Houston, TX - KMG Chemicals, Inc., a global provider of specialty chemicals to select markets, today announced financial results for the fiscal 2014 first quarter ended October 31, 2013.
2014 First Quarter Financial Review
Net sales were $93.6 million, an increase of 43.3% from the comparable quarter in fiscal 2013. The sales increase reflected the addition of OM Group’s Ultra Pure Chemicals (UPC) business, acquired in May 2013.
Adjusted EBITDA1 of $8.0 million, compared to $9.3 million last year. First quarter fiscal 2014 adjusted EBITDA excludes $500,000 of integration expenses and $1.28 million of CEO transition expense, while first quarter fiscal 2013 adjusted EBITDA excludes $577,000 in acquisition expenses.
GAAP diluted earnings per share was $0.12 vs. $0.36 reported in the same period a year ago. First quarter EPS was adversely impacted by an increase of $960,000 in audit, tax and other professional service fees.
Adjusted (non-GAAP) diluted EPS, which excludes integration expenses and CEO transition expense, was $0.22.
1 Non-U.S. GAAP measure. See Table 1 for reconciliation.
Chris Fraser, KMG chairman and chief executive officer, said, “KMG achieved record quarterly revenue of $93.6 million in the first quarter, driven by our newly acquired UPC business. We have been pleased with the integration of the UPC business into our existing Electronic Chemicals business, and we continue to focus intensely on this initiative to ensure a seamless transition for our numerous customers in the global semiconductor industry.
“During the first quarter we announced a strategic manufacturing realignment of our global Electronic Chemicals business. Currently we are in the process of transferring production from the Fremont, California site primarily to our larger facilities in the U.S. In addition, we recently announced a consolidation plan for our European operations, involving the transfer of production from our Milan, Italy site to our other European facilities. We are confident these actions will yield enduring operating efficiencies for our global Electronic Chemicals business.”
Mr. Fraser continued, “In the first quarter, consolidated net income was negatively impacted by higher than anticipated audit, tax and professional service fees due to the coincident timing of the close of the UPC acquisition and our fiscal year-end filing. For the fiscal 2014 year, overall corporate overhead expense will be higher than last year’s level, reflecting the increased size and scope of our global operations.”
First Quarter Results |
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Dollars in thousands, except EPS | Fiscal 2014 | Fiscal 2013 | ||||||
(unaudited) | As | As | ||||||
Adjusted | Reported | Adjusted | Reported | |||||
(non-GAAP) | (GAAP) | (non-GAAP) | (GAAP) | |||||
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Net Sales | $93,560 | $93,560 | $65,336 | $65,336 | ||||
Operating Income | 4,835 | 3,055 | 7,681 | 7,104 | ||||
Operating Margin | 5.2% | 3.3% | 11.8% | 10.9% | ||||
Net Income | 2,511 | 1,352 | 4,507 | 4,142 | ||||
Diluted EPS | $0.22 | $0.12 | $0.39 | $0.36 | ||||
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Electronic Chemicals |
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First Quarter Results | ||||||
Dollars in thousands | Fiscal 2014 | Fiscal 2013 | ||||
As | As | |||||
Adjusted | Reported | Reported | ||||
(non-GAAP) | (GAAP) | (GAAP) | ||||
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Net Sales | $64,452 | $64,452 | $39,507 | |||
Operating Income | $3,838 | 3,338 | 5,072 | |||
Operating Margin | 6.0% | 5.2% | 12.8% | |||
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For the first fiscal quarter, the Electronic Chemicals segment reported:
- Sales of $64.5 million, up from $39.5 million in the same period a year ago. The increase in sales reflected the addition of the UPC business. Electronic Chemicals sales represented 69% of consolidated first quarter sales.
- Adjusted operating income of $3.8 million, vs. $5.1 million last year. Including integration expenses of $500,000, operating income was $3.3 million.
- Adjusted operating margin of 6.0% vs. 12.8% in the previous year. Including the impact of integration expenses, operating margin was 5.2%.
- Depreciation and amortization expense of $3.2 million, compared to $1.6 million last year. Depreciation and amortization increased due to the acquisition of UPC assets.
Wood Treating Chemicals |
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First Quarter Results | ||||
Dollars in thousands | Fiscal 2014 | Fiscal 2013 | ||
As | As | |||
Reported | Reported | |||
(GAAP) | (GAAP) | |||
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Net Sales | $29,064 | $25,700 | ||
Operating Income | 2,505 | 3,366 | ||
Operating Margin | 8.6% | 13.1% | ||
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For the first fiscal quarter, the Wood Treating Chemicals segment reported:
- Sales of $29.1 million, up 13.1% from the same period a year ago. The sales increase was due to higher volumes to the rail tie treating market. Wood Treating Chemicals sales represented 31% of consolidated first quarter sales.
- Operating profit of $2.5 million, or 8.6% of sales, compared to $3.4 million, or 13.1% of sales, last year. The decrease in operating profit reflected a less favorable product mix.
Outlook
For fiscal 2014, the company issued the following forecast:
- Consistent with prior guidance, consolidated net sales are forecast to exceed $350 million, benefiting from the acquisition of the UPC business.
- Projected restructuring charges remain targeted at $4-5 million, partially offset by an estimated $2-3 million of restructuring-related synergies and commercial benefits. In addition, incremental capital expenditures of $2 million are expected to be incurred to accomplish these plans.
- Depreciation and amortization expense of approximately $15 million, up approximately $7 million from fiscal 2013.
- GAAP net income to decline from the level reported in fiscal 2013.
