Contact UsConnect with us:
SDS Search
KMG Chemical
RSS Content
KMG Reports Fourth Quarter and Full Year 2017 Financial Results

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

Primary Logo

KMG Chemicals, Inc.