KMG Chemicals Second Fiscal Quarter 2002 Results; Second Quarter Results Meet Internal Plan

Second Half of Fiscal 2002 Expected to Beat Last Year's Numbers


HOUSTON, March 1, 2002 (PRIMEZONE) -- KMG Chemicals, Inc. (Nasdaq:KMGB), a global provider of specialty chemicals in carefully focused markets, today announced its unaudited financial results for the second fiscal quarter ended January 31, 2002.

For the second fiscal 2002 quarter, net income was $0.386 million or $0.05 per diluted share, down from $0.609 million or $.08 per diluted share reported for the same quarter in 2001. Fiscal second quarter net sales were $7.6 million, down from $8.2 million in the year earlier period.

At the end of the second fiscal 2002-quarter, KMG had total assets of $26.1 million and long-term debt of $1.1 million. Long-term debt to total assets was 4.2 percent on January 31, 2002, and has decreased from 26.2 percent at the end of fiscal 1998. The company had approximately $1.7 million of cash and cash equivalents at January 31, 2002.

David Hatcher, chief executive officer and president of KMG Chemicals, said, "Both the second quarter and the first half of fiscal 2002 went according to our internal annual plan. However, we now expect the second half of fiscal 2002 to exceed our annual plan. These higher expectations are a result of two main factors:


  -- We are seeing improvement in portions of our wood treating
     chemicals business.

  -- We continue to benefit from the cost control initiative which we
     began in 2001, in anticipation of the current national economic
     slowdown."

In spite of the recessionary environment, the company maintains strong and profitable positions in stable markets. Based on existing business, it anticipates that fiscal 2002 earnings will exceed fiscal 2001 earnings of $.35 per share. The current earnings per share estimate for the third quarter of fiscal 2002 is in the $0.09 to $0.10 range, up from the $.03 per share earned in the third quarter of fiscal 2001. Hatcher commented that because of the board's confidence in the company's improving performance, it elected to increase the cash dividend, as previously announced, by 12.5 percent to $0.045 annually.

The company's MSMA (agricultural herbicide) plant in Matamoros continues to produce on schedule for the upcoming spring planting in the domestic cotton markets. Production should be sufficient for all customer needs. The selling season for the Bueno(r) 6 herbicide occurs in the company's third and fourth fiscal quarters, so fiscal 2002 earnings will be skewed toward the second half of the fiscal year.

"We are continuing the aggressive acquisition initiative implemented at the beginning of this fiscal year," continued Hatcher. "We are greatly encouraged by the results thus far, and are actively pursuing several attractive opportunities. Our cash flow and strong balance sheet continue to provide us with a significant competitive advantage in the process."


                          KMG Chemicals, Inc.
                        Selected Financial Data
                   (In thousands, except share data)
                              (UNAUDITED)

                       Three Months Ending      Six Months Ending
                            January 31              January 31
                      ----------------------  ----------------------
                         2002        2001        2002        2001
                      ----------  ----------  ----------  ----------

 Net sales            $    7,571  $    8,193  $   15,669  $   16,495
 Gross profit              2,553       2,938       5,189       6,085
 Pre-tax income              622         982       1,305       2,513
 Net income                  386         609         809       1,558
 EBITDA                      935       1,253       1,927       2,986
 Earnings per
  diluted share(1)    $     0.05  $     0.08  $     0.11  $     0.20
 Weighted average
  diluted shares
  outstanding(1)       7,546,127   7,544,032   7,546,197   7,619,691
 Working capital           5,785       7,564       5,785       7,564
 Total assets             26,134      26,068      26,134      26,068
 Long-term debt            1,086       2,094       1,086       2,094
 Shareholders equity      20,097      18,129      20,097      18,129

     (1) Restated for March 2001 stock dividend.

KMG Chemicals, Inc., through its subsidiaries, produces and distributes specialty chemicals to carefully focused markets. The company grows by acquiring and managing stable chemical product lines and businesses with established production processes. Its wholly owned subsidiary, KMG Bernuth, Inc., is a global provider of wood preservation chemicals to the lumber treatment industry and herbicides to the agricultural industry. For more information, visit the company's Web site at www.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.


            

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