FORT WORTH, Texas, Oct. 16, 2017 (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, 2017.
2017 Fourth Quarter Financial Highlights
- Sales increased 28% from the fourth quarter of last year to a record $96.3 million.
- GAAP diluted earnings per share was $0.43, up 39% compared to $0.31 per diluted share in the fourth quarter of fiscal 2016. GAAP EPS in 2017 was unfavorably impacted by $3.7 million in purchase price adjustments to acquired inventories, equivalent to $0.22 per diluted share.
- Adjusted diluted earnings per share1 increased to a record $0.69 compared to $0.38 per share reported in the fourth quarter of fiscal 2016.
- GAAP net income rose 43% to $5.3 million compared to $3.7 million in last year’s fourth quarter.
- Adjusted EBITDA2 grew to a record $20.6 million, up from $11.7 million in the fourth quarter of fiscal 2016.
2017 Fiscal Year Financial Highlights
- Sales increased 12% from the prior year to $333.4 million.
- GAAP diluted earnings per share was a record $1.92, up 22% from fiscal 2016. GAAP EPS in 2017 was unfavorably impacted by $3.7 million in purchase price adjustments to acquired inventories, equivalent to $0.22 per diluted share.
- Adjusted diluted earnings per share was a record $2.27, up 41% from the prior year.
- GAAP net income of $23.6 million increased 27% from the prior year.
- Adjusted EBITDA grew to a record $60.2 million, an increase of 33% from the prior year’s $45.4 million.
“Fiscal 2017 was a year of continued record financial performance and strategic growth for KMG,” said Chris Fraser, KMG chairman and CEO. “We generated record adjusted EBITDA for the third consecutive year and record earnings per share for the second consecutive year. We also acquired two premier businesses — Sealweld and Flowchem — that advanced our growth strategy and significantly expanded our breadth and capabilities in the global pipeline and energy markets.
“Our performance materials segment, which consists of our pipeline performance and wood treating chemicals businesses, generated fiscal 2017 sales of $56.8 million, a 56% increase from the prior year. Growth in this segment benefited from increased capital and maintenance spending in the energy industry that drove stronger demand for industrial lubricants, as well as a partial-year contribution from Sealweld and a partial-quarter contribution from Flowchem. Additionally, sales in our wood treating chemicals business improved from the prior year.
“Excluding a foreign currency translation impact of $3.1 million, fiscal 2017 sales in our electronic chemicals segment increased 7% from the prior year, representing our most robust sales growth in this segment over the past three years. Positive fundamentals within the global semiconductor industry enhanced our product volume growth, and we also benefited from our ongoing efforts to serve dynamic end markets, such as cloud computing, automotive and advanced logic.”
Mr. Fraser continued, “Fourth quarter adjusted diluted earnings per share of $0.69 increased 82% from the prior-year period and represented a quarterly record for KMG. Our fourth quarter results reflected continued strong performance across our global businesses, further improvements in our operational efficiency and a tax benefit.”
Mr. Fraser concluded, “Given solid fundamentals and favorable growth outlooks in our business segments, as well as full-year contributions from Sealweld and Flowchem, we project fiscal 2018 sales of $435-450 million and fiscal 2018 adjusted EBITDA of $110-115 million.”
Consolidated results
| Fourth Quarter Dollars in thousands, except EPS | Fiscal 2017 | Fiscal 2016 | |||||||||||
| As Reported | Adjusted | As Reported | Adjusted | ||||||||||
| (GAAP) | (non-GAAP)3 | (GAAP) | (non-GAAP)4 | ||||||||||
| Net sales | $96,260 | $96,260 | $75,301 | $75,301 | |||||||||
| Operating income | 10,245 | 14,628 | 7,085 | 7,849 | |||||||||
| Operating margin | 10.6% | 15.2% | 9.4% | 10.4% | |||||||||
| Net income | 5,338 | 8,535 | 3,743 | 4,483 | |||||||||
| Diluted earnings per share | $0.43 | $0.69 | $ 0.31 | $0.38 | |||||||||
| Fiscal Year ended July 31 Dollars in thousands, except EPS | Fiscal 2017 | Fiscal 2016 | |||||||||||
| As Reported | Adjusted | As Reported | Adjusted | ||||||||||
| (GAAP) | (non-GAAP)5 | (GAAP) | (non-GAAP)6 | ||||||||||
| Net sales | $333,442 | $333,442 | $297,978 | $297,978 | |||||||||
| Operating income | 37,333 | 43,300 | 27,571 | 31,218 | |||||||||
| Operating margin | 11.2% | 13.0% | 9.3% | 10.5% | |||||||||
| Net income | 23,633 | 27,859 | 18,675 | 19,219 | |||||||||
| Diluted earnings per share | $1.92 | $2.27 | $1.57 | $1.61 | |||||||||
Business segment results
| Electronic Chemicals | Fourth Quarter | Fourth Quarter | Full Year | Full Year | |||||||||
| Dollars in thousands | Fiscal 2017 | Fiscal 2016 | Fiscal 2017 | Fiscal 2016 | |||||||||
| As Reported | As Reported | As Reported | As Reported | ||||||||||
| (GAAP) | (GAAP) | (GAAP) | (GAAP) | ||||||||||
| Net sales | $71,792 | $66,282 | $276,621 | $261,523 | |||||||||
| Operating income | 9,132 | 8,214 | 35,285 | 32,141 | |||||||||
| Operating margin | 12.7% | 12.4% | 12.8% | 12.3% | |||||||||
For the fourth fiscal quarter, the Electronic Chemicals segment reported:
- Sales of $71.8 million, up 8% from the fourth quarter of fiscal 2016. Excluding a foreign currency translation impact of $400,000, sales increased 9% year-over-year to $72.2 million. Product volume growth primarily drove the Q4 sales increase.
- Operating income of $9.1 million, up 11% from $8.2 million in the same period of fiscal 2016. Operating income increased primarily due to product volume growth and operating efficiencies. Operating margin improved to 12.7% compared to 12.4% in the prior-year period.
- Adjusted EBITDA7 of $12.9 million compared to $11.3 million last year.
For the fiscal 2017 year, the Electronic Chemicals segment reported:
- Sales of $276.6 million, an increase of 6% compared to the prior year. Excluding a foreign currency translation impact of $3.1 million, sales grew 7% year-over-year. Product volume growth was the primary driver of the sales increase.
- Operating income of $35.3 million, up 10% from $32.1 million in the prior year. Operating income increased due to product volume growth, a favorable product mix and operating efficiencies. Operating margin increased to 12.8% from 12.3% in the prior year.
- Adjusted EBITDA8 of $48.8 million compared to $43.9 million in fiscal 2016.
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 2017 | Fiscal 2016 | Fiscal 2017 | Fiscal 2016 | |||||||||
| As Reported | As Reported | As Reported | As Reported | ||||||||||
| (GAAP) | (GAAP) | (GAAP) | (GAAP) | ||||||||||
| Net sales | $24,468 | $9,019 | $56,821 | $36,455 | |||||||||
| Operating income | 2,877 | 3,210 | 13,804 | 12,631 | |||||||||
| Operating margin | 11.8% | 35.6% | 24.3% | 34.6% | |||||||||
For the fourth fiscal quarter, the Performance Materials segment reported:
- Sales of $24.5 million, up 171% from $9.0 million in the same period a year ago. Sales growth reflected contributions from Sealweld and Flowchem, product volume growth in industrial lubricants and increased sales of wood treating chemicals.
- Operating income of $2.9 million, or 11.8% of sales, compared to $3.2 million, or 35.6% of sales, last year. The decrease in operating income was due to the step-up in basis for acquired inventories, totaling $3.7 million, as required under purchase price accounting, as well as a $2.5 million increase in depreciation and amortization related to the acquisitions of Sealweld and Flowchem. For the same reasons, segment operating margins decreased to 11.8%, from 35.6% in the fourth quarter of 2016.
- Adjusted EBITDA9 of $10.1 million compared to $3.4 million last year.
For the fiscal 2017 year, the Performance Materials segment reported:
- Sales of $56.8 million, up 56% from the prior year. The sales increase was driven by the contributions from Sealweld and Flowchem, as well as product volume growth in industrial lubricants and increased sales of wood treating chemicals.
- Operating income of $13.8 million, or 24.3% of sales, compared to $12.6 million, or 34.6% of sales, last year. Although operating income improved from the prior year due to the contributions from Sealweld and Flowchem, and stronger sales in the industrial lubricants and wood treating chemicals businesses, operating income and margin were unfavorably impacted by a $3.7 million purchase price adjustment to acquired inventories and a $2.7 million increase in depreciation and amortization expense.
- Adjusted EBITDA10 of $22.3 million compared to $13.7 million last year.
Fiscal 2018 Outlook
- Sales: Fiscal 2018 consolidated net sales are forecast to be $435-450 million.
- Adjusted EBITDA: Fiscal 2018 adjusted EBITDA is forecast to be $110-115 million. Our fiscal 2018 adjusted EBITDA forecast includes approximately $6.5 million in stock-based compensation expense.
- Depreciation and amortization: Depreciation and amortization expense is forecast to be approximately $21 million.
- Capital expenditures: Capital expenditures are forecast to be approximately $29 million, including a portion of our planned capital investment in Singapore.
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 with 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 charges and acquisition and integration-related expenses.
Conference call
Date: Monday, October 16, 2017
Time: 5:00 p.m. ET
Dial in: 844-316-8066 or 703-736-7353
Participant passcode: 92450504
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 October 16, 2017. To access the call, dial 855-859-2056 or 404-537-3406 using participant passcode 92450504.
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, | ||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||||||
| Net sales | $96,260 | $75,301 | $333,442 | $297,978 | |||||||||||||
| Cost of sales | 59,518 | 46,444 | 203,304 | 182,470 | |||||||||||||
| Gross profit | 36,742 | 28,857 | 130,138 | 115,508 | |||||||||||||
| Distribution expenses | 9,989 | 8,861 | 38,318 | 36,986 | |||||||||||||
| Selling, general and administrative expenses | 16,558 | 12,680 | 54,467 | 49,192 | |||||||||||||
| Restructuring charges | (50 | ) | 231 | 20 | 1,629 | ||||||||||||
| Realignment charges | − | − | − | 130 | |||||||||||||
| Operating income | 10,245 | 7,085 | 37,333 | 27,571 | |||||||||||||
| Other (expense) income | |||||||||||||||||
| Interest expense, net | (4,167 | ) | (194 | ) | (4,817 | ) | (799 | ) | |||||||||
| Loss on the extinguishment of debt | (353 | ) | − | (353 | ) | − | |||||||||||
| Gain on purchase of NFC | − | (243 | ) | − | 1,826 | ||||||||||||
| Other, net | 190 | (125 | ) | 279 | (368 | ) | |||||||||||
| Total other (expense) income, net | (4,330 | ) | (562 | ) | (4,891 | ) | 659 | ||||||||||
| Income before income taxes | 5,915 | 6,523 | 32,442 | 28,230 | |||||||||||||
| Provision for income taxes | (577 | ) | (2,780 | ) | (8,809 | ) | (9,555 | ) | |||||||||
| Net income | $5,338 | $3,743 | $23,633 | $18,675 | |||||||||||||
| Earnings per share: | |||||||||||||||||
| Net income per common share basic | $0.45 | $0.32 | $1.99 | $1.59 | |||||||||||||
| Net income per common share diluted | $0.43 | $0.31 | $1.92 | $1.57 | |||||||||||||
| Weighted average shares outstanding: | |||||||||||||||||
| Basic | 11,890 | 11,735 | 11,885 | 11,719 | |||||||||||||
| Diluted | 12,436 | 11,937 | 12,286 | 11,926 | |||||||||||||
| KMG CHEMICALS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except for share and per share amounts) | ||||||
| July 31, | July 31, | |||||
| 2017 | 2016 | |||||
| Assets | ||||||
| Current assets | ||||||
| Cash and cash equivalents | $20,708 | $12,428 | ||||
| Accounts receivable | ||||||
| Trade, net of allowances of $263 at July 31, 2017 and $210 at July 31, 2016 | 51,168 | 33,324 | ||||
| Other | 6,168 | 5,572 | ||||
| Inventories, net | 46,482 | 37,401 | ||||
| Prepaid expenses and other | 8,617 | 6,623 | ||||
| Total current assets | 133,143 | 95,348 | ||||
| Property, plant and equipment, net | 105,435 | 79,739 | ||||
| Goodwill | 224,391 | 22,228 | ||||
| Intangible assets, net | 320,401 | 33,906 | ||||
| Restricted cash | − | 1,000 | ||||
| Other assets, net | 9,061 | 4,807 | ||||
| Total assets | $792,431 | $237,028 | ||||
| Liabilities & stockholders’ equity | ||||||
| Current liabilities | ||||||
| Accounts payable | $29,570 | $26,418 | ||||
| Accrued liabilities | 12,456 | 11,252 | ||||
| Employee incentive accrual | 7,713 | 5,999 | ||||
| Current portion of long-term debt | 3,167 | − | ||||
| Total current liabilities | 52,906 | 43,669 | ||||
| Long-term debt | 523,102 | 35,800 | ||||
| Deferred tax liabilities | 37,944 | 9,948 | ||||
| Other long-term liabilities | 4,763 | 4,422 | ||||
| Total liabilities | 618,715 | 93,839 | ||||
| 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, 11,889,649 shares issued and outstanding at July 31, 2017 and 11,877,282 shares issued and outstanding at July 31, 2016 | 119 | 119 | ||||
| Additional paid-in capital | 42,535 | 36,553 | ||||
| Accumulated other comprehensive loss | (9,712 | ) | (12,047 | ) | ||
| Retained earnings | 140,774 | 118,564 | ||||
| Total stockholders’ equity | 173,716 | 143,189 | ||||
| Total liabilities and stockholders’ equity | $792,431 | $237,028 | ||||
| KMG CHEMICALS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) | ||||||||
| Year Ended | ||||||||
| July 31, | ||||||||
| 2017 | 2016 | |||||||
| Cash flows from operating activities | ||||||||
| Net income | $ | 23,633 | $ | 18,675 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities | ||||||||
| Depreciation and amortization | 16,964 | 14,534 | ||||||
| Non-cash restructuring and realignment charges | − | 295 | ||||||
| Loss on extinguishment of debt | 353 | − | ||||||
| Amortization of loan costs included in interest expense | 401 | 167 | ||||||
| Stock-based compensation expense | 6,259 | 4,836 | ||||||
| Allowance for excess and obsolete inventory | 22 | 173 | ||||||
| Gain on NFC acquisition | − | (1,826 | ) | |||||
| Gain on equipment disposition | (200 | ) | − | |||||
| Other | (156 | ) | 81 | |||||
| Deferred income tax expense/(benefit) | (1,090 | ) | 258 | |||||
| Tax expense/(benefit) from stock-based awards | (694 | ) | (43 | ) | ||||
| Changes in operating assets and liabilities | ||||||||
| Accounts receivable — trade | (3,146 | ) | 5,154 | |||||
| Accounts receivable — other | 254 | (1,889 | ) | |||||
| Inventories | 2,870 | 4,348 | ||||||
| Other current and noncurrent assets | (1,500 | ) | 1,221 | |||||
| Accounts payable | (1,096 | ) | (9,226 | ) | ||||
| Accrued liabilities and other | 2,049 | 4,276 | ||||||
| Net cash provided by operating activities | 44,923 | 41,034 | ||||||
| Cash flows from investing activities | ||||||||
| Additions to property, plant and equipment | (13,074 | ) | (14,358 | ) | ||||
| Additions to product registration intangibles | (753 | ) | − | |||||
| Purchase of NFC, net of cash acquired | − | (2,679 | ) | |||||
| Purchase of Sealweld, net of cash acquired | (16,599 | ) | − | |||||
| Purchase of Flowchem, net of cash acquired | (495,000 | ) | − | |||||
| Proceeds from insurance claim | 1,251 | − | ||||||
| Net cash used in investing activities | (524,175 | ) | (17,037 | ) | ||||
| Cash flows from financing activities | ||||||||
| Deferred financing costs | (15,323 | ) | − | |||||
| Proceeds from borrowings under credit facility | 17,000 | 2,800 | ||||||
| Net payments under credit facility | (52,800 | ) | (20,000 | ) | ||||
| Proceeds from term loan | 550,000 | − | ||||||
| Principal payments on borrowings on term loans | (10,000 | ) | − | |||||
| Tax benefit from stock-based awards | − | 43 | ||||||
| Cash payments related to tax withholdings from stock-based awards | (277 | ) | − | |||||
| Payment of dividends | (1,423 | ) | (1,406 | ) | ||||
| Net cash provided by (used in) financing activities | 487,177 | (18,563 | ) | |||||
| Effect of exchange rate changes on cash | (645 | ) | (523 | ) | ||||
| Net increase in cash, cash equivalents and restricted cash | 7,280 | 4,911 | ||||||
| Cash, cash equivalents and restricted cash at beginning of period | 13,428 | 8,517 | ||||||
| Cash, cash equivalents and restricted cash at end of period | $ | 20,708 | $ | 13,428 | ||||
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 2017 | Fourth Quarter Fiscal 2016 | |||
| Consolidated GAAP net income | $5,338 | $3,743 | |||
| Add back: | |||||
| Interest expense, net | 4,167 | 194 | |||
| Loss on the extinguishment of debt | 353 | − | |||
| Provision for income taxes | 577 | 2,780 | |||
| Depreciation & amortization* | 6,100 | 3,927 | |||
| Gain on purchase of NFC | − | 243 | |||
| Acquisition & integration expenses | 405 | 102 | |||
| Corporate relocation expense | 1 | 431 | |||
| Restructuring charges, excluding accelerated depreciation | (50 | ) | 231 | ||
| Effect of purchase price accounting on acquired inventories valuation** | 3,674 | − | |||
| Consolidated adjusted EBITDA | $20,565 | $11,651 | |||
| * 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, 2017 | Year Ended July 31, 2016 | |||
| Consolidated GAAP net income | $23,633 | $18,675 | |||
| Add back (deduct): | |||||
| Interest expense, net | 4,817 | 799 | |||
| Loss on the extinguishment of debt | 353 | − | |||
| Provision for income taxes | 8,809 | 9,555 | |||
| Depreciation & amortization* | 16,964 | 14,829 | |||
| Gain on purchase of NFC | − | (1,826 | ) | ||
| Acquisition & integration expenses | 1,550 | 335 | |||
| Corporate relocation expense | 370 | 1,553 | |||
| Restructuring & realignment charges, excluding accelerated depreciation | 20 | 1,464 | |||
| Effect of purchase price accounting on acquired inventories valuation** | 3,674 | − | |||
| Consolidated adjusted EBITDA | $60,190 | $45,384 | |||
| * 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 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 | ||||||
| * Higher costs of goods sold for our performance materials segment related to the fair value adjustment in purchase accounting for acquired inventories. | |||||||||||
| 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 | − | 18,616 | ||||||
| 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 | |||||
| * Higher costs of goods sold for our performance materials segment related to the fair value adjustment in purchase accounting for acquired inventories. | ||||||||||
| Fourth Quarter Fiscal 2016 | Electronic | Performance | ||||||||||
| (in thousands) | Chemicals | Materials | Corporate | Total | ||||||||
| Operating Income (Loss) | $8,214 | $3,210 | ($4,339 | ) | $7,085 | |||||||
| Other income (expense), net | (45 | ) | (45 | ) | (35 | ) | (125 | ) | ||||
| Depreciation and amortization | 3,170 | 282 | 475 | 3,927 | ||||||||
| Acquisition & integration expenses | − | − | 102 | 102 | ||||||||
| Restructuring charges* | − | − | 231 | 231 | ||||||||
| Corporate relocation expense | − | − | 431 | 431 | ||||||||
| Adjusted EBITDA | 11,339 | 3,447 | (3,135 | ) | 11,651 | |||||||
| Corporate allocation | 2,558 | 799 | (3,357 | ) | − | |||||||
| Adjusted EBITDA excl. corporate allocation | $13,897 | $4,246 | ($6,492 | ) | $11,651 | |||||||
| *Excludes depreciation | ||||||||||||
| Year Ended July 31, 2016 | Electronic | Performance | ||||||||||
| (in thousands) | Chemicals | Materials | Corporate | Total | ||||||||
| Operating Income (Loss) | $32,141 | $12,631 | ($17,201 | ) | $27,571 | |||||||
| Other income (expense), net | (118 | ) | (120 | ) | (130 | ) | (368 | ) | ||||
| Depreciation and amortization | 11,830 | 1,150 | 1,849 | 14,829 | ||||||||
| Acquisition & integration expenses | − | − | 335 | 335 | ||||||||
| Restructuring & realignment charges* | − | − | 1,464 | 1,464 | ||||||||
| Corporate relocation expense | − | − | 1,553 | 1,553 | ||||||||
| Adjusted EBITDA | 43,853 | 13,661 | (12,130 | ) | 45,384 | |||||||
| Corporate allocation | 10,337 | 3,371 | (13,708 | ) | − | |||||||
| Adjusted EBITDA excl. corporate allocation | $54,190 | $17,032 | ($25,838 | ) | $45,384 | |||||||
| * 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, | |||||
| 2017 | 2016 | ||||
| Net income | $5,338 | $3,743 | |||
| Items impacting pre-tax income: | |||||
| Acquisition & integration expenses | 405 | 102 | |||
| Loss on the extinguishment of debt | 353 | − | |||
| Corporate relocation expense | 1 | 431 | |||
| Gain on purchase of NFC | − | 243 | |||
| Restructuring & realignment charges | (50 | ) | 231 | ||
| Effect of purchase price accounting on acquired inventories valuation* | 3,674 | − | |||
| Provision for income taxes** | (1,186 | ) | (267) | ||
| Adjusted net income | $8,535 | $4,483 | |||
| Adjusted diluted earnings per share | $ 0.69 | $ 0.38 | |||
| Weighted average diluted shares outstanding | 12,436 | 11,937 | |||
| * 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. ** Represents the aggregate tax-effect assuming a 35% tax rate of the items impacting pre-tax income, except for the gain on the purchase of NFC, which is not a recognized gain for tax purposes. | |||||
| (in thousands) | Year Ended | ||||||
| July 31, | |||||||
| 2017 | 2016 | ||||||
| Net income | $23,633 | $18,675 | |||||
| Items impacting pre-tax income: | |||||||
| Acquisition & integration expenses | 1,550 | 335 | |||||
| Loss on extinguishment of debt | 353 | − | |||||
| Corporate relocation expense | 370 | 1,553 | |||||
| Gain on purchase of NFC | − | (1,826 | ) | ||||
| Restructuring & realignment charges | 20 | 1,759 | |||||
| Effect of purchase price accounting on acquired inventories valuation* | 3,674 | − | |||||
| Provision for income taxes** | (1,741 | ) | (1,277 | ) | |||
| Adjusted net income | $27,859 | $19,219 | |||||
| Adjusted diluted earnings per share | $2.27 | $1.61 | |||||
| Weighted average diluted shares outstanding | 12,286 | 11,926 | |||||
| * 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. ** Represents the aggregate tax-effect assuming a 35% tax rate of the items impacting pre-tax income, except for the gain on the purchase of NFC, which is not a recognized gain for tax purposes. | |||||||
Table 2A
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES
| 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. | |||||||||||||
| Year Ended July 31, 2017 | KMG Chemicals, Inc. | ||||||||||
| 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. | |||||||||||
| Fourth Quarter Fiscal 2016 | KMG Chemicals, Inc. | ||||||||||
| Dollars in thousands, except EPS | |||||||||||
| Operating | Net | Diluted Earnings | |||||||||
| Income | Margin | Income | Per Share | ||||||||
| GAAP measure | $7,085 | 9.4 | % | $3,743 | $0.31 | ||||||
| Acquisition & integration expenses | 102 | 0.1 | % | 66 | 0.01 | ||||||
| Restructuring charges | 231 | 0.3 | % | 150 | 0.01 | ||||||
| Gain on purchase of NFC | − | 0.0 | % | 243 | 0.02 | ||||||
| Corporate relocation expense | 431 | 0.6 | % | 281 | 0.03 | ||||||
| Non-GAAP measure | $7,849 | 10.4 | % | $4,483 | $0.38 | ||||||
| Year Ended July 31, 2016 | KMG Chemicals, Inc. | ||||||||||||
| Dollars in thousands, except EPS | |||||||||||||
| Operating | Net | Diluted Earnings | |||||||||||
| Income | Margin | Income | Per Share | ||||||||||
| GAAP measure | $27,571 | 9.3 | % | $18,675 | $1.57 | ||||||||
| Acquisition & integration expenses | 335 | 0.1 | % | 218 | 0.02 | ||||||||
| Restructuring & realignment charges | 1,759 | 0.6 | % | 1,143 | 0.09 | ||||||||
| Gain on purchase of NFC | − | 0.0 | % | (1,826 | ) | (0.15) | |||||||
| Corporate relocation expense | 1,553 | 0.5 | % | 1,009 | 0.08 | ||||||||
| Non-GAAP measure | $31,218 | 10.5 | % | $19,219 | $1.61 | ||||||||
KMG Investor Relations
Eric Glover, 817-761-6006
eglover@kmgchemicals.com