FORT WORTH, Texas, March 08, 2018 (GLOBE NEWSWIRE) -- KMG (NYSE:KMG), a global provider of specialty chemicals and performance materials, today announced financial results for the fiscal 2018 second quarter ended January 31, 2018.
2018 Second Quarter Financial Highlights
- Sales increased 44% from the second quarter of last year to a record $113.9 million.
- GAAP diluted earnings per share increased 200% to $1.59 from $0.53 per diluted share in the second quarter of fiscal 2017.
- Adjusted diluted earnings per share1 were a record $1.04 compared to $0.57 per share reported in the second quarter of last year. Among other items, adjusted EPS exclude an $11.0 million benefit from recent U.S. tax reform.
- GAAP net income increased to a record $25.3 million, compared to $6.5 million in the second quarter of last year.
- Adjusted EBITDA2 was a record $29.4 million, up 124% from $13.1 million in the second quarter of fiscal 2017.
“KMG’s record second quarter results reflect broad-based growth across our businesses, significant contributions from recent acquisitions and our disciplined focus on execution,” said Chris Fraser, KMG chairman and CEO. “Supported by our continued strong financial performance and reduction in leverage from our recent equity offering, we successfully repriced our outstanding debt during the second quarter, generating substantial interest expense savings.”
Mr. Fraser continued, “Second quarter sales in our electronic chemicals segment increased 6% year-over-year to a record $73.9 million, driven by growth in each of our major geographic regions. Segment operating income and margins also reached record levels in the second quarter, reflecting a favorable product mix and gains in operational efficiency.
“Our performance materials segment generated record sales and operating income in the second quarter, fueled by contributions from Flowchem and Sealweld, as well as growth in our industrial lubricants and wood treating chemicals businesses. Addressing key growth opportunities in the pipeline and energy markets, our pipeline performance business benefited from growing demand for our value-added products and services that enhance pipeline integrity and safety, as well as optimize pipeline throughput and performance. Our wood treating chemicals business also performed well, aided in part by the need to replace storm-damaged utility poles.”
Mr. Fraser concluded, “Considering our solid financial performance in the first half of fiscal 2018, as well as our expectations for continued growth in the second half of the year, we are increasing our fiscal 2018 sales forecast to $445-455 million, from $435-450 million previously, and increasing our fiscal 2018 adjusted EBITDA guidance to $114-118 million, from $110-115 million.”
Consolidated results
| Second 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 | $ | 113,851 | $ | 113,851 | $ | 79,071 | $ | 79,071 | |||||
| Operating income | 21,730 | 25,635 | 9,040 | 9,857 | |||||||||
| Operating margin | 19.1 | % | 22.5 | % | 11.4 | % | 12.5 | % | |||||
| Net income | 25,337 | 16,618 | 6,486 | 7,017 | |||||||||
| Diluted earnings per share | $ | 1.59 | $ | 1.04 | $ | 0.53 | $ | 0.57 | |||||
| Six months ended January 31 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 | $ | 224,515 | $ | 224,515 | $ | 155,566 | $ | 155,566 | |||||
| Operating income | 41,810 | 49,126 | 17,720 | 18,670 | |||||||||
| Operating margin | 18.6 | % | 21.9 | % | 11.4 | % | 12.0 | % | |||||
| Net income | 31,187 | 27,746 | 12,227 | 12,844 | |||||||||
| Diluted earnings per share | $ | 2.18 | $ | 1.94 | $ | 1.00 | $ | 1.05 | |||||
Business segment results
| Electronic Chemicals | Second Quarter | Second Quarter | First Half | First Half | |||||||||
| 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 | $ | 73,924 | $ | 69,766 | $ | 147,732 | $ | 136,688 | |||||
| Operating income | 12,730 | 9,583 | 23,988 | 17,644 | |||||||||
| Operating margin | 17.2 | % | 13.7 | % | 16.2 | % | 12.9 | % | |||||
For the second fiscal quarter, the Electronic Chemicals segment reported:
- Sales of $73.9 million, up 6% from the second quarter of fiscal 2017. Sales grew in each geographic region.
- Operating income of $12.7 million, up 32.8% from $9.6 million in the same period of fiscal 2017. Operating income increased due to higher sales, product mix and operational efficiencies. Operating margin improved to 17.2% compared to 13.7% in the prior-year period.
- Adjusted EBITDA7 of $15.0 million compared to $12.2 million last year.
Performance Materials
The Performance Materials segment consists of the pipeline performance business and the wood treating chemicals business.
| Performance Materials | Second Quarter | Second Quarter | First Half | First Half | |||||||||
| 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 | $ | 39,927 | $ | 9,305 | $ | 76,783 | $ | 18,878 | |||||
| Operating income | 12,810 | 3,023 | 24,394 | 6,704 | |||||||||
| Operating margin | 32.1 | % | 32.5 | % | 31.8 | % | 35.5 | % | |||||
For the second fiscal quarter, the Performance Materials segment reported:
- Sales of $39.9 million versus $9.3 million in the same period a year ago. Sales growth reflected contributions from Flowchem and Sealweld, as well as product volume growth in both industrial lubricants and wood treating chemicals.
- Operating income of $12.8 million compared to $3.0 million last year. The increase in operating income reflected contributions from Flowchem and Sealweld, as well as product volume growth in both industrial lubricants and wood treating chemicals. Segment operating margins were 32.1%, compared to 32.5% in the second quarter of 2017, primarily due to higher depreciation and amortization expense related to the acquisitions of Flowchem and Sealweld.
- Adjusted EBITDA8 of $17.1 million versus $3.2 million last year.
Fiscal 2018 Outlook
- Sales: We increase our fiscal 2018 consolidated net sales forecast to $445-455 million, from our prior guidance of $435-450 million.
- Adjusted EBITDA: We increase our adjusted EBITDA forecast to $114-118 million, from our prior guidance of $110-115 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, compared to our prior estimate of approximately $6.5 million.
- Depreciation and Amortization: Depreciation and amortization expense is forecast to be approximately $31 million.
- Capital Expenditures: Capital expenditures are forecast to be approximately $29 million, in line with our prior estimate, and include 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 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: Thursday March 8, 2018
Time: 5:00 p.m. ET
Dial in: 844-316-8066 or 703-736-7353
Conference ID: 1178959
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 March 8, 2018. To access the call, dial 855-859-2056 (domestic) or 404-537-3406 (international) using conference ID 1178959.
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.
| CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (In thousands, except per share amounts) | ||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| January 31, | January 31, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Net sales | $ | 113,851 | $ | 79,071 | $ | 224,515 | $ | 155,566 | ||||||||
| Cost of sales | 64,597 | 47,869 | 128,780 | 94,681 | ||||||||||||
| Gross profit | 49,254 | 31,202 | 95,735 | 60,885 | ||||||||||||
| Distribution expenses | 8,680 | 9,770 | 18,122 | 18,872 | ||||||||||||
| Selling, general and administrative expenses | 14,999 | 11,867 | 28,338 | 23,233 | ||||||||||||
| Amortization of intangible assets | 3,885 | 525 | 7,396 | 1,060 | ||||||||||||
| Restructuring charges | (40 | ) | − | 69 | − | |||||||||||
| Operating income | 21,730 | 9,040 | 41,810 | 17,720 | ||||||||||||
| Other (expense) income | ||||||||||||||||
| Interest expense, net | (5,086 | ) | (172 | ) | (13,180 | ) | (349 | ) | ||||||||
| Loss on the extinguishment of debt | (1,916 | ) | − | (6,091 | ) | − | ||||||||||
| Derivative fair value gain | 3,024 | − | 3,873 | − | ||||||||||||
| Other, net | (596 | ) | (285 | ) | (777 | ) | (55 | ) | ||||||||
| Total other (expense) income, net | (4,574 | ) | (457 | ) | (16,175 | ) | (404 | ) | ||||||||
| Income before income taxes | 17,156 | 8,583 | 25,635 | 17,316 | ||||||||||||
| Provision for income taxes | 8,181 | (2,097 | ) | 5,552 | (5,089 | ) | ||||||||||
| Net income | $ | 25,337 | $ | 6,486 | $ | 31,187 | $ | 12,227 | ||||||||
| Earnings per share: | ||||||||||||||||
| Net income per common share basic | $ | 1.64 | $ | 0.55 | $ | 2.24 | $ | 1.03 | ||||||||
| Net income per common share diluted | $ | 1.59 | $ | 0.53 | $ | 2.18 | $ | 1.00 | ||||||||
| Weighted average shares outstanding: | ||||||||||||||||
| Basic | 15,495 | 11,882 | 13,923 | 11,881 | ||||||||||||
| Diluted | 15,903 | 12,293 | 14,285 | 12,203 | ||||||||||||
| KMG CHEMICALS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except for share and per share amounts) | ||||||
| January 31, | July 31, | |||||
| 2018 | 2017 | |||||
| (Unaudited) | ||||||
| Assets | ||||||
| Current assets | ||||||
| Cash and cash equivalents | $ | 21,966 | $ | 20,708 | ||
| Accounts receivable | ||||||
| Trade, net of allowances of $237 at January 31, 2018 and $263 at July 31, 2017 | 54,339 | 51,168 | ||||
| Other | 4,721 | 6,168 | ||||
| Inventories, net | 49,534 | 46,482 | ||||
| Prepaid expenses and other | 7,751 | 8,617 | ||||
| Total current assets | 138,311 | 133,143 | ||||
| Property, plant and equipment, net | 108,954 | 105,435 | ||||
| Goodwill | 230,214 | 224,391 | ||||
| Intangible assets, net | 307,528 | 320,401 | ||||
| Other assets, net | 11,176 | 9,061 | ||||
| Total assets | $ | 796,183 | $ | 792,431 | ||
| Liabilities & stockholders’ equity | ||||||
| Current liabilities | ||||||
| Accounts payable | $ | 32,496 | $ | 29,570 | ||
| Accrued liabilities | 10,686 | 12,456 | ||||
| Employee incentive accrual | 3,679 | 7,713 | ||||
| Current portion of long-term debt | − | 3,167 | ||||
| Total current liabilities | 46,861 | 52,906 | ||||
| Long-term debt | 337,048 | 523,102 | ||||
| Deferred tax liabilities | 22,852 | 37,944 | ||||
| Other long-term liabilities | 5,350 | 4,763 | ||||
| Total liabilities | 412,111 | 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, 15,503,290 shares issued and outstanding at January 31, 2018 and 11,889,649 shares issued and outstanding at July 31, 2017 | 155 | 119 | ||||
| Additional paid-in capital | 218,001 | 42,535 | ||||
| Accumulated other comprehensive loss | (5,222 | ) | (9,712 | ) | ||
| Retained earnings | 171,138 | 140,774 | ||||
| Total stockholders’ equity | 384,072 | 173,716 | ||||
| Total liabilities and stockholders’ equity | $ | 796,183 | $ | 792,431 | ||
| KMG CHEMICALS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands) | ||||||||
| Six Months Ended | ||||||||
| January, 31 | ||||||||
| 2018 | 2017 | |||||||
| Cash flows from operating activities | ||||||||
| Net income | $ | 31,187 | $ | 12,227 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities | ||||||||
| Depreciation and amortization | 14,695 | 7,048 | ||||||
| Loss on extinguishment of debt | 6,091 | − | ||||||
| Stock-based compensation expense | 3,593 | 3,087 | ||||||
| Amortization of debt discounts and financing costs included in interest expense | 828 | − | ||||||
| Debt repricing transaction costs | 602 | − | ||||||
| Deferred income tax expense | (11,780 | ) | (821 | ) | ||||
| Derivative fair value gain | (3,873 | ) | − | |||||
| Other | (77 | ) | 53 | |||||
| Changes in operating assets and liabilities | ||||||||
| Accounts receivable — trade | (2,041 | ) | (2,585 | ) | ||||
| Accounts receivable — other | 1,554 | 1,846 | ||||||
| Inventories | (2,272 | ) | 1,002 | |||||
| Other current and noncurrent assets | 442 | (302 | ) | |||||
| Accounts payable | 2,579 | 951 | ||||||
| Accrued liabilities and other | (5,293 | ) | (3,083 | ) | ||||
| Net cash provided by operating activities | 36,235 | 19,423 | ||||||
| Cash flows from investing activities | ||||||||
| Additions to property, plant and equipment | (9,030 | ) | (5,310 | ) | ||||
| Other investing activities | (1,262 | ) | ||||||
| Proceeds − insurance claim | − | 250 | ||||||
| Net cash used in investing activities | (10,292 | ) | (5,060 | ) | ||||
| 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 | − | (11,800 | ) | |||||
| Principal payments on borrowings on term loan | (196,000 | ) | − | |||||
| Debt repricing transaction costs | (602 | ) | − | |||||
| Payment of dividends | (822 | ) | (709 | ) | ||||
| Cash payments related to tax withholdings from stock-based awards | (3,729 | ) | (277 | ) | ||||
| Net cash provided by (used in) financing activities | (25,484 | ) | 4,214 | |||||
| Effect of exchange rate changes on cash | 799 | (418 | ) | |||||
| Net increase in cash, cash equivalents and restricted cash | 1,258 | 18,159 | ||||||
| Cash, cash equivalents and restricted cash at beginning of period | 20,708 | 13,428 | ||||||
| Cash, cash equivalents and restricted cash at end of period | $ | 21,966 | $ | 31,587 | ||||
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) | Second Quarter Fiscal 2018 | Second Quarter Fiscal 2017 | |||
| Consolidated GAAP net income | $ | 25,337 | $ | 6,486 | |
| Add back: | |||||
| Interest expense, net | 5,086 | 172 | |||
| Income taxes | (8,181 | ) | 2,097 | ||
| Depreciation & amortization | 7,586 | 3,496 | |||
| Loss on the extinguishment of debt | 1,916 | − | |||
| Derivative fair value gain | (3,024 | ) | − | ||
| Debt repricing transaction costs | 602 | − | |||
| Acquisition & integration expenses | 119 | 501 | |||
| Corporate relocation expense | − | 316 | |||
| Restructuring charges, excluding accelerated depreciation | (40 | ) | − | ||
| Consolidated adjusted EBITDA | $ | 29,401 | $ | 13,068 | |
| (in thousands) | Six Months Ended Jan. 31, 2018 | Six Months Ended Jan. 31, 2017 | |||
| Consolidated GAAP net income | $ | 31,187 | $ | 12,227 | |
| Add back: | |||||
| Interest expense, net | 13,180 | 349 | |||
| Income taxes | (5,552 | ) | 5,089 | ||
| Depreciation & amortization | 14,695 | 7,048 | |||
| Loss on the extinguishment of debt | 6,091 | − | |||
| Derivative fair value gain | (3,873 | ) | − | ||
| Debt repricing transaction costs | 602 | − | |||
| Acquisition & integration expenses | 530 | 584 | |||
| Corporate relocation expense | − | 366 | |||
| Restructuring charges, excluding accelerated depreciation | 69 | − | |||
| Consolidated adjusted EBITDA | $ | 56,929 | $ | 25,663 | |
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.
| Second Quarter Fiscal 2018 | Electronic | Performance | ||||||||||
| (in thousands) | Chemicals | Materials | Corporate | Total | ||||||||
| Operating Income (Loss) | $ | 12,730 | $ | 12,810 | $ | (3,810 | ) | $ | 21,730 | |||
| Other income (expense) | (434 | ) | (23 | ) | (139 | ) | (596 | ) | ||||
| Depreciation and amortization | 2,760 | 4,287 | 539 | 7,586 | ||||||||
| Acquisition & integration expenses | — | 36 | 83 | 119 | ||||||||
| Debt repricing costs | — | — | 602 | 602 | ||||||||
| Restructuring charges | (40 | ) | — | — | (40 | ) | ||||||
| Adjusted EBITDA | 15,016 | 17,110 | (2,725 | ) | 29,401 | |||||||
| Corporate allocation | 3,150 | 1,982 | (5,132 | ) | — | |||||||
| Adjusted EBITDA excl. corporate allocation | $ | 18,166 | $ | 19,092 | $ | (7,857 | ) | $ | 29,401 | |||
| Six Months Ended January 31, 2018 | Electronic | Performance | | ||||||||
| (in thousands) | Chemicals | Materials | Corporate | Total | |||||||
| Operating Income (Loss) | $ | 23,988 | $ | 24,394 | $ | (6,572 | ) | $ | 41,810 | ||
| Other income (expense) | (583 | ) | 55 | (249 | ) | (777 | ) | ||||
| Depreciation and amortization | 5,554 | 8,168 | 973 | 14,695 | |||||||
| Acquisition & integration expenses | — | 97 | 433 | 530 | |||||||
| Debt repricing transaction costs | — | — | 602 | 602 | |||||||
| Restructuring charges | 69 | — | — | 69 | |||||||
| Adjusted EBITDA | 29,028 | 32,714 | (4,813 | ) | 56,929 | ||||||
| Corporate allocation | 6,069 | 3,929 | (9,998 | ) | — | ||||||
| Adjusted EBITDA excl. corporate allocation | $ | 35,097 | $ | 36,643 | $ | (14,811 | ) | $ | 56,929 | ||
| Second Quarter Fiscal 2017 | Electronic | Performance | ||||||||||
| (in thousands) | Chemicals | Materials | Corporate | Total | ||||||||
| Operating Income (Loss) | $ | 9,583 | $ | 3,023 | $ | (3,566 | ) | $ | 9,040 | |||
| Other income (expense) | (148 | ) | (75 | ) | (62 | ) | (285 | ) | ||||
| Depreciation and amortization | 2,793 | 285 | 418 | 3,496 | ||||||||
| Acquisition & integration expenses | — | — | 501 | 501 | ||||||||
| Corporate relocation expense | — | — | 316 | 316 | ||||||||
| Adjusted EBITDA | 12,228 | 3,233 | (2,393 | ) | 13,068 | |||||||
| Corporate allocation | 3,329 | 842 | (4,171 | ) | — | |||||||
| Adjusted EBITDA excl. corporate allocation | $ | 15,557 | $ | 4,075 | $ | (6,564 | ) | $ | 13,068 | |||
| Six Months Ended January 31, 2017 | Electronic | Performance | |||||||||
| (in thousands) | Chemicals | Materials | Corporate | Total | |||||||
| Operating Income (Loss) | $ | 17,644 | $ | 6,704 | $ | (6,628 | ) | $ | 17,720 | ||
| Other income (expense) | 163 | (99 | ) | (119 | ) | (55 | ) | ||||
| Depreciation and amortization | 5,645 | 572 | 831 | 7,048 | |||||||
| Acquisition & integration expenses | — | — | 584 | 584 | |||||||
| Corporate relocation expense | — | — | 366 | 366 | |||||||
| Adjusted EBITDA | 23,452 | 7,177 | (4,966 | ) | 25,663 | ||||||
| Corporate allocation | 6,658 | 1,684 | (8,342 | ) | — | ||||||
| Adjusted EBITDA excl. corporate allocation | $ | 30,110 | $ | 8,861 | $ | (13,308 | ) | $ | 25,663 | ||
Table 2
RECONCILIATION OF NET INCOME TO ADJUSTED NET INCOME AND ADJUSTED DILUTED EARNINGS PER SHARE
(in thousands)
| Three Months Ended | |||||||||
| January 31, | |||||||||
| 2018 | 2017 | ||||||||
| Net income | $ | 25,337 | $ | 6,486 | |||||
| Items impacting pre-tax income: | |||||||||
| Impact of the Tax Cuts and Jobs Act | (11,005 | ) | − | ||||||
| Acquisition & integration expenses | 119 | 501 | |||||||
| Corporate relocation expense | − | 316 | |||||||
| Restructuring charges | (40 | ) | − | ||||||
| Derivative fair value gain | (3,024 | ) | − | ||||||
| Amortization of Flowchem intangible assets | 3,224 | − | |||||||
| Loss on the extinguishment of debt | 1,916 | − | |||||||
| Debt repricing transaction costs | 602 | − | |||||||
| Amortization of debt discounts and financing costs | 335 | − | |||||||
| Income taxes* | (846 | ) | (286 | ) | |||||
| Adjusted net income | $ | 16,618 | $ | 7,017 | |||||
| Adjusted diluted earnings per share | $ | 1.04 | $ | 0.57 | |||||
| Weighted average diluted shares outstanding | 15,903 | 12,293 | |||||||
| * For the three months ended January 31, 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 Cuts and Jobs Act in December 2017. For the three months ended January 31, 2017, represents the aggregate tax-effect assuming a 35% tax rate of items impacting pre-tax income. | |||||||||
| Six Months Ended | |||||||||
| January 31, | |||||||||
| 2018 | 2017 | ||||||||
| Net income | $ | 31,187 | $ | 12,227 | |||||
| Items impacting pre-tax income: | |||||||||
| Impact of the Tax Cuts and Jobs Act | (11,005 | ) | − | ||||||
| Acquisition & integration expenses | 530 | 584 | |||||||
| Corporate relocation expense | − | 366 | |||||||
| Restructuring charges | 69 | − | |||||||
| Derivative fair value gain | (3,873 | ) | − | ||||||
| Amortization of Flowchem intangible assets | 6,115 | − | |||||||
| Loss on the extinguishment of debt | 6,091 | − | |||||||
| Debt repricing transaction costs | 602 | − | |||||||
| Amortization of debt discounts and financing costs | 828 | − | |||||||
| Income taxes* | (2,798 | ) | (332 | ) | |||||
| Adjusted net income** | $ | 27,746 | $ | 12,845 | |||||
| Adjusted diluted earnings per share ** | $ | 1.94 | $ | 1.05 | |||||
| Weighted average diluted shares outstanding | 14,285 | 12,203 | |||||||
| * For the six months ended January 31, 2018, represents the aggregate tax-effect assuming a 27% tax rate of the items impacting pre-tax income, which is the estimated blended statutory tax rate for fiscal year 2018. For the six months ended January 31, 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 six months ended January 31, 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
| Second Quarter Fiscal 2018 | KMG Chemicals, Inc. | |||||||||||||
| Dollars in thousands, except EPS | ||||||||||||||
| Operating | Net | Diluted Earnings | ||||||||||||
| Income | Margin | Income | Per Share | |||||||||||
| GAAP measure | $ | 21,730 | 19.1 | % | $ | 25,337 | $ | 1.59 | ||||||
| Amortization of Flowchem intangible assets | 3,224 | 2.8 | % | 2,354 | 0.15 | |||||||||
| Debt repricing transaction costs | 602 | 0.5 | % | 439 | 0.03 | |||||||||
| Acquisition & integration expenses | 119 | 0.1 | % | 87 | 0.01 | |||||||||
| Restructuring charges | (40 | ) | (0.0 | %) | (30 | ) | (0.01 | ) | ||||||
| Impact of the Tax Cuts and Jobs Act | — | — | (11,005 | ) | (0.69 | ) | ||||||||
| Derivative fair value gain | — | — | (2,208 | ) | (0.14 | ) | ||||||||
| Loss on the extinguishment of debt | — | — | 1,399 | 0.09 | ||||||||||
| Amortization of debt discounts and financing costs | — | — | 245 | 0.01 | ||||||||||
| Non-GAAP measure | $ | 25,635 | 22.5 | % | $ | 16,618 | $ | 1.04 | ||||||
| Six Months Ended January 31, 2018 | KMG Chemicals, Inc. | ||||||||||||
| Dollars in thousands, except EPS | |||||||||||||
| Operating | Net | Diluted Earnings | |||||||||||
| Income | Margin | Income | Per Share | ||||||||||
| GAAP measure | $ | 41,810 | 18.6 | % | $ | 31,187 | $ | 2.18 | |||||
| Amortization of Flowchem intangible assets | 6,115 | 2.7 | % | 4,464 | 0.31 | ||||||||
| Debt repricing transaction costs | 602 | 0.3 | % | 439 | 0.03 | ||||||||
| Acquisition & integration expenses | 530 | 0.2 | % | 387 | 0.03 | ||||||||
| Restructuring charges | 69 | 0.1 | % | 51 | 0.01 | ||||||||
| Impact of the Tax Cuts and Jobs Act | — | — | (11,005 | ) | (0.77 | ) | |||||||
| Loss on the extinguishment of debt | — | — | 4,446 | 0.31 | |||||||||
| Derivative fair value gain | — | — | (2,827 | ) | (0.20 | ) | |||||||
| Amortization of debt discounts and financing costs | — | — | 604 | 0.04 | |||||||||
| Non-GAAP measure | $ | 49,126 | 21.9 | % | $ | 27,746 | $ | 1.94 | |||||
| Second Quarter Fiscal 2017 | KMG Chemicals, Inc. | ||||||||||
| Dollars in thousands, except EPS | |||||||||||
| Operating | Net | Diluted Earnings | |||||||||
| Income | Margin | Income | Per Share | ||||||||
| GAAP measure | $ | 9,040 | 11.5 | % | $ | 6,486 | $ | 0.53 | |||
| Acquisition & integration expenses | 501 | 0.6 | % | 326 | 0.02 | ||||||
| Corporate relocation expense | 316 | 0.4 | % | 205 | 0.02 | ||||||
| Non-GAAP measure | $ | 9,857 | 12.5 | % | $ | 7,017 | $ | 0.57 | |||
| Six Months Ended January 31, 2017 | KMG Chemicals, Inc. | ||||||||||
| Dollars in thousands, except EPS | |||||||||||
| Operating | Net | Diluted Earnings | |||||||||
| Income | Margin | Income | Per Share | ||||||||
| GAAP measure | $ | 17,720 | 11.4 | % | $ | 12,227 | $ | 1.00 | |||
| Acquisition & integration expenses | 584 | 0.4 | % | 380 | 0.03 | ||||||
| Corporate relocation expense | 366 | 0.2 | % | 238 | 0.02 | ||||||
| Non-GAAP measure | $ | 18,670 | 12.0 | % | $ | 12,845 | $ | 1.05 | |||