| As Reported | Adjusted | As Reported | Adjusted | ||||||||||
| (GAAP) | (non-GAAP)5 | (GAAP) | (non-GAAP)6 | ||||||||||
| Net sales | $343,162 | $343,162 | $237,182 | $237,182 | |||||||||
| Operating income | 65,763 | 75,749 | 27,087 | 28,671 | |||||||||
| Operating margin | 19.2 | % | 22.1 | % | 11.4 | % | 12.1 | % | |||||
| Net income | 46,832 | 45,205 | 18,293 | 19,323 | |||||||||
| Diluted earnings per share | $3.16 | $3.05 | $ 1.50 | $ 1.58 | |||||||||
Business segment results
| Electronic Chemicals | Third Quarter | Third Quarter | Nine Months | Nine Months | |||||||||
| Dollars in thousands | Fiscal 2018 | Fiscal 2017 | Fiscal 2018 | Fiscal 2017 | |||||||||
| As Reported | As Reported | As Reported | As Reported | ||||||||||
| (GAAP) | (GAAP) | (GAAP) | (GAAP) | ||||||||||
| Net sales | $74,669 | $68,141 | $222,401 | $204,829 | |||||||||
| Operating income | 10,889 | 8,509 | 34,877 | 26,153 | |||||||||
| Operating margin | 14.6 | % | 12.5 | % | 15.7 | % | 12.8 | % | |||||
For the third fiscal quarter, the Electronic Chemicals segment reported:
- Sales of $74.7 million, up 10% from the third quarter of fiscal 2017. The gain in sales reflected product volume growth in all geographic regions and a more favorable product mix.
- Operating income of $10.9 million, up 28% from $8.5 million in the same period of fiscal 2017. Operating income increased due to product volume growth, operational efficiencies and product mix. Operating margin improved to 14.6% compared to 12.5% in the prior-year period.
- Adjusted EBITDA7 of $13.7 million, up 19.7% from $11.5 million last year.
Performance Materials
The Performance Materials segment consists of the pipeline performance business and the wood treating chemicals business.
| Performance Materials | Third Quarter | Third Quarter | Nine Months | Nine Months | |||||||||
| Dollars in thousands | Fiscal 2018 | Fiscal 2017 | Fiscal 2018 | Fiscal 2017 | |||||||||
| As Reported | As Reported | As Reported | As Reported | ||||||||||
| (GAAP) | (GAAP) | (GAAP) | (GAAP) | ||||||||||
| Net sales | $43,978 | $13,475 | $120,761 | $32,353 | |||||||||
| Operating income | 16,041 | 4,224 | 40,435 | 10,927 | |||||||||
| Operating margin | 36.5 | % | 31.4 | % | 33.5 | % | 33.8 | % | |||||
For the third fiscal quarter, the Performance Materials segment reported:
- Sales of $44.0 million versus $13.5 million in the same period a year ago. Sales growth reflected the contribution from Flowchem, as well as product volume growth in both industrial lubricants and wood treating chemicals.
- Operating income of $16.0 million compared to $4.2 million last year. The increase in operating income reflected the contribution from Flowchem, as well as product volume growth in both industrial lubricants and wood treating chemicals. Segment operating margins were 36.5%, compared to 31.4% in the third quarter of 2017, due to the contribution from Flowchem, as well as product volume growth in both industrial lubricants and wood treating chemicals.
- Adjusted EBITDA8 of $20.2 million versus $4.8 million last year.
Fiscal 2018 Outlook
- Sales: We increase our fiscal 2018 consolidated net sales forecast to $455-465 million, from our prior guidance of $445-455 million.
- Adjusted EBITDA: We increase our adjusted EBITDA forecast to $118-120 million, from our prior guidance of $114-118 million, reflecting stronger growth expectations in both our electronic chemicals and performance materials segments. Our revised fiscal 2018 adjusted EBITDA forecast includes approximately $8.0 million in stock-based compensation expense, unchanged from our prior estimate.
- Depreciation and Amortization: Depreciation and amortization expense is forecast to be approximately $30 million.
- Capital Expenditures: Capital expenditures are forecast to be approximately $25 million, down from our prior estimate of approximately $29 million.
With respect to the Company’s full year guidance of Adjusted EBITDA, the Company is not able to provide a reconciliation of these fiscal 2018 non-GAAP financial measures to the most comparable GAAP measure without unreasonable efforts; certain items that are included have not yet occurred and cannot be reasonably predicted, and, accordingly, the probable significance of such items cannot be determined at this time. The most comparable GAAP measure and reconciling information that is unavailable, or not reasonably predictable, would include restructuring and realignment charges and acquisition and integration-related expenses.
Conference call
Date: Monday June 11, 2018
Time: 5:00 p.m. ET
Dial in: 844-316-8066 or 703-736-7353
Conference ID: 1685029
The conference call will be webcast live via the “Investors” section of the Company’s website at http://kmgchemicals.com.
If you are unable to listen live, the conference call will be archived on the KMG website. A telephone replay of the call will also be available for one week, starting at 8:00 p.m. ET on June 11, 2018. To access the call, dial 855-859-2056 (domestic) or 404-537-3406 (international) using conference ID 1685029.
About KMG
KMG Chemicals, Inc., through its subsidiaries, produces and distributes specialty chemicals and performance materials for the semiconductor, industrial wood preservation and pipeline and energy markets. For more information, visit the Company's website at http://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.
1 Non-U.S. GAAP measure. See Table 2 for reconciliation.
2 Non-U.S. GAAP measure. See Tables 1 and 1A for reconciliation.
3 Non-U.S. GAAP measure. See Tables 2 and 2A for reconciliation.
4 Non-U.S. GAAP measure. See Tables 2 and 2A for reconciliation.
5 Non-U.S. GAAP measure. See Tables 2 and 2A for reconciliation.
6 Non-U.S. GAAP measure. See Tables 2 and 2A for reconciliation.
7 Non-U.S. GAAP measure. See Tables 1 and 1A for reconciliation.
8 Non-U.S. GAAP measure. See Tables 1 and 1A for reconciliation.
| CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (In thousands, except for per share amounts) | |||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||
| April 30, | April 30, | ||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||||
| Net sales | $118,647 | $81,616 | $343,162 | $237,182 | |||||||||||||
| Cost of sales | 68,156 | 49,106 | 196,936 | 143,787 | |||||||||||||
| Gross profit | 50,491 | 32,510 | 146,226 | 93,395 | |||||||||||||
| Distribution expenses | 9,070 | 9,457 | 27,192 | 28,329 | |||||||||||||
| Selling, general and administrative expenses | 13,601 | 13,008 | 41,939 | 36,241 | |||||||||||||
| Amortization of intangible assets | 3,867 | 608 | 11,263 | 1,668 | |||||||||||||
| Restructuring charges | − | 70 | 69 | 70 | |||||||||||||
| Operating income | 23,953 | 9,367 | 65,763 | 27,087 | |||||||||||||
| Other (expense) income | |||||||||||||||||
| Interest expense, net | (4,153 | ) | (301 | ) | (17,333 | ) | (650 | ) | |||||||||
| Loss on the extinguishment of debt | (277 | ) | − | (6,368 | ) | − | |||||||||||
| Derivative fair value gain | 1,365 | − | 5,238 | − | |||||||||||||
| Other, net | (200 | ) | 144 | (977 | ) | 88 | |||||||||||
| Total other (expense) income, net | (3,265 | ) | (157 | ) | (19,440 | ) | (562 | ) | |||||||||
| Income before income taxes | 20,688 | 9,210 | 46,323 | 26,525 | |||||||||||||
| Provision for income taxes | (5,043 | ) | (3,143 | ) | 509 | (8,232 | ) | ||||||||||
| Net income | $15,645 | $6,067 | $46,832 | $18,293 | |||||||||||||
| Earnings per share: | |||||||||||||||||
| Net income per common share basic | $1.01 | $0.51 | $3.24 | $1.54 | |||||||||||||
| Net income per common share diluted | $0.98 | $0.49 | $3.16 | $1.50 | |||||||||||||
| Weighted average shares outstanding: | |||||||||||||||||
| Basic | 15,505 | 11,888 | 14,439 | 11,884 | |||||||||||||
| Diluted | 15,905 | 12,303 | 14,814 | 12,236 | |||||||||||||
| KMG CHEMICALS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except for share and per share amounts) | ||||||
| April 30, | July 31, | |||||
| 2018 | 2017 | |||||
| (Unaudited) | ||||||
| Assets | ||||||
| Current assets | ||||||
| Cash and cash equivalents | $21,818 | $20,708 | ||||
| Accounts receivable | ||||||
| Trade, net of allowances of $235 at April 30, 2018 and $263 at July 31, 2017 | 59,422 | 51,168 | ||||
| Other | 7,176 | 6,168 | ||||
| Inventories, net | 54,087 | 46,482 | ||||
| Prepaid expenses and other | 4,305 | 8,617 | ||||
| Total current assets | 146,808 | 133,143 | ||||
| Property, plant and equipment, net | 114,640 | 105,435 | ||||
| Goodwill | 227,797 | 224,391 | ||||
| Intangible assets, net | 303,318 | 320,401 | ||||
| Other assets, net | 12,744 | 9,061 | ||||
| Total assets | $805,307 | $792,431 | ||||
| Liabilities & stockholders’ equity | ||||||
| Current liabilities | ||||||
| Accounts payable | $37,907 | $29,570 | ||||
| Accrued liabilities | 10,884 | 12,456 | ||||
| Employee incentive accrual | 5,574 | 7,713 | ||||
| Current portion of long-term debt | − | 3,167 | ||||
| Total current liabilities | 54,365 | 52,906 | ||||
| Long-term debt | 323,550 | 523,102 | ||||
| Deferred tax liabilities | 23,243 | 37,944 | ||||
| Other long-term liabilities | 5,446 | 4,763 | ||||
| Total liabilities | 406,604 | 618,715 | ||||
| Commitments and contingencies | ||||||
| Stockholders’ equity | ||||||
| Preferred stock, $.01 par value, 10,000,000 shares authorized, none issued | − | − | ||||
| Common stock, $.01 par value, 40,000,000 shares authorized, 15,505,350 shares issued and outstanding at April 30, 2018 and 11,889,649 shares issued and outstanding at July 31, 2017 | 155 | 119 | ||||
| Additional paid-in capital | 220,094 | 42,535 | ||||
| Accumulated other comprehensive loss | (7,864 | ) | (9,712 | ) | ||
| Retained earnings | 186,318 | 140,774 | ||||
| Total stockholders’ equity | 398,703 | 173,716 | ||||
| Total liabilities and stockholders’ equity | $805,307 | $792,431 | ||||
| KMG CHEMICALS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands) | ||||||||
| Nine Months Ended | ||||||||
| April 30, | ||||||||
| 2018 | 2017 | |||||||
| Cash flows from operating activities | ||||||||
| Net income | $46,832 | $18,293 | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities | ||||||||
| Depreciation and amortization | 22,359 | 10,864 | ||||||
| Loss on extinguishment of debt | 6,368 | − | ||||||
| Stock-based compensation expense | 5,687 | 4,280 | ||||||
| Amortization of debt discounts and financing costs included in interest expense | 1,124 | 125 | ||||||
| Debt repricing transaction costs | 607 | − | ||||||
| Deferred income tax benefit | (9,097 | ) | (1,189 | ) | ||||
| Derivative fair value gain | (5,238 | ) | − | |||||
| Other | (65 | ) | (935 | ) | ||||
| Changes in operating assets and liabilities | ||||||||
| Accounts receivable — trade | (7,664 | ) | (3,172 | ) | ||||
| Accounts receivable — other | (50 | ) | 2,253 | |||||
| Inventories | (7,238 | ) | 606 | |||||
| Other current and noncurrent assets | (715 | ) | (1,062 | ) | ||||
| Accounts payable | 8,194 | (1,282 | ) | |||||
| Accrued liabilities and other | (3,349 | ) | (1,444 | ) | ||||
| Net cash provided by operating activities | 57,755 | 27,337 | ||||||
| Cash flows from investing activities | ||||||||
| Additions to property, plant and equipment | (15,527 | ) | (8,586 | ) | ||||
| Purchase of Sealweld, net of cash acquired | (585 | ) | (16,584 | ) | ||||
| Other investing activities | (577 | ) | − | |||||
| Proceeds − insurance claim | − | 1,247 | ||||||
| Net cash used in investing activities | (16,689 | ) | (23,923 | ) | ||||
| Cash flows from financing activities | ||||||||
| Proceeds from sale of common stock, net of issuance costs | 175,669 | − | ||||||
| Borrowings under credit facility | − | 17,000 | ||||||
| Payments under credit facility | − | (18,800 | ) | |||||
| Principal payments on borrowings on term loan | (210,000 | ) | − | |||||
| Debt repricing transaction costs | (607 | ) | − | |||||
| Payment of dividends | (1,288 | ) | (1,066 | ) | ||||
| Cash payments related to tax withholdings from stock-based awards | (3,729 | ) | (277 | ) | ||||
| Net cash used in financing activities | (39,955 | ) | (3,143 | ) | ||||
| Effect of exchange rate changes on cash | (1 | ) | 398 | |||||
| Net increase in cash, cash equivalents and restricted cash | 1,110 | 669 | ||||||
| Cash, cash equivalents and restricted cash at beginning of period | 20,708 | 13,428 | ||||||
| Cash, cash equivalents and restricted cash at end of period | $21,818 | $14,097 | ||||||
Reconciliation of GAAP financial measures to non-GAAP financial measures
KMG provides non-GAAP financial information to complement reported GAAP results. KMG believes that analysis of our financial performance would be enhanced by an understanding of the factors underlying that performance and our judgments about the likelihood that particular factors will repeat. We define adjusted EBITDA as earnings from operations before interest, taxes, depreciation, amortization, acquisition and integration expenses, restructuring and realignment charges and other relevant items.
KMG intends to continue to provide certain non-GAAP financial information and the appropriate reconciliation to GAAP in its financial results. As required by SEC rules, the tables below present a reconciliation of our presented non-GAAP measures to the most directly comparable GAAP measures. These non-GAAP measures should be viewed as a supplement to, and not a substitute for, U.S. GAAP measures of performance.
Table 1
RECONCILIATION OF CONSOLIDATED GAAP NET INCOME TO CONSOLIDATED ADJUSTED EBITDA
| (in thousands) | Third Quarter Fiscal 2018 | Third Quarter Fiscal 2017 | |||
| Consolidated GAAP net income | $15,645 | $ 6,067 | |||
| Add back: | |||||
| Interest expense, net | 4,153 | 301 | |||
| Income taxes | 5,043 | 3,143 | |||
| Depreciation & amortization | 7,664 | 3,817 | |||
| Loss on the extinguishment of debt | 277 | − | |||
| Derivative fair value gain | (1,365 | ) | − | ||
| Debt repricing transaction costs | 5 | − | |||
| Acquisition & integration expenses | 48 | 562 | |||
| Corporate relocation expense | − | 2 | |||
| Restructuring charges, excluding accelerated depreciation | − | 70 | |||
| Consolidated adjusted EBITDA | $31,470 | $13,962 | |||
| (in thousands) | Nine Months Ended April 30, 2018 | Nine Months Ended April 30, 2017 | |||
| Consolidated GAAP net income | $46,832 | $18,293 | |||
| Add back: | |||||
| Interest expense, net | 17,333 | 650 | |||
| Income taxes | (509 | ) | 8,232 | ||
| Depreciation & amortization | 22,359 | 10,864 | |||
| Loss on the extinguishment of debt | 6,368 | − | |||
| Derivative fair value gain | (5,238 | ) | − | ||
| Debt repricing transaction costs | 607 | − | |||
| Acquisition & integration expenses | 578 | 1,145 | |||
| Corporate relocation expense | − | 369 | |||
| Restructuring charges, excluding accelerated depreciation | 69 | 70 | |||
| Consolidated adjusted EBITDA | $88,399 | $39,623 | |||
Table 1A
RECONCILIATION OF OPERATING INCOME TO ADJUSTED EBITDA
Note that we do not allocate certain financial statement line items below operating income to our segments; as such, the reconciliations below only reflect the reconciliation of our operating income by segment to our non-GAAP measures.
| Third Quarter Fiscal 2018 | Electronic | Performance | ||||||||||
| (in thousands) | Chemicals | Materials | Corporate | Total | ||||||||
| Operating Income (Loss) | $10,889 | $16,041 | ($2,977 | ) | $23,953 | |||||||
| Other income (expense) | (33 | ) | (96 | ) | (71 | ) | (200 | ) | ||||
| Depreciation and amortization | 2,864 | 4,250 | 550 | 7,664 | ||||||||
| Acquisition & integration expenses | — | 28 | 20 | 48 | ||||||||
| Debt repricing costs | — | — | 5 | 5 | ||||||||
| Restructuring charges | — | — | — | — | ||||||||
| Adjusted EBITDA | 13,720 | 20,223 | (2,473 | ) | 31,470 | |||||||
| Corporate allocation | 3,034 | 1,964 | (4,999 | ) | — | |||||||
| Adjusted EBITDA excl. corporate allocation | $16,754 | $22,188 | ($7,472 | ) | $31,470 | |||||||
| Nine Months Ended April 30, 2018 | Electronic | Performance | ||||||||||
| (in thousands) | Chemicals | Materials | Corporate | Total | ||||||||
| Operating Income (Loss) | $34,877 | $40,435 | ($9,549 | ) | $65,763 | |||||||
| Other income (expense) | (616 | ) | (41 | ) | (320 | ) | (977 | ) | ||||
| Depreciation and amortization | 8,418 | 12,418 | 1,523 | 22,359 | ||||||||
| Acquisition & integration expenses | — | 125 | 453 | 578 | ||||||||
| Debt repricing transaction costs | — | — | 607 | 607 | ||||||||
| Restructuring charges | 69 | — | — | 69 | ||||||||
| Adjusted EBITDA | 42,748 | 52,937 | (7,286 | ) | 88,399 | |||||||
| Corporate allocation | 9,103 | 5,893 | (14,997 | ) | — | |||||||
| Adjusted EBITDA excl. corporate allocation | $51,851 | $58,831 | ($22,283 | ) | $88,399 | |||||||
| Third Quarter Fiscal 2017 | Electronic | Performance | |||||||
| (in thousands) | Chemicals | Materials | Corporate | Total | |||||
| Operating Income (Loss) | $8,509 | $4,224 | ($3,366 | ) | $9,367 | ||||
| Other income (expense) | 99 | 33 | 12 | 144 | |||||
| Depreciation and amortization | 2,857 | 549 | 411 | 3,817 | |||||
| Acquisition & integration expenses | — | — | 562 | 562 | |||||
| Restructuring charges | — | — | 70 | 70 | |||||
| Corporate relocation expense | — | — | 2 | 2 | |||||
| Adjusted EBITDA | 11,465 | 4,806 | (2,309 | ) | 13,962 | ||||
| Corporate allocation | 3,329 | 842 | (4,171 | ) | — | ||||
| Adjusted EBITDA excl. corporate allocation | $14,794 | $5,648 | ($6,480 | ) | $13,962 | ||||
| Nine Months Ended April 30, 2017 | Electronic | Performance | ||||||||
| (in thousands) | Chemicals | Materials | Corporate | Total | ||||||
| Operating Income (Loss) | $26,153 | $10,927 | ($9,993 | ) | $27,087 | |||||
| Other income (expense) | (88 | ) | 66 | 110 | 88 | |||||
| Depreciation and amortization | 8,502 | 1,121 | 1,241 | 10,864 | ||||||
| Acquisition & integration expenses | — | — | 1,145 | 1,145 | ||||||
| Restructuring charges | — | — | 70 | 70 | ||||||
| Corporate relocation expense | — | — | 369 | 369 | ||||||
| Adjusted EBITDA | 34,567 | 12,114 | (7,058 | ) | 39,623 | |||||
| Corporate allocation | 9,987 | 2,527 | (12,514 | ) | — | |||||
| Adjusted EBITDA excl. corporate allocation | $44,554 | $14,641 | ($19,572 | ) | $39,623 | |||||
Table 2
RECONCILIATION OF NET INCOME TO ADJUSTED NET INCOME AND ADJUSTED DILUTED EARNINGS PER SHARE
(in thousands)
| Three Months Ended | ||||||||
| April 30, | ||||||||
| 2018 | 2017 | |||||||
| Net income | $15,645 | $6,067 | ||||||
| Items impacting pre-tax income: | ||||||||
| Impact of the Tax Cuts and Jobs Act | − | − | ||||||
| Acquisition & integration expenses | 48 | 562 | ||||||
| Corporate relocation expense | − | 2 | ||||||
| Restructuring charges | − | 70 | ||||||
| Derivative fair value gain | (1,365 | ) | − | |||||
| Amortization of Flowchem intangible assets | 3,224 | − | ||||||
| Loss on the extinguishment of debt | 277 | − | ||||||
| Debt repricing transaction costs | 5 | − | ||||||
| Amortization of debt discounts and financing costs | 296 | − | ||||||
| Income taxes * | (671 | ) | (222 | ) | ||||
| Adjusted net income ** | $17,459 | $6,479 | ||||||
| Adjusted diluted earnings per share ** | $ 1.10 | $0.53 | ||||||
| Weighted average diluted shares outstanding | 15,905 | 12,303 | ||||||
| | ||||||||
| Nine Months Ended | ||||||||
| April 30, | ||||||||
| 2018 | 2017 | |||||||
| Net income | $46,832 | $18,293 | ||||||
| Items impacting pre-tax income: | ||||||||
| Impact of the Tax Cuts and Jobs Act | (11,005 | ) | − | |||||
| Acquisition & integration expenses | 578 | 1,145 | ||||||
| Corporate relocation expense | − | 369 | ||||||
| Restructuring charges | 69 | 70 | ||||||
| Derivative fair value gain | (5,238 | ) | − | |||||
| Amortization of Flowchem intangible assets | 9,339 | − | ||||||
| Loss on the extinguishment of debt | 6,368 | − | ||||||
| Debt repricing transaction costs | 607 | − | ||||||
| Amortization of debt discounts and financing costs | 1,124 | − | ||||||
| Income taxes * | (3,469 | ) | (554) | |||||
| Adjusted net income ** | $45,205 | $19,323 | ||||||
| Adjusted diluted earnings per share ** | $3.05 | $ 1.58 | ||||||
| Weighted average diluted shares outstanding | 14,814 | 12,236 | ||||||
| * For the three and nine months ended April 30, 2018, represents the aggregate tax-effect assuming a 27% tax rate of the items impacting pre-tax income, which is our estimated U.S. statutory federal tax rate for fiscal year 2018 following the Tax Act in December 2017. For the three and nine months ended April 30, 2017, represents the aggregate tax-effect assuming a 35% tax rate of items impacting pre-tax income. ** Adjusted net income and adjusted diluted earnings per share for the first quarter of fiscal 2018, which are included in the nine months ended April 30, 2018, have been adjusted to reflect the assumed 27% tax rate for fiscal year 2018. | ||||||||
Table 2A
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES
| Third Quarter Fiscal 2018 | KMG Chemicals, Inc. | ||||||||||||
| Dollars in thousands, except EPS | |||||||||||||
| Operating | Net | Diluted Earnings | |||||||||||
| Income | Margin | Income | Per Share | ||||||||||
| GAAP measure | $23,953 | 20.2 | % | $15,645 | $0.98 | ||||||||
| Amortization of Flowchem intangible assets | 3,224 | 2.7 | % | 2,354 | 0.15 | ||||||||
| Acquisition & integration expenses | 48 | 0.1 | % | 35 | 0.01 | ||||||||
| Debt repricing transaction costs | 5 | 0.0 | % | 4 | 0.00 | ||||||||
| Derivative fair value gain | — | — | (996 | ) | (0.06 | ) | |||||||
| Amortization of debt discounts and financing costs | — | — | 216 | 0.01 | |||||||||
| Loss on the extinguishment of debt | — | — | 202 | 0.01 | |||||||||
| Non-GAAP measure | $27,230 | 23.0 | % | $17,459 | $1.10 | ||||||||
| Nine Months Ended April 30, 2018 | KMG Chemicals, Inc. | ||||||||||||
| Dollars in thousands, except EPS | |||||||||||||
| Operating | Net | Diluted Earnings | |||||||||||
| Income | Margin | Income | Per Share | ||||||||||
| GAAP measure | $65,763 | 19.2 | % | $46,832 | $3.16 | ||||||||
| Amortization of Flowchem intangible assets | 9,339 | 2.7 | % | 6,817 | 0.46 | ||||||||
| Acquisition & integration expenses | 578 | 0.2 | % | 422 | 0.03 | ||||||||
| Restructuring charges | 69 | 0.0 | % | 50 | 0.00 | ||||||||
| Impact of the Tax Cuts and Jobs Act | — | — | (11,005 | ) | (0.74 | ) | |||||||
| Loss on the extinguishment of debt | — | — | 4,649 | 0.31 | |||||||||
| Derivative fair value gain | — | — | (3,824 | ) | (0.26 | ) | |||||||
| Amortization of debt discounts and financing costs | — | — | 821 | 0.06 | |||||||||
| Debt repricing transaction costs | — | — | 443 | 0.03 | |||||||||
| Non-GAAP measure | $75,749 | 22.1 | % | $45,205 | $3.05 | ||||||||
| Third Quarter Fiscal 2017 | KMG Chemicals, Inc. | |||||||||
| Dollars in thousands, except EPS | ||||||||||
| Operating | Net | Diluted Earnings | ||||||||
| Income | Margin | Income | Per Share | |||||||
| GAAP measure | $ 9,367 | 11.5 | % | $6,067 | $0.49 | |||||
| Acquisition & integration expenses | 562 | 0.7 | % | 365 | 0.03 | |||||
| Restructuring & realignment charges | 70 | 0.1 | % | 46 | 0.01 | |||||
| Corporate relocation expense | 2 | 0.0 | % | 1 | 0.00 | |||||
| Non-GAAP measure | $10,001 | 12.3 | % | $6,479 | $0.53 | |||||
| Nine Months Ended April 30, 2017 | KMG Chemicals, Inc. | |||||||||
| Dollars in thousands, except EPS | ||||||||||
| Operating | Net | Diluted Earnings | ||||||||
| Income | Margin | Income | Per Share | |||||||
| GAAP measure | $ 27,087 | 11.4 | % | $18,293 | $1.50 | |||||
| Acquisition & integration expenses | 1,145 | 0.5 | % | 744 | 0.06 | |||||
| Restructuring & realignment charges | 70 | 0.0 | % | 46 | 0.00 | |||||
| Corporate relocation expense | 369 | 0.2 | % | 240 | 0.02 | |||||
| Non-GAAP measure | $ 28,671 | 12.1 | % | $19,323 | $1.58 | |||||