KMG Chemicals, Inc. KMG, a global provider of specialty chemicals to select markets, today announced financial results for the fiscal 2015 first quarter ended October 31, 2014.
2015 First Quarter Financial Highlights
- Consolidated net sales were $90.8 million, a 3% decrease from last year's first quarter. Sales declined due to lower creosote volume in the Wood Treating Chemicals segment.
- Adjusted EBITDA1 was $8.8 million, up 10% from $8.0 million in last year's first quarter.
- Adjusted diluted EPS2 was $0.24, a 9% gain from $0.22 per share reported in the prior year's first quarter.
- GAAP earnings per share was $0.10 vs. $0.12 per share in the first quarter of fiscal 2014.
- Cash flow from operations totaled $9.6 million vs. $4.0 million in last year's first quarter.
Chris Fraser, KMG chairman and chief executive officer, said, “Our first quarter results benefited from continued positive semiconductor industry demand for our high purity process chemicals, as well as the benefits arising from the restructuring of our global manufacturing operations. In addition, operating profit margins within our Wood Treating Chemicals segment improved, reflecting reduced supply chain costs and a more favorable product mix. Overall, our adjusted EPS of $0.24 increased 9% from the prior year period and our operating cash flow more than doubled on a year-over-year basis.”
Mr. Fraser concluded, “We remain focused on the strategic consolidation of our global manufacturing operations, including the realignment of our North American hydrofluoric acid operations announced last quarter. These initiatives will improve our manufacturing efficiency and enhance our overall quality offering to our global semiconductor customers.”
|
First quarter results |
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Dollars in thousands, except EPS |
Fiscal 2015 |
Fiscal 2014 | ||||||||||||||||
| Adjusted | As Reported | Adjusted | As Reported | |||||||||||||||
| (non-GAAP) | (GAAP) | (non-GAAP) | (GAAP) | |||||||||||||||
| Net sales | $ | 90,779 | $ | 90,779 | $ | 93,560 | $ | 93,560 | ||||||||||
| Operating income | 5,392 | 2,819 | 4,835 | 3,055 | ||||||||||||||
| Operating margin | 5.9 | % | 3.1 | % | 5.2 | % | 3.3 | % | ||||||||||
| Net income | 2,857 | 1,185 | 2,511 | 1,352 | ||||||||||||||
| Diluted earnings per share | $ | 0.24 | $ | 0.10 | $ | 0.22 | $ | 0.12 | ||||||||||
Business segment results
| Electronic Chemicals | |||||||||||||||
|
First quarter results |
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Dollars in thousands |
Fiscal 2015 | Fiscal 2014 | |||||||||||||
| As Reported | Adjusted | As Reported | |||||||||||||
| (GAAP) | (non-GAAP) | (GAAP) | |||||||||||||
| Net sales | $ | 66,323 | $ | 64,452 | $ | 64,452 | |||||||||
| Operating income | 4,121 | 3,838 | 3,338 | ||||||||||||
| Operating margin | 6.2 | % | 6.0 | % | 5.2 | % | |||||||||
For the first fiscal quarter, the Electronic Chemicals segment reported:
- Sales of $66.3 million, up 2.9% from $64.5 million in the same period a year ago. The increase reflects higher sales volume for high purity process chemicals, especially in North America and Asia. Electronic Chemicals sales represented 73% of consolidated first quarter sales.
- Adjusted EBITDA3 of $7.4 million, compared to $6.8 million last year.
- GAAP operating income of $4.1 million vs. $3.3 million in the same period of fiscal 2014. Operating income improved due to increased sales volumes, as well as restructuring-related benefits arising from the closure of the Fremont, California facility.
| Wood Treating Chemicals | ||||||||||
|
First quarter results |
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Dollars in thousands |
Fiscal 2015 | Fiscal 2014 | ||||||||
| As Reported | As Reported | |||||||||
| (GAAP) | (GAAP) | |||||||||
| Net sales | $ | 24,427 | $ | 29,064 | ||||||
| Operating income | 2,585 | 2,505 | ||||||||
| Operating margin | 10.6 | % | 8.6 | % | ||||||
For the first fiscal quarter, the Wood Treating Chemicals segment reported:
- Sales of $24.4 million, down 16.0% from $29.1 million in the same period a year ago. Sales declined primarily due to lower creosote sales volume. Wood Treating Chemicals sales represented 27% of consolidated first quarter sales.
- EBITDA4 of $2.7 million, up from $2.6 million last year.
- Operating income of $2.6 million, or 10.6% of sales, compared to $2.5 million, or 8.6% of sales, last year. The increase in operating income and margin was due to lower supply chain costs and a more favorable product mix.
Outlook
- We expect fiscal 2015 Electronic Chemicals segment sales to increase compared to the level reported in fiscal 2014, but lower creosote sales in the Wood Treating Chemicals segment are likely to cause fiscal 2015 consolidated net sales to decline from last year.
- We continue to forecast that fiscal 2015 adjusted EBITDA will be $32-35 million.
- Fiscal 2015 depreciation and amortization expense is forecast at approximately $16 million, excluding restructuring and realignment charges.
- Fiscal 2015 capital expenditures are forecast to be $14-16 million, including expenses related to our ERP system implementation and UPC integration.
Conference call
Date: Wednesday, December 10, 2014
Time: 4:30 p.m. EST
Dial in: 866-318-8612 or 617-399-5131
Participant passcode: 25638357
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 8:30 p.m. EST on December 10, 2014. To access the call, dial 888-286-8010 or 617-801-6888 using participant passcode 29686746.
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. Its current operations are focused on the electronic and industrial wood treatment chemical 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 1 for reconciliation.
2 Non-U.S. GAAP measure. See Table 2 for reconciliation.
3 Non-U.S. GAAP measure. See Table 1 for reconciliation.
4 Non-U.S. GAAP measure. See Table 1 for reconciliation.
| KMG CHEMICALS, INC. AND SUBSIDIARIES | ||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||||||||
| (UNAUDITED) | ||||||||||
| (In thousands, except for per share amounts) | ||||||||||
| Three Months Ended | ||||||||||
| October 31, | ||||||||||
| 2014 | 2013 | |||||||||
| Net sales | $ | 90,779 | $ | 93,560 | ||||||
| Cost of sales | 63,188 | 67,993 | ||||||||
| Gross profit | 27,591 | 25,567 | ||||||||
| Distribution expenses | 12,999 | 12,112 | ||||||||
| Selling, general and administrative expenses | 9,200 | 10,400 | ||||||||
| Restructuring charges | 577 | ― | ||||||||
| Realignment charges | 1,996 | ― | ||||||||
| Operating income | 2,819 | 3,055 | ||||||||
| Other income (expense) | ||||||||||
| Interest expense, net | (803 | ) | (663 | ) | ||||||
| Other, net | (28 | ) | (315 | ) | ||||||
| Total other expense, net | (831 | ) | (978 | ) | ||||||
| Income before income taxes | 1,988 | 2,077 | ||||||||
| Provision for income taxes | (803 | ) | (725 | ) | ||||||
| Net income | $ | 1,185 | $ | 1,352 | ||||||
| Earnings per share: | ||||||||||
| Net income per common share basic | $ | 0.10 | $ | 0.12 | ||||||
| Net income per common share diluted | $ | 0.10 | $ | 0.12 | ||||||
| Weighted average shares outstanding: | ||||||||||
| Basic | 11,658 | 11,575 | ||||||||
| Diluted | 11,696 | 11,610 | ||||||||
| KMG CHEMICALS, INC. AND SUBSIDIARIES | ||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
| (In thousands, except for share and per share amounts) | ||||||||
| October 31, | July 31, | |||||||
| 2014 | 2014 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 19,731 | $ | 19,252 | ||||
| Accounts receivable | ||||||||
| Trade, net of allowances of $270 at October 31, 2014 and $272 at July 31, 2014 |
41,768 |
40,176 |
||||||
| Other | 2,245 | 1,904 | ||||||
| Inventories, net | 45,143 | 45,268 | ||||||
| Current deferred tax assets | 1,485 | 1,577 | ||||||
| Prepaid expenses and other | 2,946 | 3,476 | ||||||
| Total current assets | 113,318 | 111,653 | ||||||
| Property, plant and equipment, net | 88,524 | 92,450 | ||||||
| Deferred tax assets | 442 | 442 | ||||||
| Goodwill | 12,235 | 12,595 | ||||||
| Intangible assets, net | 27,416 | 28,353 | ||||||
| Restricted cash | 1,000 | 1,000 | ||||||
| Other assets, net | 4,976 | 4,365 | ||||||
| Total assets | $ | 247,911 | $ | 250,858 | ||||
| Liabilities & stockholders' equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | 40,321 | $ | 36,690 | ||||
| Accrued liabilities | 17,128 | 16,986 | ||||||
| Employee incentive accrual | 5,972 | 4,575 | ||||||
| Total current liabilities | 63,421 | 58,251 | ||||||
| Long-term debt | 56,000 | 60,000 | ||||||
| Deferred tax liabilities | 8,570 | 9,881 | ||||||
| Other long-term liabilities | 2,425 | 2,520 | ||||||
| Total liabilities | 130,416 | 130,652 | ||||||
| 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, 11,659,001 shares issued and outstanding at October 31, 2014 and 11,649,001 shares issued and outstanding at July 31, 2014 |
116 |
116 |
||||||
| Additional paid-in capital | 29,314 | 28,886 | ||||||
| Accumulated other comprehensive income/(loss) | (3,329 | ) | 645 | |||||
| Retained earnings | 91,394 | 90,559 | ||||||
| Total stockholders' equity | 117,495 | 120,206 | ||||||
| Total liabilities and stockholders' equity | $ | 247,911 | $ | 250,858 | ||||
| KMG CHEMICALS, INC. AND SUBSIDIARIES | |||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||
| (UNAUDITED) | |||||||||
| (In thousands) | |||||||||
| Three Months Ended | |||||||||
| October 31, | |||||||||
| 2014 | 2013 | ||||||||
| Cash flows from operating activities | |||||||||
| Net income | $ | 1,185 | $ | 1,352 | |||||
| Adjustments to reconcile net income to net cash provided by operating activities | |||||||||
| Depreciation and amortization | 3,430 | 3,464 | |||||||
| Depreciation related to restructuring and realignment | 2,589 | — | |||||||
| Amortization of loan costs included in interest expense | 27 | 15 | |||||||
| Stock-based compensation expense | 436 | 1,243 | |||||||
| Bad debt expense | — | 111 | |||||||
| Allowance for excess and obsolete inventory | 221 | (41 | ) | ||||||
| (Gain)/loss on disposal of property | (2 | ) | 4 | ||||||
| Deferred income taxes | (1,141 | ) | (820 | ) | |||||
| Tax benefit from stock-based awards | (9 | ) | (217 | ) | |||||
| Changes in operating assets and liabilities | |||||||||
| Accounts receivable — trade | (2,398 | ) | (1,182 | ) | |||||
| Accounts receivable — other | (373 | ) | 999 | ||||||
| Inventories | (826 | ) | 4,890 | ||||||
| Other current and noncurrent assets | (139 | ) | 1,910 | ||||||
| Accounts payable | 4,486 | (9,806 | ) | ||||||
| Accrued liabilities and other | 2,099 | 2,068 | |||||||
| Net cash provided by operating activities | 9,585 | 3,990 | |||||||
| Cash flows from investing activities | |||||||||
| Additions to property, plant and equipment | (4,184 | ) | (2,665 | ) | |||||
| Disposals of property, plant and equipment | 10 | — | |||||||
| Net cash used in investing activities | (4,174 | ) | (2,665 | ) | |||||
| Cash flows from financing activities | |||||||||
| Net payments under revolving credit agreement | (43,100 | ) | (2,000 | ) | |||||
| Principal payments on term loan | (20,000 | ) | — | ||||||
| Borrowings under new credit facility | 59,100 | — | |||||||
| Tax benefit from stock-based awards | 9 | 217 | |||||||
| Payment of dividends | (349 | ) | (347 | ) | |||||
| Net cash used in financing activities | (4,340 | ) | (2,130 | ) | |||||
| Effect of exchange rate changes on cash | (592 | ) | 266 | ||||||
| Net increase (decrease) in cash and cash equivalents | 479 | (539 | ) | ||||||
| Cash and cash equivalents at beginning of period | 19,252 | 13,949 | |||||||
| Cash and cash equivalents at end of period | $ | 19,731 | $ | 13,410 | |||||
Reconciliation of non-GAAP financial measures to 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. Excluding expenses related to the integration of the UPC business, restructuring and realignment of the Electronic Chemicals business, and CEO transition expenses from current results will allow for more accurate comparisons of our operating performance. 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 |
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| RECONCILIATION OF OPERATING INCOME TO EBITDA AND ADJUSTED EBITDA | |||||||||||||
| (In thousands) | |||||||||||||
| Wood | |||||||||||||
| Electronic | Treating | ||||||||||||
|
First Quarter Fiscal 2015 |
Chemicals | Chemicals | Corporate | Total | |||||||||
| Operating Income |
$4,121 |
$2,585 |
($3,887 |
) |
$2,819 |
||||||||
| Other income (expense) | 120 | (10 | ) | (138 | ) | (28 | ) | ||||||
| Depreciation and amortization | 3,202 | 96 | 2,721 | 6,019 | |||||||||
| EBITDA | 7,443 | 2,671 | (1,304 | ) | 8,810 | ||||||||
| Restructuring charges* |
- |
- |
(54 | ) | (54 | ) | |||||||
| Realignment charges* |
- |
- |
38 | 38 | |||||||||
| Adjusted EBITDA |
$7,443 |
$2,671 |
($1,320 |
) |
$8,794 |
||||||||
| * Excludes depreciation | |||||||||||||
| Wood | |||||||||||||
| Electronic | Treating | ||||||||||||
|
First Quarter Fiscal 2014 |
Chemicals | Chemicals | Corporate | Total | |||||||||
| Operating Income |
$3,338 |
$2,505 |
($2,788 |
) |
$3,055 |
||||||||
| Other income (expense) | (249 | ) | (21 | ) | (45 | ) | (315 | ) | |||||
| Depreciation and amortization | 3,247 | 98 | 119 | 3,464 | |||||||||
| EBITDA | 6,336 | 2,582 | (2,714 | ) | 6,204 | ||||||||
|
Integration expenses |
500 | - | - | 500 | |||||||||
| CEO transition costs |
- |
- | 1,280 | 1,280 | |||||||||
| Adjusted EBITDA |
$6,836 |
$2,582 |
($1,434 |
) |
$7,984 |
||||||||
| Table 2 | ||||||||||||||||
| Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures | ||||||||||||||||
|
First Quarter Fiscal 2015 |
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|
Dollars in thousands, except EPS |
KMG Chemicals, Inc. | |||||||||||||||
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| Operating | Net |
Diluted Earnings |
||||||||||||||
|
Income |
Margin |
Income |
Per Share |
|||||||||||||
| Non-GAAP measure | $ | 5,392 | 5.9 | % | $ | 2,857 | $ | 0.24 | ||||||||
| Restructuring charges | (577 | ) | (0.6 | %) | (375 | ) |
(0.03 |
) | ||||||||
| Realignment charges | (1,996 | ) | (2.2 | %) | (1,297 | ) |
(0.11 |
) | ||||||||
| GAAP measure | $ | 2,819 | 3.1 | % | $ | 1,185 | $ | 0.10 | ||||||||
|
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|
First Quarter Fiscal 2014 |
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| Dollars in thousands, except EPS | KMG Chemicals, Inc. | |||||||||||||||
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| Operating | Net |
Diluted Earnings |
||||||||||||||
|
Income |
Margin |
Income |
Per Share |
|||||||||||||
| Non-GAAP measure | $ | 4,835 | 5.2 | % | $ | 2,511 | $ | 0.22 | ||||||||
| Integration expenses | (500 | ) | (0.5 | %) | (326 | ) |
(0.03 |
) | ||||||||
| CEO transition costs | (1,280 | ) | (1.4 | %) | (833 | ) |
(0.07 |
) | ||||||||
| GAAP measure | $ | 3,055 | 3.3 | % | $ | 1,352 | $ | 0.12 | ||||||||
| Electronic Chemicals | Wood Treating Chemicals | ||||||||||||||||||
| Operating | Operating | ||||||||||||||||||
|
Income |
Margin |
Income |
Margin |
||||||||||||||||
| Non-GAAP measure | $ | 3,838 | 6.0 | % | $ | 2,505 | 8.6 | % | |||||||||||
| Integration expenses | (500 | ) | (0.8 | )% | — | — | |||||||||||||
| GAAP measure | $ | 3,338 | 5.2 | % | $ | 2,505 | 8.6 | % | |||||||||||
KMG Chemicals, Inc.
Eric Glover, 713-600-3865
Investor
Relations Manager
eglover@kmgchemicals.com
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