FORT WORTH, Texas, Oct. 01, 2018 (GLOBE NEWSWIRE) -- KMG (NYSE: KMG), a global provider of specialty chemicals and performance materials, today announced financial results for the fourth fiscal quarter and fiscal year ended July 31, 2018.
2018 Fourth Quarter Financial Highlights
- Sales grew to a record $122.4 million, an increase of 27% compared to the same quarter last year.
- GAAP diluted earnings per share was $1.13, up 163% compared to $0.43 per diluted share in the fourth quarter of fiscal 2017.
- Adjusted diluted earnings per share1 increased to a record $1.26 compared to $0.69 per share reported in the fourth quarter of fiscal 2017.
- GAAP net income rose 237% to $18.0 million compared to $5.3 million in last year’s fourth quarter.
- Adjusted EBITDA2 increased to $31.1 million, from $20.6 million in the fourth quarter of fiscal 2017.
2018 Fiscal Year Financial Highlights
- Sales increased 40% year-over-year to a record $465.6 million.
- GAAP diluted earnings per share was a record $4.29, up from $1.92 in fiscal 2017.
- Adjusted diluted earnings per share was a record $4.33, up 91% from the prior year.
- GAAP net income rose 174% from the prior year to a record $64.8 million.
- Adjusted EBITDA grew to a record $119.5 million, an increase of 99% from the prior year’s $60.2 million.
Recent Merger Announcement
On August 15, 2018, Cabot Microelectronics Corporation and KMG Chemicals, Inc. announced a definitive agreement under which Cabot Microelectronics will acquire KMG Chemicals in a cash and stock transaction with a total enterprise value of approximately $1.6 billion. Under the terms of the agreement, KMG shareholders will be entitled to receive, per KMG share, $55.65 in cash and 0.2000 of a share of Cabot Microelectronics common stock.
Due to the pending transaction with Cabot Microelectronics, KMG is not hosting a conference call in conjunction with its fourth quarter and full year 2018 earnings release and does not expect to do so for future quarters. Completion of the transaction is subject to approval by KMG’s shareholders and other customary closing conditions. The transaction is expected to close by the end of the current calendar year.
“Fiscal 2018 was a year of progress, growth and continued strong performance for KMG,” said Chris Fraser, KMG chairman and CEO. “We again achieved record financial results, with fiscal 2018 sales exceeding the top end of our upwardly revised guidance range and fiscal 2018 adjusted EBITDA at the high end of our forecast. We also achieved record earnings per share of $4.29 on a GAAP basis. Throughout the year, we further strengthened our diverse and market-leading businesses and continued to enhance our efficiency across our global operations.”
Mr. Fraser concluded, “Over the past five years, KMG’s adjusted EBITDA and adjusted earnings per share have increased approximately fourfold, a period of sustained growth and progress that culminated in an outstanding fiscal 2018 year. I would like to thank our exceptional employees whose dedication, passion and teamwork have driven our growth and success for more than two decades. On behalf of our entire organization, I sincerely thank our investors for placing their confidence and trust in KMG.”
Consolidated results
Fourth 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 | $122,394 | $122,394 | $96,260 | $96,260 | |||||||||
Operating income | 22,362 | 26,870 | 10,245 | 14,628 | |||||||||
Operating margin | 18.3% | 22.0% | 10.6% | 15.2% | |||||||||
Net income | 18,009 | 20,199 | 5,338 | 8,535 | |||||||||
Diluted earnings per share | $1.13 | $1.26 | $ 0.43 | $0.69 |
Fiscal Year ended July 31 Dollars in thousands, except EPS | Fiscal 2018 | Fiscal 2017 | |||||||||||
As Reported | Adjusted | As Reported | Adjusted | ||||||||||
(GAAP) | (non-GAAP)5 | (GAAP) | (non-GAAP)6 | ||||||||||
Net sales | $465,556 | $465,556 | $333,442 | $333,442 | |||||||||
Operating income | 88,125 | 102,617 | 37,333 | 43,300 | |||||||||
Operating margin | 18.9% | 22.0% | 11.2% | 13.0% | |||||||||
Net income | 64,841 | 65,404 | 23,633 | 27,859 | |||||||||
Diluted earnings per share | $ 4.29 | $4.33 | $1.92 | $ 2.27 |
Business segment results
Electronic Chemicals | Fourth Quarter | Fourth Quarter | Full Year | Full Year | |||
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 | $79,622 | $71,792 | 302,023 | $276,621 | |||
Operating income | 11,678 | 9,132 | 46,554 | 35,285 | |||
Operating margin | 14.7% | 12.7% | 15.4% | 12.8% |
For the fourth fiscal quarter, the Electronic Chemicals segment reported:
- Sales of $79.6 million, up 10.9% from the fourth quarter of fiscal 2017. Product volume growth primarily drove the sales increase.
- Operating income of $11.7 million, up 27.8% from $9.1 million in the same period of fiscal 2017. Operating income increased primarily due to product volume growth and operating efficiencies. Operating margin improved to 14.7% compared to 12.7% in the prior-year period.
- Adjusted EBITDA7 of $14.5 million compared to $12.9 million last year.
For the fiscal 2018 year, the Electronic Chemicals segment reported:
- Sales of $302.0 million, an increase of 9.2% compared to the prior year. Product volume growth was the primary driver of the sales increase.
- Operating income of $46.6 million, up 31.9% from $35.3 million in the prior year. Operating income increased due to product volume growth, a favorable product mix and operating efficiencies. Operating margin increased to 15.4% from 12.8% in the prior year.
- Adjusted EBITDA8 of $57.2 million compared to $48.8 million in fiscal 2017.
Performance Materials
The Performance Materials segment consists of the pipeline performance business and the wood treating chemicals business.
Performance Materials | Fourth Quarter | Fourth Quarter | Full Year | Full Year | |||
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 | $42,772 | $24,468 | $163,533 | $56,821 | |||
Operating income | 14,557 | 2,877 | 54,991 | 13,804 | |||
Operating margin | 34.0% | 11.8% | 33.6% | 24.3% |
For the fourth fiscal quarter, the Performance Materials segment reported:
- Sales of $42.8 million, up 75% from $24.5 million in the same period a year ago. Sales growth reflected a full quarter of contribution from Flowchem as compared to a partial quarter in Q4 2017, as well as product volume growth in the pipeline performance and wood treating chemicals businesses.
- Operating income of $14.6 million, or 34.0% of sales, compared to $2.9 million, or 11.8% of sales, last year. The increase in operating income was due to a full quarter of contribution from Flowchem as compared to a partial quarter in Q4 2017, as well as product volume growth in the pipeline performance and wood treating chemicals businesses. Operating income in the fourth quarter of fiscal 2017 was dampened due to the step-up in basis for acquired Flowchem inventories totaling $3.7 million, as well as a $2.5 million increase in depreciation and amortization related to the acquisitions of Sealweld and Flowchem.
- Adjusted EBITDA9 of $18.8 million compared to $10.1 million last year.
For the fiscal 2018 year, the Performance Materials segment reported:
- Sales of $163.5 million, up 188% from the prior year. The sales increase was driven by full-year contributions from Sealweld and Flowchem, as well as product volume growth in the pipeline performance and wood treating chemicals businesses.
- Operating income of $55.0 million, or 33.6% of sales, compared to $13.8 million, or 24.3% of sales, last year. Operating income improved due to higher sales and product volume growth in the pipeline performance and wood treating chemicals businesses. Operating income in fiscal 2017 was unfavorably impacted by a $3.7 million purchase price adjustment to acquired Flowchem inventories and a $2.7 million increase in depreciation and amortization.
- Adjusted EBITDA10 of $71.8 million compared to $22.3 million last year.
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.
9 Non-U.S. GAAP measure. See Tables 1 and 1A for reconciliation.
10 Non-U.S. GAAP measure. See Tables 1 and 1A for reconciliation.
KMG CHEMICALS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts) | |||||||||||||||
Three Months Ended | Year Ended | ||||||||||||||
July 31, | July 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net sales | $122,394 | $96,260 | $465,556 | $333,442 | |||||||||||
Cost of sales | 70,959 | 59,518 | 267,895 | 203,304 | |||||||||||
Gross profit | 51,435 | 36,742 | 197,661 | 130,138 | |||||||||||
Distribution expenses | 9,247 | 9,989 | 36,439 | 38,318 | |||||||||||
Selling, general and administrative expenses | 15,961 | 12,279 | 57,900 | 50,188 | |||||||||||
Amortization of intangible assets | 3,860 | 4,279 | 15,123 | 4,279 | |||||||||||
Restructuring charges | 5 | (50 | ) | 74 | 20 | ||||||||||
Operating income | 22,362 | 10,245 | 88,125 | 37,333 | |||||||||||
Other (expense) income | |||||||||||||||
Interest expense, net | (4,196 | ) | (4,167 | ) | (21,529 | ) | (4,817 | ) | |||||||
Loss on the extinguishment of debt | (342 | ) | (353 | ) | (6,710 | ) | (353 | ) | |||||||
Derivative fair value gain | 338 | − | 5,576 | − | |||||||||||
Other, net | (86 | ) | 190 | (1,063 | ) | 279 | |||||||||
Total other (expense) income, net | (4,286 | ) | (4,330 | ) | (23,726 | ) | (4,891 | ) | |||||||
Income before income taxes | 18,076 | 5,915 | 64,399 | 32,442 | |||||||||||
Provision for income taxes | (67 | ) | (577 | ) | 442 | (8,809 | ) | ||||||||
Net income | 18,009 | $5,338 | 64,841 | $23,633 | |||||||||||
Earnings per share: | |||||||||||||||
Net income per common share basic | $1.16 | $0.45 | $4.41 | $1.99 | |||||||||||
Net income per common share diluted | $1.13 | $0.43 | $4.29 | $1.92 | |||||||||||
Weighted average shares outstanding: | |||||||||||||||
Basic | 15,507 | 11,890 | 14,708 | 11,885 | |||||||||||
Diluted | 15,994 | 12,436 | 15,111 | 12,286 | |||||||||||
KMG CHEMICALS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except for share and per share amounts) | ||||||
July 31, | July 31, | |||||
2018 | 2017 | |||||
Assets | ||||||
Current assets | ||||||
Cash and cash equivalents | $24,436 | $20,708 | ||||
Accounts receivable | ||||||
Trade, net of allowances of $219 at July 31, 2018 and $263 at July 31, 2017 | 61,895 | 51,168 | ||||
Other | 9,943 | 6,168 | ||||
Inventories, net | 54,218 | 46,482 | ||||
Prepaid expenses and other | 4,807 | 8,617 | ||||
Total current assets | 155,299 | 133,143 | ||||
Property, plant and equipment, net | 117,101 | 105,435 | ||||
Goodwill | 233,204 | 224,391 | ||||
Intangible assets, net | 300,457 | 320,401 | ||||
Other assets, net | 12,373 | 9,061 | ||||
Total assets | 818,434 | $792,431 | ||||
Liabilities & stockholders’ equity | ||||||
Current liabilities | ||||||
Accounts payable | $39,005 | $29,570 | ||||
Accrued liabilities | 12,524 | 12,456 | ||||
Employee incentive accrual | 7,726 | 7,713 | ||||
Current portion of long-term debt | − | 3,167 | ||||
Total current liabilities | 59,255 | 52,906 | ||||
Long-term debt | 306,119 | 523,102 | ||||
Deferred tax liabilities | 32,129 | 37,944 | ||||
Other long-term liabilities | 4,864 | 4,763 | ||||
Total liabilities | 402,367 | 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, 15,509,733 shares | ||||||
issued and outstanding at July 31, 2018 and 11,889,649 shares issued and | ||||||
outstanding at July 31, 2017 | 155 | 119 | ||||
Additional paid-in capital | 222,371 | 42,535 | ||||
Accumulated other comprehensive loss | (10,321) | (9,712) | ||||
Retained earnings | 203,862 | 140,774 | ||||
Total stockholders’ equity | 416,067 | 173,716 | ||||
Total liabilities and stockholders’ equity | 818,434 | $792,431 | ||||
KMG CHEMICALS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) | |||||||
Year Ended | |||||||
July 31, | |||||||
2018 | 2017 | ||||||
Cash flows from operating activities | |||||||
Net income | $ | 64,841 | $ | 23,633 | |||
Adjustments to reconcile net income to net cash provided by operating activities | |||||||
Depreciation and amortization | 29,948 | 16,964 | |||||
Loss on extinguishment of debt | 6,710 | 353 | |||||
Amortization of loan costs included in interest expense | 1,421 | 401 | |||||
Stock-based compensation expense | 7,964 | 6,259 | |||||
Deferred income tax (benefit)/expense | (5,517 | ) | (1,090 | ) | |||
Other | 371 | (1,028 | ) | ||||
Derivative fair value gain | (5,576 | ) | − | ||||
Debt repricing transaction costs | 607 | − | |||||
Changes in operating assets and liabilities | |||||||
Accounts receivable — trade | (11,039 | ) | (3,146 | ) | |||
Accounts receivable — other | (2,221 | ) | 254 | ||||
Inventories | (8,206 | ) | 2,870 | ||||
Other current and noncurrent assets | (566 | ) | (1,500 | ) | |||
Accounts payable | 9,904 | (1,096 | ) | ||||
Accrued liabilities and other | (666 | ) | 2,049 | ||||
Net cash provided by operating activities | 87,975 | 44,923 | |||||
Cash flows from investing activities | |||||||
Additions to property, plant and equipment | (23,654 | ) | (13,074 | ) | |||
Purchase of Sealweld, net of cash acquired | (585 | ) | (16,599 | ) | |||
Purchase of Flowchem, net of cash acquired | − | (495,000 | ) | ||||
Other investing activities | (988 | ) | (753 | ) | |||
Proceeds from insurance claim | 50 | 1,251 | |||||
Net cash used in investing activities | (25,177 | ) | (524,175 | ) | |||
Cash flows from financing activities | |||||||
Proceeds from sale of common stock, net of issuance costs | 175,637 | − | |||||
Principal payments on borrowings of term loan | (228,000 | ) | (10,000 | ) | |||
Debt repricing transaction costs | (607 | ) | − | ||||
Proceeds from term loan | − | 550,000 | |||||
Borrowings under credit facility | − | 17,000 | |||||
Deferred financing costs | − | (15,323 | ) | ||||
Net payments under credit facility | − | (52,800 | ) | ||||
Cash payments related to tax withholdings from stock-based awards | (3,729 | ) | (277 | ) | |||
Payment of dividends | (1,753 | ) | (1,423 | ) | |||
Other financing activities | 32 | − | |||||
Net cash (used in)/provided by financing activities | (58,420 | ) | 487,177 | ||||
Effect of exchange rate changes on cash | (650 | ) | (645 | ) | |||
Net increase in cash, cash equivalents and restricted cash | 3,728 | 7,280 | |||||
Cash, cash equivalents and restricted cash at beginning of period | 20,708 | 13,428 | |||||
Cash, cash equivalents and restricted cash at end of period | $ | 24,436 | $ | 20,708 | |||
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) | Fourth Quarter Fiscal 2018 | Fourth Quarter Fiscal 2017 | ||||
Consolidated GAAP net income | $18,009 | $5,338 | ||||
Add back: | ||||||
Interest expense, net | 4,196 | 4,167 | ||||
Loss on the extinguishment of debt | 342 | 353 | ||||
Provision for income taxes | 67 | 577 | ||||
Depreciation & amortization* | 7,590 | 6,100 | ||||
Acquisition & integration expenses | 1,266 | − | ||||
Derivative fair value gain | (338) | − | ||||
Corporate relocation expense | − | 405 | ||||
Restructuring charges, excluding accelerated depreciation | 5 | 1 | ||||
Effect of purchase price accounting on acquired inventories valuation** | − | (50) | ||||
Purchase price adjustment to inventories | − | 3,674 | ||||
Consolidated adjusted EBITDA | $31,137 | $20,565 | ||||
* Includes depreciation related to restructuring and realignment included in non-cash restructuring and realignment charges on the statement of cash flows. ** Higher costs of goods sold for our performance materials segment related to the fair value adjustment in purchase accounting for acquired inventories. |
(in thousands) | Year Ended July 31, 2018 | Year Ended July 31, 2017 | |||||
Consolidated GAAP net income | $64,841 | $23,633 | |||||
Add back (deduct): | |||||||
Interest expense, net | 21,529 | 4,817 | |||||
Income taxes | (442) | 8,809 | |||||
Depreciation & amortization* | 29,948 | 16,964 | |||||
Loss on the extinguishment of debt | 6,710 | 353 | |||||
Derivative fair value gain | (5,576) | — | |||||
Debt repricing transaction costs | 607 | — | |||||
Acquisition & integration expenses | 1,843 | 1,550 | |||||
Corporate relocation expense | — | 370 | |||||
Restructuring & realignment charges, excluding accelerated depreciation | 74 | 20 | |||||
Effect of purchase price accounting on acquired inventories valuation** | — | 3,674 | |||||
Consolidated adjusted EBITDA | $119,534 | $60,190 | |||||
* Includes depreciation related to restructuring and realignment included in non-cash restructuring and realignment charges on the statement of cash flows. ** Higher costs of goods sold for our performance materials segment related to the fair value adjustment in purchase accounting for acquired inventories. | |||||||
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.
Fourth Quarter Fiscal 2018 | Electronic | Performance | |||||||||
(in thousands) | Chemicals | Materials | Corporate | Total | |||||||
Operating Income (Loss) | $11,678 | $14,557 | ($3,873) | $22,362 | |||||||
Other income (expense), net | 61 | (72) | (75) | (86) | |||||||
Depreciation and amortization | 2,727 | 4,325 | 538 | 7,590 | |||||||
Acquisition & integration expenses | − | 38 | 1,228 | 1,266 | |||||||
Restructuring charges | 5 | − | − | 5 | |||||||
Adjusted EBITDA | 14,471 | 18,848 | (2,182) | 31,137 | |||||||
Corporate allocation | 3,201 | 2,458 | (5,659) | − | |||||||
Adjusted EBITDA excl. corporate allocation | $17,672 | $21,306 | ($7,841) | $31,137 | |||||||
Year Ended July 31, 2018 | Electronic | Performance | ||||||||||
(in thousands) | Chemicals | Materials | Corporate | Total | ||||||||
Operating Income (Loss) | $46,554 | $54,991 | ($13,420) | $88,125 | ||||||||
Other income (expense), net | (555) | (112) | (396) | (1,063) | ||||||||
Depreciation and amortization | 11,145 | 16,743 | 2,060 | 29,948 | ||||||||
Acquisition & integration expenses | − | 163 | 1,680 | 1,843 | ||||||||
Restructuring charges | 74 | − | − | 74 | ||||||||
Debt repricing transaction costs | − | − | 607 | 607 | ||||||||
Adjusted EBITDA | 57,218 | 71,785 | (9,469) | 119,534 | ||||||||
Corporate allocation | 12,304 | 8,351 | (20,655) | − | ||||||||
Adjusted EBITDA excl. corporate allocation | $69,522 | $80,136 | ($30,124) | $119,534 | ||||||||
Fourth Quarter Fiscal 2017 | Electronic | Performance | |||||||||
(in thousands) | Chemicals | Materials | Corporate | Total | |||||||
Operating Income (Loss) | $9,234 | $2,877 | ($1,866) | $10,245 | |||||||
Other income (expense), net | 397 | (101) | (106) | 190 | |||||||
Depreciation and amortization | 3,282 | 2,821 | (3) | 6,100 | |||||||
Acquisition & integration expenses | 12 | 819 | (426) | 405 | |||||||
Effect of purchase price accounting on acquired inventories valuation | — | 3,674 | — | 3,674 | |||||||
Restructuring charges* | — | — | (50) | (50) | |||||||
Corporate relocation expense | — | — | 1 | 1 | |||||||
Adjusted EBITDA | 12,924 | 10,090 | (2,449) | 20,565 | |||||||
Corporate allocation | 3,896 | 1,006 | (4,902) | — | |||||||
Adjusted EBITDA excl. corporate allocation | $16,820 | $11,096 | ($7,351) | $20,565 | |||||||
*Excludes depreciation |
Year Ended July 31, 2017 | Electronic | Performance | |||||||
(in thousands) | Chemicals | Materials | Corporate | Total | |||||
Operating Income (Loss) | $35,317 | $13,804 | ($11,788) | $37,333 | |||||
Other income (expense), net | 659 | (167) | (215) | 277 | |||||
Depreciation and amortization | 12,772 | 4,192 | — | 16,964 | |||||
Acquisition & integration expenses | 20 | 819 | 712 | 1,550 | |||||
Effect of purchase price accounting on acquired inventories valuation | — | 3,674 | — | 3,674 | |||||
Restructuring charges | — | — | 20 | 20 | |||||
Corporate relocation expense | — | — | 370 | 370 | |||||
Adjusted EBITDA | 48,768 | 22,322 | (10,900) | 60,190 | |||||
Corporate allocation | 12,894 | 3,282 | (16,176) | — | |||||
Adjusted EBITDA excl. corporate allocation | $61,662 | $25,604 | ($27,076) | $60,190 | |||||
* Excludes depreciation | |||||||||
Table 2
RECONCILIATION OF NET INCOME TO ADJUSTED NET INCOME AND ADJUSTED DILUTED EARNINGS PER SHARE
(in thousands) | Three Months Ended | ||||||
July 31, | |||||||
2018 | 2017 | ||||||
Net income | $18,009 | $5,338 | |||||
Items impacting pre-tax income: | |||||||
Amortization of Flowchem intangible assets | 3,237 | — | |||||
Loss on the extinguishment of debt | 342 | 353 | |||||
Acquisition & integration expenses | 1,266 | 405 | |||||
Amortization of debt discounts and financing costs | 298 | — | |||||
Restructuring & realignment charges | 5 | (50) | |||||
Derivative fair value gain | (338) | — | |||||
Impact of the Tax Cuts and Jobs Act | (1,321) | — | |||||
Corporate relocation expense | — | 1 | |||||
Effect of purchase price accounting on acquired inventories valuation* | — | 3,674 | |||||
Provision for income taxes** | (1,299) | (1,186) | |||||
Adjusted net income | $20,199 | $8,535 | |||||
Adjusted diluted earnings per share | $1.26 | $ 0.69 | |||||
Weighted average diluted shares outstanding | 15,994 | 12,436 | |||||
* Higher costs of goods sold for our performance materials segment related to the fair value adjustment in purchase accounting for acquired inventories. Only 73% of the purchase price adjustment is deductible for income taxes and has therefore been included in the calculation of the tax-effect of the items impacting pre-tax income. ** For fiscal year 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 enactment of the Tax Cut and Jobs Act of 2017 in December 2017. For the fiscal year ended 2017, represents the aggregate tax-effect of assuming a 35% tax rate of items impacting pre-tax income. |
(in thousands) | Year Ended | ||||||
July 31, | |||||||
2018 | 2017 | ||||||
Net income | $64,841 | $23,633 | |||||
Items impacting pre-tax income: | |||||||
Amortization of Flowchem intangible assets | 12,575 | — | |||||
Loss on extinguishment of debt | 6,710 | 353 | |||||
Acquisition & integration expenses | 1,843 | 1,550 | |||||
Amortization of debt discounts and financing costs | 1,421 | — | |||||
Debt repricing transaction costs | 607 | — | |||||
Restructuring & realignment charges | 74 | 20 | |||||
Derivative fair value gain | (5,576) | — | |||||
Impact of the Tax Cuts and Jobs Act | (12,326) | — | |||||
Corporate relocation expense | — | 370 | |||||
Effect of purchase price accounting on acquired inventories valuation* | — | 3,674 | |||||
Income taxes** | (4,765) | (1,741) | |||||
Adjusted net income | $65,404 | $27,859 | |||||
Adjusted diluted earnings per share | $4.33 | $2.27 | |||||
Weighted average diluted shares outstanding | 15,111 | 12,286 | |||||
* Higher costs of goods sold for our performance materials segment related to the fair value adjustment in purchase accounting for acquired inventories. Only 73% of the purchase price adjustment is deductible for income taxes and has therefore been included in the calculation of the tax-effect of the items impacting pre-tax income. ** For fiscal year 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 enactment of the Tax Cut and Jobs Act of 2017 in December 2017. For the fiscal year ended 2017, represents the aggregate tax-effect of assuming a 35% tax rate of items impacting pre-tax income. | |||||||
Table 2A
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES
Fourth Quarter Fiscal 2018 | KMG Chemicals, Inc. | ||||||||||
Dollars in thousands, except EPS | |||||||||||
Operating | Net | Diluted Earnings | |||||||||
Income | Margin | Income | Per Share | ||||||||
GAAP measure | $22,362 | 18.3% | $18,009 | $1.13 | |||||||
Amortization of Flowchem intangible assets | 3,237 | 2.6% | 2,363 | 0.15 | |||||||
Acquisition & integration expenses | 1,266 | 1.0% | 924 | 0.05 | |||||||
Restructuring & realignment charges | 5 | 0.1% | 4 | 0.00 | |||||||
Impact of the Tax Cuts and Jobs Act | — | 0.0% | (1,321) | (0.08) | |||||||
Loss on the extinguishment of debt | — | 0.0% | 250 | 0.02 | |||||||
Derivative fair value gain | — | 0.0% | (247) | (0.02) | |||||||
Amortization of debt discounts and financing costs | — | 0.0% | 217 | 0.01 | |||||||
Non-GAAP measure | $26,870 | 22.0% | $20,199 | $1.26 |
Year Ended July 31, 2018 | KMG Chemicals, Inc. | ||||||||||
Dollars in thousands, except EPS | |||||||||||
Operating | Net | Diluted Earnings | |||||||||
Income | Margin | Income | Per Share | ||||||||
GAAP measure | $88,125 | 18.9% | $64,841 | $4.29 | |||||||
Amortization of Flowchem intangible assets | 12,575 | 2.7% | 9,181 | 0.61 | |||||||
Acquisition & integration expenses | 1,843 | 0.4% | 1,345 | 0.09 | |||||||
Restructuring & realignment charges | 74 | 0.0% | 54 | 0.01 | |||||||
Impact of the Tax Cuts and Jobs Act | — | 0.0% | (12,326) | (0.82) | |||||||
Loss on the extinguishment of debt | — | 0.0% | 4,899 | 0.32 | |||||||
Derivative fair value gain | — | 0.0% | (4,070) | (0.27) | |||||||
Amortization of debt discounts and financing costs | — | 0.0% | 1,037 | 0.07 | |||||||
Debt repricing transaction costs | — | 0.0% | 443 | 0.03 | |||||||
Non-GAAP measure | $102,617 | 22.0% | $65,404 | $4.33 |
Fourth Quarter Fiscal 2017 | KMG Chemicals, Inc. | |||||||||||
Dollars in thousands, except EPS | ||||||||||||
Operating | Net | Diluted Earnings | ||||||||||
Income | Margin | Income | Per Share | |||||||||
GAAP measure | $ 10,245 | 10.6% | $5,338 | $0.43 | ||||||||
Acquisition & integration expenses | 405 | 0.4% | 263 | 0.02 | ||||||||
Loss on the extinguishment of debt | 353 | 0.4% | 230 | 0.02 | ||||||||
Restructuring & realignment charges | (50) | (0.0%) | (32) | 0.00 | ||||||||
Corporate relocation expense | 1 | 0.0% | 1 | 0.00 | ||||||||
Effect of purchase price accounting on acquired inventories valuation* | 3,674 | 3.8% | 2,735 | 0.22 | ||||||||
Non-GAAP measure | $14,628 | 15.2% | $8,535 | $0.69 | ||||||||
* Higher costs of goods sold for our performance materials segment related to the fair value adjustment in purchase accounting for acquired inventories. Only 73% of the purchase price adjustment is deductible for income taxes and has therefore been included in the calculation of the tax-effect of the items impacting pre-tax income. |
KMG Chemicals, Inc. | ||||||||||
Year Ended July 31, 2017 | ||||||||||
Dollars in thousands, except EPS | ||||||||||
Operating | Net | Diluted Earnings | ||||||||
Income | Margin | Income | Per Share | |||||||
GAAP measure | $37,333 | 11.2% | $23,633 | $1.92 | ||||||
Acquisition & integration expenses | 1,550 | 0.5% | 1,008 | 0.08 | ||||||
Loss on the extinguishment of debt | 353 | 0.1% | 229 | 0.02 | ||||||
Restructuring & realignment charges | 20 | 0.0% | 13 | 0.01 | ||||||
Corporate relocation expense | 370 | 0.1% | 241 | 0.02 | ||||||
Effect of purchase price accounting on acquired inventories valuation* | 3,674 | 1.1% | 2,735 | 0.22 | ||||||
Non-GAAP measure | $43,300 | 13.0% | $27,859 | $2.27 | ||||||
* Higher costs of goods sold for our performance materials segment related to the fair value adjustment in purchase accounting for acquired inventories. Only 73% of the purchase price adjustment is deductible for income taxes and has therefore been included in the calculation of the tax-effect of the items impacting pre-tax income. | ||||||||||