KMG - KMG Reports Fourth Quarter and Full Year 2018 Financial Results

October, 01 2018 08:15 PM KMG Chemicals Inc.

FORT WORTH, Texas, Oct. 01, 2018 (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, 2018.

2018 Fourth Quarter Financial Highlights

Sales grew to a record $122.4 million, an increase of 27% compared to the same quarter last year.
GAAP diluted earnings per share was $1.13, up 163% compared to $0.43 per diluted share in the fourth quarter of fiscal 2017.
Adjusted diluted earnings per share¹ increased to a record $1.26 compared to $0.69 per share reported in the fourth quarter of fiscal 2017.
GAAP net income rose 237% to $18.0 million compared to $5.3 million in last year’s fourth quarter.
Adjusted EBITDA² increased to $31.1 million, from $20.6 million in the fourth quarter of fiscal 2017.

2018 Fiscal Year Financial Highlights

Sales increased 40% year-over-year to a record $465.6 million.
GAAP diluted earnings per share was a record $4.29, up from $1.92 in fiscal 2017.
Adjusted diluted earnings per share was a record $4.33, up 91% from the prior year.
GAAP net income rose 174% from the prior year to a record $64.8 million.
Adjusted EBITDA grew to a record $119.5 million, an increase of 99% from the prior year’s $60.2 million.

Recent Merger Announcement

On August 15, 2018, Cabot Microelectronics Corporation and KMG Chemicals, Inc. announced a definitive agreement under which Cabot Microelectronics will acquire KMG Chemicals in a cash and stock transaction with a total enterprise value of approximately $1.6 billion. Under the terms of the agreement, KMG shareholders will be entitled to receive, per KMG share, $55.65 in cash and 0.2000 of a share of Cabot Microelectronics common stock.

Due to the pending transaction with Cabot Microelectronics, KMG is not hosting a conference call in conjunction with its fourth quarter and full year 2018 earnings release and does not expect to do so for future quarters. Completion of the transaction is subject to approval by KMG’s shareholders and other customary closing conditions. The transaction is expected to close by the end of the current calendar year.

“Fiscal 2018 was a year of progress, growth and continued strong performance for KMG,” said Chris Fraser, KMG chairman and CEO. “We again achieved record financial results, with fiscal 2018 sales exceeding the top end of our upwardly revised guidance range and fiscal 2018 adjusted EBITDA at the high end of our forecast. We also achieved record earnings per share of $4.29 on a GAAP basis. Throughout the year, we further strengthened our diverse and market-leading businesses and continued to enhance our efficiency across our global operations.”

Mr. Fraser concluded, “Over the past five years, KMG’s adjusted EBITDA and adjusted earnings per share have increased approximately fourfold, a period of sustained growth and progress that culminated in an outstanding fiscal 2018 year. I would like to thank our exceptional employees whose dedication, passion and teamwork have driven our growth and success for more than two decades. On behalf of our entire organization, I sincerely thank our investors for placing their confidence and trust in KMG.”

Consolidated results

Fourth 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
$122,394

$122,394

$96,260

$96,260

Operating income

22,362


26,870


10,245


14,628

Operating margin

18.3%


22.0%


10.6%


15.2%

Net income

18,009


20,199


5,338


8,535

Diluted earnings per share
$1.13

$1.26

$ 0.43

$0.69

Fiscal Year ended July 31 Dollars in thousands, except EPS
Fiscal 2018

Fiscal 2017

As Reported
Adjusted
As Reported
Adjusted

(GAAP)
(non-GAAP)⁵
(GAAP)
(non-GAAP)⁶
Net sales
$465,556

$465,556

$333,442

$333,442

Operating income

88,125


102,617


37,333


43,300

Operating margin

18.9%


22.0%


11.2%


13.0%

Net income

64,841


65,404


23,633


27,859

Diluted earnings per share
$ 4.29

$4.33

$1.92

$ 2.27

Business segment results

Electronic Chemicals

Fourth Quarter

Full Year

Dollars in thousands

Fiscal 2018

Fiscal 2017

Fiscal 2018

Fiscal 2017

As Reported

(GAAP)

Net sales

$79,622

$71,792

302,023

$276,621

Operating income

11,678

9,132

46,554

35,285

Operating margin

14.7%

12.7%

15.4%

12.8%

For the fourth fiscal quarter, the Electronic Chemicals segment reported:

Sales of $79.6 million, up 10.9% from the fourth quarter of fiscal 2017. Product volume growth primarily drove the sales increase.
Operating income of $11.7 million, up 27.8% from $9.1 million in the same period of fiscal 2017. Operating income increased primarily due to product volume growth and operating efficiencies. Operating margin improved to 14.7% compared to 12.7% in the prior-year period.
Adjusted EBITDA⁷ of $14.5 million compared to $12.9 million last year.

For the fiscal 2018 year, the Electronic Chemicals segment reported:

Sales of $302.0 million, an increase of 9.2% compared to the prior year. Product volume growth was the primary driver of the sales increase.
Operating income of $46.6 million, up 31.9% from $35.3 million in the prior year. Operating income increased due to product volume growth, a favorable product mix and operating efficiencies. Operating margin increased to 15.4% from 12.8% in the prior year.
Adjusted EBITDA⁸ of $57.2 million compared to $48.8 million in fiscal 2017.

Performance Materials
The Performance Materials segment consists of the pipeline performance business and the wood treating chemicals business.

Performance
Materials

Fourth Quarter

Full Year

Dollars in thousands

Fiscal 2018

Fiscal 2017

Fiscal 2018

Fiscal 2017

As Reported

(GAAP)

Net sales

$42,772

$24,468

$163,533

$56,821

Operating income

14,557

2,877

54,991

13,804

Operating margin

34.0%

11.8%

33.6%

24.3%

For the fourth fiscal quarter, the Performance Materials segment reported:

Sales of $42.8 million, up 75% from $24.5 million in the same period a year ago. Sales growth reflected a full quarter of contribution from Flowchem as compared to a partial quarter in Q4 2017, as well as product volume growth in the pipeline performance and wood treating chemicals businesses.
Operating income of $14.6 million, or 34.0% of sales, compared to $2.9 million, or 11.8% of sales, last year. The increase in operating income was due to a full quarter of contribution from Flowchem as compared to a partial quarter in Q4 2017, as well as product volume growth in the pipeline performance and wood treating chemicals businesses. Operating income in the fourth quarter of fiscal 2017 was dampened due to the step-up in basis for acquired Flowchem inventories totaling $3.7 million, as well as a $2.5 million increase in depreciation and amortization related to the acquisitions of Sealweld and Flowchem.
Adjusted EBITDA⁹ of $18.8 million compared to $10.1 million last year.

For the fiscal 2018 year, the Performance Materials segment reported:

Sales of $163.5 million, up 188% from the prior year. The sales increase was driven by full-year contributions from Sealweld and Flowchem, as well as product volume growth in the pipeline performance and wood treating chemicals businesses.
Operating income of $55.0 million, or 33.6% of sales, compared to $13.8 million, or 24.3% of sales, last year. Operating income improved due to higher sales and product volume growth in the pipeline performance and wood treating chemicals businesses. Operating income in fiscal 2017 was unfavorably impacted by a $3.7 million purchase price adjustment to acquired Flowchem inventories and a $2.7 million increase in depreciation and amortization.
Adjusted EBITDA¹⁰ of $71.8 million compared to $22.3 million last year.

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,

2018

2017

2018

2017
Net sales
$122,394


$96,260


$465,556


$333,442

Cost of sales

70,959



59,518



267,895



203,304

Gross profit

51,435



36,742



197,661



130,138









Distribution expenses

9,247



9,989



36,439



38,318

Selling, general and administrative expenses

15,961



12,279



57,900



50,188

Amortization of intangible assets

3,860



4,279



15,123



4,279

Restructuring charges

5



(50
)


74



20

Operating income

22,362



10,245



88,125



37,333

Other (expense) income







Interest expense, net

(4,196
)


(4,167
)


(21,529
)


(4,817
)
Loss on the extinguishment of debt

(342
)


(353
)


(6,710
)


(353
)
Derivative fair value gain

338


âˆ’


5,576


âˆ’
Other, net

(86
)


190



(1,063
)


279

Total other (expense) income, net

(4,286
)


(4,330
)


(23,726
)


(4,891
)








Income before income taxes

18,076



5,915



64,399



32,442

Provision for income taxes

(67
)


(577
)


442



(8,809
)
Net income

18,009


$5,338



64,841


$23,633

Earnings per share:







Net income per common share basic
$1.16


$0.45


$4.41


$1.99

Net income per common share diluted
$1.13


$0.43


$4.29


$1.92









Weighted average shares outstanding:







Basic

15,507



11,890



14,708



11,885

Diluted

15,994



12,436



15,111



12,286


KMG CHEMICALS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except for share and per share amounts)


July 31,
July 31,

2018
2017



*Assets*


Current assets


Cash and cash equivalents
$24,436

$20,708

Accounts receivable


Trade, net of allowances of $219 at July 31, 2018 and $263 at July 31, 2017

61,895


51,168

Other

9,943


6,168

Inventories, net

54,218


46,482

Prepaid expenses and other

4,807


8,617

Total current assets

155,299


133,143




Property, plant and equipment, net

117,101


105,435

Goodwill

233,204


224,391

Intangible assets, net

300,457


320,401

Other assets, net

12,373


9,061

Total assets

818,434

$792,431




*Liabilities & stockholders’ equity*


Current liabilities


Accounts payable
$39,005

$29,570

Accrued liabilities

12,524


12,456

Employee incentive accrual

7,726


7,713

Current portion of long-term debt
âˆ’

3,167

Total current liabilities

59,255


52,906




Long-term debt

306,119


523,102

Deferred tax liabilities

32,129


37,944

Other long-term liabilities

4,864


4,763

Total liabilities

402,367


618,715




Commitments and contingencies





Stockholders’ equity


Preferred stock, $.01 par value, 10,000,000 shares authorized, none issued

âˆ’


âˆ’

Common stock, $.01 par value, 40,000,000 shares authorized, 15,509,733 shares






issued and outstanding at July 31, 2018 and 11,889,649 shares issued and






outstanding at July 31, 2017

155


119

Additional paid-in capital

222,371


42,535

Accumulated other comprehensive loss

(10,321)


(9,712)

Retained earnings

203,862


140,774

Total stockholders’ equity

416,067


173,716

Total liabilities and stockholders’ equity

818,434

$792,431


KMG CHEMICALS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)


Year Ended

July 31,

2018

2017
Cash flows from operating activities







Net income
$
64,841


$
23,633

Adjustments to reconcile net income to net cash provided by operating activities







Depreciation and amortization

29,948



16,964

Loss on extinguishment of debt

6,710



353

Amortization of loan costs included in interest expense

1,421



401

Stock-based compensation expense

7,964



6,259

Deferred income tax (benefit)/expense

(5,517
)


(1,090
)
Other

371



(1,028
)
Derivative fair value gain

(5,576
)


âˆ’

Debt repricing transaction costs

607



âˆ’

Changes in operating assets and liabilities







Accounts receivable – trade

(11,039
)


(3,146
)
Accounts receivable – other

(2,221
)


254

Inventories

(8,206
)


2,870

Other current and noncurrent assets

(566
)


(1,500
)
Accounts payable

9,904



(1,096
)
Accrued liabilities and other

(666
)


2,049

Net cash provided by operating activities

87,975



44,923









Cash flows from investing activities







Additions to property, plant and equipment

(23,654
)


(13,074
)
Purchase of Sealweld, net of cash acquired

(585
)


(16,599
)
Purchase of Flowchem, net of cash acquired

âˆ’



(495,000
)
Other investing activities

(988
)


(753
)
Proceeds from insurance claim

50



1,251

Net cash used in investing activities

(25,177
)


(524,175
)








Cash flows from financing activities







Proceeds from sale of common stock, net of issuance costs

175,637



âˆ’

Principal payments on borrowings of term loan

(228,000
)


(10,000
)
Debt repricing transaction costs

(607
)


âˆ’

Proceeds from term loan

âˆ’



550,000

Borrowings under credit facility

âˆ’



17,000

Deferred financing costs

âˆ’



(15,323
)
Net payments under credit facility

âˆ’



(52,800
)
Cash payments related to tax withholdings from stock-based awards

(3,729
)


(277
)
Payment of dividends

(1,753
)


(1,423
)
Other financing activities

32



âˆ’

Net cash (used in)/provided by financing activities

(58,420
)


487,177









Effect of exchange rate changes on cash

(650
)


(645
)
Net increase in cash, cash equivalents and restricted cash

3,728



7,280

Cash, cash equivalents and restricted cash at beginning of period

20,708



13,428

Cash, cash equivalents and restricted cash at end of period
$
24,436


$
20,708

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 2018
Fourth Quarter Fiscal 2017
Consolidated GAAP net income
$18,009

$5,338

Add back:


Interest expense, net

4,196


4,167

Loss on the extinguishment of debt

342


353

Provision for income taxes

67


577

Depreciation & amortization*

7,590


6,100

Acquisition & integration expenses

1,266


âˆ’

Derivative fair value gain

(338)


âˆ’

Corporate relocation expense

âˆ’


405

Restructuring charges, excluding accelerated depreciation

5


1

Effect of purchase price accounting on acquired inventories valuation**

âˆ’


(50)

Purchase price adjustment to inventories

âˆ’


3,674

Consolidated adjusted EBITDA
$31,137

$20,565


* 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, 2018

Year Ended July 31, 2017

Consolidated GAAP net income
$64,841


$23,633

Add back (deduct):




Interest expense, net

21,529



4,817

Income taxes

(442)



8,809

Depreciation & amortization*

29,948



16,964

Loss on the extinguishment of debt

6,710



353

Derivative fair value gain

(5,576)



–

Debt repricing transaction costs

607



–

Acquisition & integration expenses

1,843



1,550

Corporate relocation expense

–



370

Restructuring & realignment charges, excluding accelerated depreciation

74



20

Effect of purchase price accounting on acquired inventories valuation**

–



3,674

Consolidated adjusted EBITDA
$119,534


$60,190


* 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 2018

Electronic

Performance

(in thousands)

Chemicals

Materials

Corporate

Total

Operating Income (Loss)

$11,678

$14,557

($3,873)

$22,362

Other income (expense), net

(72)

(75)

(86)

Depreciation and amortization

2,727

4,325

538

7,590

Acquisition & integration expenses

âˆ’

1,228

1,266

Restructuring charges

âˆ’

Adjusted EBITDA

14,471

18,848

(2,182)

31,137

Corporate allocation

3,201

2,458

(5,659)

âˆ’

Adjusted EBITDA excl. corporate allocation

$17,672

$21,306

($7,841)

$31,137

Year Ended July 31, 2018

Electronic

Performance

(in thousands)

Chemicals

Materials

Corporate

Total

Operating Income (Loss)

$46,554

$54,991

($13,420)

$88,125

Other income (expense), net

(555)

(112)

(396)

(1,063)

Depreciation and amortization

11,145

16,743

2,060

29,948

Acquisition & integration expenses

âˆ’

163

1,680

1,843

Restructuring charges

âˆ’

Debt repricing transaction costs

âˆ’

607

Adjusted EBITDA

57,218

71,785

(9,469)

119,534

Corporate allocation

12,304

8,351

(20,655)

âˆ’

Adjusted EBITDA excl. corporate allocation

$69,522

$80,136

($30,124)

$119,534

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

819

(426)

405

Effect of purchase price accounting on acquired inventories valuation

–

3,674

–

3,674

Restructuring charges*

–

(50)

Corporate relocation expense

–

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

*Excludes depreciation

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

–

16,964

Acquisition & integration expenses

819

712

1,550

Effect of purchase price accounting on acquired inventories valuation

–

3,674

–

3,674

Restructuring charges

–

Corporate relocation expense

–

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

* 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,

2018

2017
Net income
$18,009


$5,338

Items impacting pre-tax income:



Amortization of Flowchem intangible assets

3,237



–

Loss on the extinguishment of debt

342



353

Acquisition & integration expenses

1,266



405

Amortization of debt discounts and financing costs

298



–

Restructuring & realignment charges

5



(50)

Derivative fair value gain

(338)



–

Impact of the Tax Cuts and Jobs Act

(1,321)



–

Corporate relocation expense

–



1

Effect of purchase price accounting on acquired inventories valuation*

–



3,674

Provision for income taxes**

(1,299)



(1,186)

Adjusted net income
$20,199


$8,535

Adjusted diluted earnings per share
$1.26


$ 0.69

Weighted average diluted shares outstanding

15,994



12,436


* 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. ** For fiscal year 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 Cut and Jobs Act of 2017 in December 2017. For the fiscal year ended 2017, represents the aggregate tax-effect of assuming a 35% tax rate of items impacting pre-tax income.

(in thousands)
Year Ended

July 31,

2018

2017
Net income
$64,841


$23,633

Items impacting pre-tax income:



Amortization of Flowchem intangible assets

12,575



–

Loss on extinguishment of debt

6,710



353

Acquisition & integration expenses

1,843



1,550

Amortization of debt discounts and financing costs

1,421



–

Debt repricing transaction costs

607



–

Restructuring & realignment charges

74



20

Derivative fair value gain

(5,576)



–

Impact of the Tax Cuts and Jobs Act

(12,326)



–

Corporate relocation expense

–



370

Effect of purchase price accounting on acquired inventories valuation*

–



3,674

Income taxes**

(4,765)



(1,741)

Adjusted net income
$65,404


$27,859

Adjusted diluted earnings per share
$4.33


$2.27

Weighted average diluted shares outstanding

15,111



12,286


* 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. ** For fiscal year 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 Cut and Jobs Act of 2017 in December 2017. For the fiscal year ended 2017, represents the aggregate tax-effect of assuming a 35% tax rate of items impacting pre-tax income.

Table 2A
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES

Fourth Quarter Fiscal 2018
KMG Chemicals, Inc.
Dollars in thousands, except EPS


Operating

Net

Diluted Earnings
Income

Margin

Income

Per Share
GAAP measure
$22,362

18.3%


$18,009


$1.13
Amortization of Flowchem intangible assets

3,237

2.6%



2,363


0.15
Acquisition & integration expenses

1,266

1.0%



924


0.05
Restructuring & realignment charges

5

0.1%



4


0.00
Impact of the Tax Cuts and Jobs Act

–

0.0%



(1,321)


(0.08)
Loss on the extinguishment of debt

–

0.0%



250


0.02
Derivative fair value gain

–

0.0%



(247)


(0.02)
Amortization of debt discounts and financing costs

–

0.0%



217


0.01
Non-GAAP measure
$26,870

22.0%


$20,199


$1.26

Year Ended July 31, 2018
KMG Chemicals, Inc.
Dollars in thousands, except EPS


Operating

Net

Diluted Earnings
Income

Margin

Income

Per Share
GAAP measure
$88,125

18.9%


$64,841


$4.29
Amortization of Flowchem intangible assets

12,575

2.7%



9,181


0.61
Acquisition & integration expenses

1,843

0.4%



1,345


0.09
Restructuring & realignment charges

74

0.0%



54


0.01
Impact of the Tax Cuts and Jobs Act

–

0.0%



(12,326)


(0.82)
Loss on the extinguishment of debt

–

0.0%



4,899


0.32
Derivative fair value gain

–

0.0%



(4,070)


(0.27)
Amortization of debt discounts and financing costs

–

0.0%



1,037


0.07
Debt repricing transaction costs

–

0.0%



443


0.03
Non-GAAP measure
$102,617

22.0%


$65,404


$4.33

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.


KMG Chemicals, Inc.
Year Ended July 31, 2017

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.

KMG Investor Relations Eric Glover, 817-761-6006 eglover@kmgchemicals.com

Company Name:	KMG Chemicals Inc.
Stock Symbol:	KMG
Market:	NYSE

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