Exhibit 99.1
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300 Throckmorton Street |
Fort Worth, TX 76102 |
KMG Reports First Quarter 2017 Financial Results
FORT WORTH, Texas—(BUSINESS WIRE)—December 12, 2016—KMG (NYSE: KMG), a global provider of specialty chemicals, today announced financial results for the fiscal 2017 first quarter ended October 31, 2016.
2017 First Quarter Financial Highlights
| • | GAAP diluted earnings per share of $0.47 increased 21% from $0.39 per share in the first quarter of fiscal 2016. |
| • | Adjusted diluted earnings per share1 improved to $0.48 vs. $0.42 per share reported in the first quarter of last year. |
| • | GAAP net income rose to $5.7 million compared to $4.6 million in the prior year period. |
| • | Adjusted EBITDA2 was $12.6 million, up 11% from $11.4 million in the first quarter of fiscal 2016. |
Chris Fraser, KMG chairman and chief executive officer, said, “Our fiscal 2017 year is off to a strong start, as KMG achieved 24% year-over-year growth in first quarter net income to $5.7 million. In addition, first quarter adjusted EBITDA reached a record quarterly level of $12.6 million, while operating cash flow of $10.9 million represented a 36% increase from the prior year’s first quarter. We also further strengthened our balance sheet by reducing long-term debt.”
Mr. Fraser continued, “Our electronic chemicals segment performed well in the first quarter, generating 2% sales growth, excluding a foreign currency impact, compared to the first quarter of fiscal 2016. KMG’s global capabilities, diverse customer base and expanded participation in key end markets, including automotive, the Internet-of-Things and next-generation memory, were important factors driving sales volume growth in the first quarter. Segment operating income and margins improved significantly from last year’s first quarter, reflecting continued efficiency enhancements and a more favorable product mix.
“Profitability in our other chemicals segment improved compared to the prior year period, despite softer pentachlorophenol sales due to a moderation in the pace of utility pole replacements in the western U.S. Our industrial lubricants business, which provides critical products for valve maintenance and safety in the energy storage and distribution markets, continues to contribute positively to segment results. We remain active in pursuing strategic acquisitions to expand this platform and broaden our global reach.”
1 | Non-U.S. GAAP measure. See Table 2 for reconciliation |
2 | Non-U.S. GAAP measure. See Tables 1 and 1A for reconciliation. |
Phone: 817.761.6100 ● Fax: 817.720.1043
www.kmgchemicals.com ● NYSE: KMG
Consolidated results
First 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 | | $ | 76,495 | | | $ | 76,495 | | | $ | 76,650 | | | $ | 76,650 | |
Operating income | | | 8,681 | | | | 8,814 | | | | 7,320 | | | | 7,916 | |
Operating margin | | | 11.3 | % | | | 11.5 | % | | | 9.6 | % | | | 10.3 | % |
Net income | | | 5,742 | | | | 5,828 | | | | 4,591 | | | | 4,978 | |
Diluted earnings per share | | $ | 0.47 | | | $ | 0.48 | | | $ | 0.39 | | | $ | 0.42 | |
Business segment results
Electronic Chemicals | | | | | |
First Quarter | | Fiscal 2017 | | Fiscal 2016 | |
Dollars in thousands | | As Reported | | | As Reported | |
| | (GAAP) | | | (GAAP) | |
Net sales | | $ | 66,921 | | | $ | 66,082 | |
Operating income | | | 8,062 | | | | 7,274 | |
Operating margin | | | 12.0 | % | | | 11.0 | % |
For the first fiscal quarter, the Electronic Chemicals segment reported:
| • | Sales of $66.9 million, up 1% from the first quarter of fiscal 2016. Foreign currency translation reduced sales by approximately $420,000 as compared to the prior year period. Excluding the foreign currency impact, sales increased 2% due to higher product volume and a contribution from Nagase FineChem. |
| • | Operating income of $8.1 million, up 11% from $7.3 million in the same period of fiscal 2016. Operating income and margin improved primarily due to higher sales and operating efficiencies. |
| • | Adjusted EBITDA5 of $11.2 million compared to $10.3 million last year. |
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 1 and 1A for reconciliation. |
Phone: 817.761.6100 ● Fax: 817.720.1043
www.kmgchemicals.com ● NYSE: KMG
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Other Chemicals
The Other Chemicals segment includes the pentachlorophenol (“penta”) business and the industrial lubricants business.
Other Chemicals | | | | | |
First Quarter | | Fiscal 2017 | | Fiscal 2016 | |
Dollars in thousands | | As Reported | | | As Reported | |
| | (GAAP) | | | (GAAP) | |
Net sales | | $ | 9,574 | | | $ | 10,568 | |
Operating income | | | 3,681 | | | | 3,764 | |
Operating margin | | | 38.4 | % | | | 35.6 | % |
For the first fiscal quarter, the Other Chemicals segment reported:
| • | Sales of $9.6 million versus $10.6 million in the same period a year ago, primarily reflecting lower sales of penta. |
| • | Operating income of $3.7 million, or 38.4% of sales, compared to $3.8 million, or 35.6% of sales, last year. The decrease in operating income was due to lower sales while the margin increase was due to improved pricing and a favorable product mix. |
| • | Adjusted EBITDA6 of $3.9 million versus $4.0 million last year. |
Conference call
Date: Monday, December 12, 2016
Time: 5:00 p.m. ET
Dial in: 877-789-6981 or 541-797-2420
Participant passcode: 24076428
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 December 12, 2016. To access the call, dial 855-859-2056 (domestic) or 404-537-3406 (international) using participant passcode 24076428.
About KMG
KMG Chemicals, Inc., through its subsidiaries, produces and distributes specialty chemicals to select markets. The Company grows by acquiring and optimizing stable chemical product lines and businesses with established production processes. For more information, visit the Company's website at http://kmgchemicals.com.
6 | Non-U.S. GAAP measure. See Tables 1 and 1A for reconciliation. |
Phone: 817.761.6100 ● Fax: 817.720.1043
www.kmgchemicals.com ● NYSE: KMG
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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.
KMG CHEMICALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(In thousands, except per share amounts)
| | Three Months Ended October 31, | |
| | 2016 | | | 2015 | |
Net sales | | $ | 76,495 | | | | 76,650 | |
Cost of sales | | | 46,811 | | | | 47,390 | |
Gross profit | | | 29,684 | | | | 29,260 | |
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Distribution expenses | | | 9,102 | | | | 10,129 | |
Selling, general and administrative expenses | | | 11,901 | | | | 11,215 | |
Restructuring charges | | − | | | 466 | |
Realignment charges | | − | | | 130 | |
Operating income | | | 8,681 | | | | 7,320 | |
Other income (expense) | | | | | | | | |
Interest expense, net | | | (177 | ) | | | (152 | ) |
Other, net | | 230 | | | | (17 | ) |
Total other income (expense), net | | 53 | | | | (169 | ) |
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Income before income taxes | | | 8,734 | | | | 7,151 | |
Provision for income taxes | | | (2,992 | ) | | | (2,560 | ) |
Net income | | $ | 5,742 | | | | 4,591 | |
Earnings per share: | | | | | | | | |
Net income per common share basic | | $ | 0.48 | | | $ | 0.39 | |
Net income per common share diluted | | $ | 0.47 | | | $ | 0.39 | |
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Weighted average shares outstanding: | | | | | | | | |
Basic | | | 11,880 | | | | 11,697 | |
Diluted | | | 12,152 | | | | 11,865 | |
Phone: 817.761.6100 ● Fax: 817.720.1043
www.kmgchemicals.com ● NYSE: KMG
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KMG CHEMICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except for share and per share amounts)
| | October 31, | | | July 31, | |
| | 2016 | | | 2016 | |
| | (Unaudited) | | | | | |
Assets | | | | | | | | |
Current assets | | | | | | | | |
Cash and cash equivalents | | $ | 17,606 | | | $ | 12,428 | |
Accounts receivable | | | | | | | | |
Trade, net of allowances of $184 at October 31, 2016 and $210 at July 31, 2016 | | | 34,446 | | | | 33,324 | |
Other | | | 5,101 | | | | 5,572 | |
Inventories, net | | | 34,851 | | | | 37,401 | |
Prepaid expenses and other | | | 6,438 | | | | 6,623 | |
Total current assets | | | 98,442 | | | | 95,348 | |
| | | | | | | | |
Property, plant and equipment, net | | | 77,706 | | | | 79,739 | |
Goodwill | | | 22,039 | | | | 22,228 | |
Intangible assets, net | | | 32,968 | | | | 33,906 | |
Restricted cash | | | 1,000 | | | | 1,000 | |
Other assets, net | | | 4,828 | | | | 4,807 | |
Total assets | | $ | 236,983 | | | $ | 237,028 | |
| | | | | | | | |
Liabilities & stockholders’ equity | | | | | | | | |
Current liabilities | | | | | | | | |
Accounts payable | | $ | 27,534 | | | $ | 26,418 | |
Accrued liabilities | | | 10,977 | | | | 11,252 | |
Employee incentive accrual | | | 3,142 | | | | 5,999 | |
Total current liabilities | | | 41,653 | | | | 43,669 | |
| | | | | | | | |
Long-term debt | | | 33,300 | | | | 35,800 | |
Deferred tax liabilities | | | 9,982 | | | | 9,948 | |
Other long-term liabilities | | | 4,299 | | | | 4,422 | |
Total liabilities | | | 89,234 | | | | 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, 11,888,664 shares issued and outstanding at October 31, 2016 and 11,877,282 shares issued and outstanding at July 31, 2016 | | 119 | | | 119 | |
Additional paid-in capital | | | 38,035 | | | | 36,553 | |
Accumulated other comprehensive loss | | | (14,358 | ) | | | (12,047 | ) |
Retained earnings | | | 123,953 | | | | 118,564 | |
Total stockholders’ equity | | | 147,749 | | | | 143,189 | |
Total liabilities and stockholders’ equity | | $ | 236,983 | | | $ | 237,028 | |
Phone: 817.761.6100 ● Fax: 817.720.1043
www.kmgchemicals.com ● NYSE: KMG
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KMG CHEMICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
| | Three Months Ended | |
| | October 31, | |
| | 2016 | | | 2015 | |
Cash flows from operating activities | | | | | | | | |
Net income | | $ | 5,742 | | | $ | 4,591 | |
Adjustments to reconcile net income to net cash provided by
operating activities | | | | | | | | |
Depreciation and amortization | | | 3,552 | | | | 3,545 | |
Non-cash restructuring and realignment charges | | | − | | | | 105 | |
Stock-based compensation expense | | | 1,425 | | | | 939 | |
Deferred income tax expense | | | 188 | | | | 86 | |
Other | | | 182 | | | | 110 | |
Changes in operating assets and liabilities | | | | | | | | |
Accounts receivable — trade | | | (1,657 | ) | | | 1,099 | |
Accounts receivable — other | | | 1,240 | | | | 160 | |
Inventories | | | 2,092 | | | | 2,310 | |
Other current and noncurrent assets | | | (153 | ) | | | 420 | |
Accounts payable | | | 1,359 | | | | (7,850 | ) |
Accrued liabilities and other | | | (3,064 | ) | | | 2,450 | |
Net cash provided by operating activities | | | 10,906 | | | | 7,965 | |
| | | | | | | | |
Cash flows from investing activities | | | | | | | | |
Additions to property, plant and equipment | | | (2,634 | ) | | | (3,616 | ) |
Proceeds − insurance claim | | | 250 | | | | − | |
Net cash used in investing activities | | | (2,384 | ) | | | (3,616 | ) |
| | | | | | | | |
Cash flows from financing activities | | | | | | | | |
Payments under credit facility | | | (2,500 | ) | | | (1,500 | ) |
Excess tax benefit from stock-based awards | | | (57 | ) | | | 10 | |
Payment of dividends | | | (353 | ) | | | (351 | ) |
Net cash used in financing activities | | | (2,910 | ) | | | (1,841 | ) |
| | | | | | | | |
Effect of exchange rate changes on cash | | | (434 | ) | | | 373 | |
| | | | | | | | |
Net increase in cash and cash equivalents | | | 5,178 | | | | 2,881 | |
Cash and cash equivalents at beginning of period | | | 12,428 | | | | 7,517 | |
Cash and cash equivalents at end of period | | $ | 17,606 | | | $ | 10,398 | |
Phone: 817.761.6100 ● Fax: 817.720.1043
www.kmgchemicals.com ● NYSE: KMG
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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)
| | First Quarter Fiscal 2017 | | | First Quarter Fiscal 2016 | |
Consolidated GAAP net income | | $ | 5,742 | | | $ | 4,591 | |
Add back: | | | | | | | | |
Interest expense | | 177 | | | 152 | |
Income taxes | | | 2,992 | | | | 2,560 | |
Depreciation & amortization* | | | 3,552 | | | | 3,651 | |
Acquisition & integration expenses | | 83 | | | − | |
Corporate relocation expense | | 50 | | | − | |
Restructuring & realignment charges, excluding accelerated depreciation | | − | | | 490 | |
Consolidated adjusted EBITDA | | $ | 12,596 | | | $ | 11,444 | |
*Includes depreciation related to restructuring and realignment included in non-cash restructuring and realignment charges on the statement of cash flows. | |
Phone: 817.761.6100 ● Fax: 817.720.1043
www.kmgchemicals.com ● NYSE: KMG
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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.
First Quarter Fiscal 2017 (in thousands) | | Electronic Chemicals | | | Other Chemicals | | | Corporate | | | Total | |
Operating Income (Loss) | | $ | 8,062 | | | $ | 3,681 | | | $ | (3,062 | ) | | $ | 8,681 | |
Other income (expense) | | 308 | | | | (24 | ) | | | (54 | ) | | 230 | |
Depreciation and amortization | | | 2,852 | | | 287 | | | 413 | | | | 3,552 | |
Acquisition & integration expenses | | — | | | — | | | 83 | | | 83 | |
Corporate relocation expense | | — | | | — | | | 50 | | | 50 | |
Adjusted EBITDA | | | 11,222 | | | | 3,944 | | | | (2,570 | ) | | | 12,596 | |
Corporate allocation | | | 3,329 | | | 842 | | | | (4,171 | ) | | — | |
Adjusted EBITDA excl. corporate allocation | | $ | 14,551 | | | $ | 4,786 | | | $ | (6,741 | ) | | $ | 12,596 | |
First Quarter Fiscal 2016 (in thousands) | | Electronic Chemicals | | | Other Chemicals | | | Corporate | | | Total | |
Operating Income (Loss) | | $ | 7,274 | | | $ | 3,764 | | | $ | (3,718 | ) | | $ | 7,320 | |
Other income (expense) | | 130 | | | | (59 | ) | | | (88 | ) | | | (17 | ) |
Depreciation and amortization | | | 2,915 | | | 297 | | | 439 | | | | 3,651 | |
Restructuring & realignment charges, excluding
accelerated depreciation* | | — | | | — | | | 490 | | | 490 | |
Adjusted EBITDA | | | 10,319 | | | | 4,002 | | | | (2,877 | ) | | | 11,444 | |
Corporate allocation | | | 2,481 | | | 790 | | | | (3,271 | ) | | — | |
Adjusted EBITDA excl. corporate allocation | | $ | 12,800 | | | $ | 4,792 | | | $ | (6,148 | ) | | $ | 11,444 | |
* Includes depreciation related to restructuring and realignment included in non-cash restructuring and realignment charges on the statement of cash flows. | |
Phone: 817.761.6100 ● Fax: 817.720.1043
www.kmgchemicals.com ● NYSE: KMG
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Table 2
RECONCILIATION OF NET INCOME TO ADJUSTED NET INCOME AND ADJUSTED DILUTED EARNINGS PER SHARE
(in thousands)
| Three Months Ended | |
| October 31, | |
| 2016 | | | 2015 | |
Net income | $ | 5,742 | | | $ | 4,591 | |
Items impacting pre-tax income: | | | | | | | |
Acquisition & integration expenses | 83 | | | − | |
Corporate relocation expense | 50 | | | − | |
Restructuring & realignment charges | − | | | 596 | |
Income taxes* | | (47 | ) | | | (209 | ) |
Adjusted net income | $ | 5,828 | | | $ | 4,978 | |
Adjusted diluted earnings per share | $ | 0.48 | | | $ | 0.42 | |
Weighted average diluted shares outstanding | | 12,152 | | | | 11,865 | |
*Represents the aggregate tax-effect of the items impacting pre-tax income utilizing a tax rate of 35%. | |
Phone: 817.761.6100 ● Fax: 817.720.1043
www.kmgchemicals.com ● NYSE: KMG
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Table 2A
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES
First Quarter Fiscal 2017 Dollars in thousands, except EPS | | KMG Chemicals, Inc. | |
| | Operating | | | Net | | | Diluted Earnings | |
| | Income | | | Margin | | | Income | | | Per Share | |
GAAP measure | | $ | 8,681 | | | | 11.3 | % | | $ | 5,742 | | | $ | 0.47 | |
Acquisition & integration expenses | | | 83 | | | | 0.1 | % | | | 54 | | | | 0.01 | |
Corporate relocation expense | | | 50 | | | | 0.1 | % | | | 32 | | | | 0.00 | |
Non-GAAP measure | | $ | 8,814 | | | | 11.5 | % | | $ | 5,828 | | | $ | 0.48 | |
First Quarter Fiscal 2016 Dollars in thousands, except EPS | | KMG Chemicals, Inc. | |
| | Operating | | | Net | | | Diluted Earnings | |
| | Income | | | Margin | | | Income | | | Per Share | |
GAAP measure | | $ | 7,320 | | | | 9.5 | % | | $ | 4,591 | | | $ | 0.39 | |
Restructuring & realignment charges | | | 596 | | | | 0.8 | % | | | 387 | | | | 0.03 | |
Non-GAAP measure | | $ | 7,916 | | | | 10.3 | % | | $ | 4,978 | | | $ | 0.42 | |
KMG Investor Relations
Eric Glover, 817-761-6006
eglover@kmgchemicals.com
Phone: 817.761.6100 ● Fax: 817.720.1043
www.kmgchemicals.com ● NYSE: KMG
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