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KMG CHEMICALS INC
0001028215
--07-31
No
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Accelerated Filer
10-Q
false
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Q1
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<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 1 - us-gaap:OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-->
<!-- xbrl,ns -->
<!-- xbrl,nx -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="left">
</div>
<div align="center" style="font-size: 10pt; margin-top: 0pt">
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><b>(1) Basis of Presentation. </b>
The (a) consolidated balance sheet as of July 31, 2011, which has
been derived from audited consolidated financial statements, and (b) the unaudited condensed
consolidated financial statements included herein have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission for interim reporting. As permitted under
those requirements, certain footnotes or other financial information that are normally required by
generally accepted accounting principles in the United States of America (“GAAP”) have been
condensed or omitted. The Company believes that the disclosures made are adequate to make the
information not misleading and in the opinion of management reflect all adjustments, including
those of a normal recurring nature, that are necessary for a fair presentation of financial
position and results of operations for the interim periods presented. The results of operations for
the interim periods are not necessarily indicative of results of operations to be expected for the
full year. The unaudited condensed consolidated financial statements included herein should be read
in conjunction with the consolidated financial statements and notes thereto included in the
Company’s Annual Report on Form 10-K for the year ended July 31, 2011.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">These condensed consolidated financial statements are prepared using certain estimates by
management and include the accounts of KMG Chemicals, Inc. and its subsidiaries (collectively, the
“Company”). All significant intercompany balances and transactions have been eliminated in
consolidation. Certain reclassifications have been made to the prior period consolidated financial
statements to conform to the current period presentation.
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 2 - us-gaap:AccountingChangesAndErrorCorrectionsTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><b>(2) Recent Accounting Standards. </b>
The Company has considered all recently issued accounting
standards updates and SEC rules and interpretive releases.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In June 2011, the Financial Accounting Standards Board issued updated accounting guidance that
requires the total of comprehensive income, the components of net income and the components of
other comprehensive income to be presented in either a single continuous statement of comprehensive
income or in two separate but consecutive statements. This update eliminates the option to present
the components of other comprehensive income as part of the statement of changes in stockholders’
equity. In the two-statement approach, the first statement should present total net income and its
components in the statement of net income followed consecutively by a second statement of other
comprehensive income that should present total other comprehensive income, the components of other
comprehensive income, and a total comprehensive income. The updated guidance does not change the
items that must be reported in comprehensive income. This updated guidance is effective for fiscal
years, and interim periods within those years, beginning after December 15, 2011, and should be
applied retrospectively. Early adoption is permitted. The Company adopted the updated guidance on
August 1, 2011, which did not have a material impact on its consolidated financial statements.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 3 - us-gaap:EarningsPerShareTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><b>(3) Earnings Per Share. </b>
Basic earnings per share have been computed by dividing net income by
the weighted average shares outstanding. Diluted earnings per share have been computed by dividing
net income by the weighted average shares outstanding plus potentially dilutive common shares. The
following table presents information necessary to calculate basic and diluted earnings per share
for periods indicated:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Three Months Ended</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>October 31,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>(Amounts in thousands, except</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>per share data)</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Income from continuing operations
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">3,568</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">3,516</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Loss from discontinued operations
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(33</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Net income
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">3,535</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">3,516</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Weighted average shares outstanding-basic
</div></td>
<td> </td>
<td> </td>
<td align="right">11,348</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">11,299</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Dilutive effect of options and stock awards
</div></td>
<td> </td>
<td> </td>
<td align="right">163</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">161</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Weighted average shares outstanding-diluted
</div></td>
<td> </td>
<td> </td>
<td align="right">11,511</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">11,460</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">BASIC EARNINGS PER SHARE
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Basic earnings per share from continuing operations
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">0.31</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">0.31</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Basic earnings per share on loss from discontinued operations
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Basic earnings per share
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">0.31</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">0.31</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">DILUTED EARNINGS PER SHARE
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Diluted earnings per share from continuing operations
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">0.31</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">0.31</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Diluted earnings per share on loss from discontinued operations
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Diluted earnings per share
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">0.31</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">0.31</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Outstanding stock based awards are not included in the computation of diluted earnings per
share under the treasury stock method, if including them would be anti-dilutive. There were
approximately 7,300 shares of potentially dilutive securities not included in the computation of
diluted earnings per share for the three months ended October 31, 2011 and there were no shares of
potentially dilutive securities not included in the computation of diluted earnings per share for
the three month period ended October 31, 2010.
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 4 - us-gaap:InventoryDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><b>(4) Inventories. </b>
Inventories are summarized in the following table (in thousands):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>October 31,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>July 31,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Raw materials and supplies
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">10,307</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">9,914</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Finished products
</div></td>
<td> </td>
<td> </td>
<td align="right">31,136</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">32,189</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Less reserve for inventory obsolescence
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(315</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(333</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Inventories, net
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">41,128</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">41,770</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 5 - us-gaap:PropertyPlantAndEquipmentDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><b>(5) Property, Plant and Equipment. </b>
Property, plant and equipment and related accumulated
depreciation and amortization are summarized as follows (in thousands):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>October 31,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>July 31,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Land
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">9,944</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">10,081</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Buildings & improvements
</div></td>
<td> </td>
<td> </td>
<td align="right">36,128</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">35,795</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Equipment
</div></td>
<td> </td>
<td> </td>
<td align="right">44,837</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">44,098</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Leasehold improvements
</div></td>
<td> </td>
<td> </td>
<td align="right">143</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">143</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td align="right">91,052</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">90,117</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Less accumulated depreciation and amortization
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(25,892</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(24,388</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td align="right">65,160</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">65,729</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Construction-in-progress
</div></td>
<td> </td>
<td> </td>
<td align="right">6,607</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,097</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Property, plant and equipment, net
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">71,767</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">71,826</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 6 - us-gaap:DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><b>(6) Stock-Based Compensation. </b>
The Company has stock-based incentive plans which are described
in more detail in note 11 to the consolidated financial statements in the Company’s Annual Report
on Form 10-K for fiscal year 2011. The Company recognized stock-based compensation costs of
approximately $211,000 and $181,000 for the three months ended October 31, 2011 and 2010,
respectively, which are recorded as selling, general and administrative expenses in the condensed
consolidated statements of income.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">As of October 31, 2011, the unrecognized compensation costs related to stock-based awards was
approximately $1.2 million, including $17,000 related to non-vested stock options expected to be
recognized over a weighted-average period of 1.5 years and $1.2 million related to non-vested
performance and time-based stock awards expected to be recognized over a weighted-average period of
2.1 years.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">A summary of stock option and stock activity is presented below.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><b><i>Stock Options</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">A summary of activity for the three months ended October 31, 2011 is presented below. No
options were granted in the first three months of fiscal years 2012 or 2011.
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Weighted-</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Average</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Shares</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Exercise Price</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Outstanding on August 1, 2011
</div></td>
<td> </td>
<td> </td>
<td align="right">222,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">3.98</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Granted
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Exercised
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Forfeited/Expired
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Outstanding on October 31, 2011
</div></td>
<td> </td>
<td> </td>
<td align="right">222,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3.98</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The following table summarizes information about stock options outstanding at October 31, 2011
based on fully vested (currently exercisable) stock option awards and stock options awards expected
to vest:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Weighted-</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Weighted-</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Average</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Average</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Remaining</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Aggregate</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Options</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Exercise Price</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Contractual</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Intrinsic Value</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Outstanding</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>per Share</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Term (years)</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>(in thousands) (1)</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Fully vested and currently exercisable
</div></td>
<td> </td>
<td> </td>
<td align="right">177,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">3.88</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5.1</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,887</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Expected to vest
</div></td>
<td> </td>
<td> </td>
<td align="right">45,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4.37</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">11.4</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">457</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total outstanding stock options
</div></td>
<td> </td>
<td> </td>
<td align="right">222,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3.98</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6.4</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2,344</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 10pt; width: 18%; border-top: 1px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr style="font-size: 6pt">
<td width="3%"> </td>
<td width="1%"> </td>
<td width="96%"> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(1)</td>
<td> </td>
<td>
<div style="text-align: left">The aggregate intrinsic value is computed based on the closing price of the Company’s stock
on October 31, 2011.
</div></td>
</tr>
</table>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">There were no options exercised in the three months ended October 31, 2011. The total
intrinsic value of options exercised during the three months ended October 31, 2010 was
approximately $546,000.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><b><i>Performance Shares</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">On August 1, 2011, there were 209,305 non-vested performance shares outstanding which
reflected the maximum number of shares under the awards. During the three months ended October 31,
2011, there were no awards vested and there were 123,811 performance-based stock awards granted.
The fair value of the awards was measured on the grant dates of October 11, 2011 and October 28,
2011 using the Company’s closing stock price of $14.16 and $15.30, respectively. Stock-based
compensation expense on the awards will be recognized on a straight line basis over the requisite
service period beginning on the date of grant through the end of the measurement period ending July
31, 2014, based on the number of shares expected to vest at the end of the measurement period. As
of October 31, 2011, the non-vested performance-based stock awards consisted of Series 1 and Series
2 awards granted to certain executives and employees in fiscal years 2012, 2011 and 2010, as
summarized below.
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="28%"> </td>
<td width="3%"> </td>
<td width="9%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Closing Stock</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Maximum</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Price</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>3-Year</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Expected</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center"><b>Series</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Award</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>(Fair Value)</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Measurement</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Percentage of</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Shares Expected</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><b>Date of Grant</b></td>
<td> </td>
<td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>Award</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>(Shares)</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>on Grant Date</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Period Ending</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Vesting</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>to Vest</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Fiscal Year 2012 Award
</div></td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">10/28/2011
</div></td>
<td> </td>
<td align="left" valign="top">Series 1</td>
<td> </td>
<td> </td>
<td align="right">15,300</td>
<td> </td>
<td> </td>
<td align="left"> </td>
<td align="right">$15.30</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">07/31/2014</td>
<td> </td>
<td> </td>
<td align="center" colspan="2">55.0%</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td align="right">8,415</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">10/28/2011
</div></td>
<td> </td>
<td align="left" valign="top">Series 2</td>
<td> </td>
<td> </td>
<td align="right">10,200</td>
<td> </td>
<td> </td>
<td align="left"> </td>
<td align="right">$15.30</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">07/31/2014</td>
<td> </td>
<td> </td>
<td align="center" colspan="2">0.0%</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td> </td>
<td align="right">25,500</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8,415</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">10/11/2011
</div></td>
<td> </td>
<td align="left" valign="top">Series 1</td>
<td> </td>
<td> </td>
<td align="right">58,987</td>
<td> </td>
<td> </td>
<td align="left"> </td>
<td align="right">$14.16</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">07/31/2014</td>
<td> </td>
<td> </td>
<td align="center" colspan="2">55.0%</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td align="right">32,443</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">10/11/2011
</div></td>
<td> </td>
<td align="left" valign="top">Series 2</td>
<td> </td>
<td> </td>
<td align="right">39,324</td>
<td> </td>
<td> </td>
<td align="left"> </td>
<td align="right">$14.16</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">07/31/2014</td>
<td> </td>
<td> </td>
<td align="center" colspan="2">0.0%</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td> </td>
<td align="right">98,311</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">32,443</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Fiscal Year 2011 Award
</div></td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">12/7/2010
</div></td>
<td> </td>
<td align="left" valign="top">Series 1</td>
<td> </td>
<td> </td>
<td align="right">61,980</td>
<td> </td>
<td> </td>
<td align="left"> </td>
<td align="right">$15.65</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">07/31/2013</td>
<td> </td>
<td> </td>
<td align="center" colspan="2">47.5%</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td align="right">29,441</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">12/7/2010
</div></td>
<td> </td>
<td align="left" valign="top">Series 2</td>
<td> </td>
<td> </td>
<td align="right">41,318</td>
<td> </td>
<td> </td>
<td align="left"> </td>
<td align="right">$15.65</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">07/31/2013</td>
<td> </td>
<td> </td>
<td align="center" colspan="2">0.0%</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td> </td>
<td align="right">103,298</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">29,441</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Fiscal Year 2010 Award
</div></td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">3/17/2010
</div></td>
<td> </td>
<td align="left" valign="top">Series 1</td>
<td> </td>
<td> </td>
<td align="right">63,605</td>
<td> </td>
<td> </td>
<td align="left"> </td>
<td align="right">$15.55</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">07/31/2012</td>
<td> </td>
<td> </td>
<td align="center" colspan="2">30.0%</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td align="right">19,081</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">3/17/2010
</div></td>
<td> </td>
<td align="left" valign="top">Series 2</td>
<td> </td>
<td> </td>
<td align="right">42,402</td>
<td> </td>
<td> </td>
<td align="left"> </td>
<td align="right">$15.55</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">07/31/2012</td>
<td> </td>
<td> </td>
<td align="center" colspan="2">20.0%</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td align="right">8,480</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td> </td>
<td align="right">106,007</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">27,561</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td> </td>
<td align="right">333,116</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">97,860</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Series 1: Vesting for the Series 1 awards is subject to a performance requirement composed of
certain revenue growth objectives and average annual return on invested capital or equity
objectives measured across a three year period. These objectives are measured quarterly using the
Company’s budget, actual results and long-term projections. For the fiscal year 2012, 2011 and 2010
awards, the expected percentage of vesting is based on performance through October 31, 2011 and
reflects the percentage of shares projected to vest for the respective awards at the end of their
measurement periods.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Series 2: Vesting for the Series 2 awards is subject to performance requirements pertaining to
the growth rate in the Company’s basic earnings per share over a three year period. The achievement
of performance requirements is measured quarterly using the Company’s budget, actual results and
long-term projections. For the fiscal year 2012, 2011 and 2010 awards, the expected percentage of
vesting is based on performance through October 31, 2011 and reflects the percentage of shares
projected to vest for the respective awards at the end of their measurement periods.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The weighted-average grant-date fair value of performance awards outstanding at October 31,
2011 and August 1, 2011 was $15.10 and $15.60, respectively.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="left" style="font-size: 10pt; margin-top: 10pt"><b><i>Time Based Shares</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">A summary of activity for time-based stock awards for the three months ended October 31, 2011
is presented below:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Weighted-Average</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Grant-Date</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Shares</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Fair Value</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Non-vested on August 1, 2011
</div></td>
<td> </td>
<td> </td>
<td align="right">24,939</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">16.03</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Granted
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Vested
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(6,608</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">15.12</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Forfeited
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Non-vested on October 31, 2011
</div></td>
<td> </td>
<td> </td>
<td align="right">18,331</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">16.36</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">There were no time-based shares granted during the three months ended October 31, 2010. The
total fair value of shares vested during the three months ended October 31, 2011 and 2010 was
approximately $100,000 and $87,500, respectively.
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 7 - us-gaap:IntangibleAssetsDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><b>(7) Intangible Assets. </b>
Intangible assets are summarized as follows (in thousands):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="23%"> </td>
<td width="3%"> </td>
<td width="8%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="6%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="6%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="6%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="6%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="6%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="6%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="4" style="border-bottom: 1px solid #000000"><b>Number of Years</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Weighted Average</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>October 31, 2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>July 31, 2011</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center"><b>Range of</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Amortization</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Original</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Accumulated</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Carrying</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Accumulated</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Carrying</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>useful life</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Period</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Cost</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Amortization</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Amount</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Amortization</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Amount</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Intangible assets subject to
amortization:</b>
</div></td>
<td> </td>
<td align="center" valign="bottom"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Creosote supply contract
</div></td>
<td> </td>
<td align="center" valign="bottom">10</td>
<td> </td>
<td align="center" colspan="2">10.0</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">4,000</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(4,000</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(3,955</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">45</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Animal health trademarks
</div></td>
<td> </td>
<td align="center" valign="bottom">4.5</td>
<td> </td>
<td align="center" colspan="2">4.1</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">364</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(364</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(364</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td> <div style="margin-left:15px; text-indent:-15px">Animal health product registrations
and other related assets
</div></td>
<td> </td>
<td align="center" valign="bottom">5-20</td>
<td> </td>
<td align="center" colspan="2">18.4</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,165</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(2,089</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">4,076</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(2,005</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">4,160</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Electronic chemicals-related contracts
</div></td>
<td> </td>
<td align="center" valign="bottom">3-8</td>
<td> </td>
<td align="center" colspan="2">3.8</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,164</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(1,023</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">141</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(1,014</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">150</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Electronic chemicals-related
trademarks and patents
</div></td>
<td> </td>
<td align="center" valign="bottom">10-15</td>
<td> </td>
<td align="center" colspan="2">12.0</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">117</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(39</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">78</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(36</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">81</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Electronic chemicals—value of
product qualifications
</div></td>
<td> </td>
<td align="center" valign="bottom">5</td>
<td> </td>
<td align="center" colspan="2">5.0</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,300</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(412</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">888</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(347</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">953</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="center" valign="bottom"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Total intangible assets subject to
amortization
</div></td>
<td> </td>
<td align="center" valign="bottom"> </td>
<td> </td>
<td align="center" colspan="2">12.8</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">13,110</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(7,927</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">5,183</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(7,721</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">5,389</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="center" valign="bottom"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="center" valign="bottom"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Intangible assets not subject to
amortization:</b>
</div></td>
<td> </td>
<td align="center" valign="bottom"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Creosote product registrations
</div></td>
<td> </td>
<td align="center" valign="bottom"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,339</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,339</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Penta product registrations
</div></td>
<td> </td>
<td align="center" valign="bottom"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8,765</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8,765</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="center" valign="bottom"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Total intangible assets not
subject to amortization
</div></td>
<td> </td>
<td align="center" valign="bottom"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">14,104</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">14,104</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="center" valign="bottom"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total intangible assets, net
</div></td>
<td> </td>
<td align="center" valign="bottom"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">19,287</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">19,493</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="center" valign="bottom"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Intangible assets subject to amortization are amortized over their estimated useful
lives. Amortization expense was approximately $206,000 and $304,000 for the three month periods
ended October 31, 2011 and 2010, respectively.
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 8 - kmgb:DividendsTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><b>(8) Dividends. </b>
Dividends of approximately $283,000 ($0.025 per share) and $226,000 ($0.02 per
share) were declared and paid in the first quarter of fiscal years 2012 and 2011, respectively.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 9 - us-gaap:SegmentReportingDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><b>(9) Segment Information. </b>
The Company previously had four reportable segments — Electronic
Chemicals, Penta, Creosote and Animal Health. The Company re-evaluated the criteria used to
determine operating segments and concluded that its Penta and Creosote product lines met the
criteria of a single operating segment. As a result, effective August 1, 2011, the Company’s
reportable segments were revised to reflect a change from four to three reportable segments —
Electronic Chemicals, Wood Treating Chemicals and Animal Health. Prior year information has been
reclassified to conform to the current period presentation.
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Three Months Ended</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>October 31,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>(Amounts in thousands)</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Sales
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Electronic Chemicals
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">38,378</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">36,793</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Wood Treating Chemicals
</div></td>
<td> </td>
<td> </td>
<td align="right">33,161</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">24,160</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Animal Health
</div></td>
<td> </td>
<td> </td>
<td align="right">1,768</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,151</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Total sales for reportable segments
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">73,307</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">62,104</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Depreciation and amortization
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Electronic Chemicals
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">1,419</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,756</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Wood Treating Chemicals
</div></td>
<td> </td>
<td> </td>
<td align="right">160</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">218</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Animal Health
</div></td>
<td> </td>
<td> </td>
<td align="right">126</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">192</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Other — general corporate
</div></td>
<td> </td>
<td> </td>
<td align="right">60</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">74</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Total consolidated depreciation and amortization
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">1,765</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2,240</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Segment income (loss) from operations (1)
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Electronic Chemicals
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">2,663</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">3,025</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Wood Treating Chemicals
</div></td>
<td> </td>
<td> </td>
<td align="right">5,221</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,829</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Animal Health
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(592</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(397</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Total segment income from operations
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">7,292</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">6,457</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>October 31,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>July 31,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Assets
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Electronic Chemicals
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">111,067</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">116,139</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Wood Treating Chemicals
</div></td>
<td> </td>
<td> </td>
<td align="right">46,636</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">45,917</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Animal Health
</div></td>
<td> </td>
<td> </td>
<td align="right">13,388</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">15,074</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Total assets for reportable segments
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">171,091</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">177,130</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 10pt; width: 18%; border-top: 1px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr style="font-size: 6pt">
<td width="3%"> </td>
<td width="1%"> </td>
<td width="96%"> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(1)</td>
<td> </td>
<td>
<div style="text-align: left">Segment income (loss) from operations includes corporate overhead expenses which are
allocated based on segment net sales.
</div></td>
</tr>
</table>
<div align="left" style="font-size: 10pt; margin-top: 10pt">Corporate overhead expenses allocated to segment income (loss) from operations
for the three months ended October 31, 2011 and 2010 were as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Three Months Ended</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>October 31,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>(Amounts in thousands)</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Electronic Chemicals
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">1,139</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">932</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Wood Treating Chemicals
</div></td>
<td> </td>
<td> </td>
<td align="right">949</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">735</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Animal Health
</div></td>
<td> </td>
<td> </td>
<td align="right">108</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">112</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total corporate overhead expense allocation
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">2,196</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,779</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">A reconciliation of total segment information to consolidated amounts is as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>October 31,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>July 31,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>(Amounts in thousands)</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Assets:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total assets for reportable segments
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">171,091</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">177,130</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Total assets for discontinued operations (1)
</div></td>
<td> </td>
<td> </td>
<td align="right">619</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">644</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Cash and cash equivalents
</div></td>
<td> </td>
<td> </td>
<td align="right">5,091</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,479</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Prepaid and other current assets
</div></td>
<td> </td>
<td> </td>
<td align="right">3,692</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,749</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Other
</div></td>
<td> </td>
<td> </td>
<td align="right">3,724</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,587</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Total assets
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">184,217</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">186,589</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Three Months Ended</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>October 31,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Sales:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total sales for reportable segments
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">73,307</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">62,104</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Net sales
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">73,307</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">62,104</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Segment income from operations:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Total segment income from operations
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">7,292</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">6,457</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Other corporate expense (2)
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(784</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(897</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Operating income
</div></td>
<td> </td>
<td> </td>
<td align="right">6,508</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,560</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Interest income
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Interest expense
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(550</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(595</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Other income (expense), net
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(75</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">51</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Income from continuing operations before income taxes
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">5,883</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">5,017</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 10pt; width: 18%; border-top: 1px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr style="font-size: 6pt">
<td width="3%"> </td>
<td width="1%"> </td>
<td width="96%"> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(1)</td>
<td> </td>
<td>
<div style="text-align: left">Reflects long-term deferred tax assets related to discontinued operations as of October 31,
2011 and July 31, 2011.
</div></td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(2)</td>
<td> </td>
<td>
<div style="text-align: left">Other corporate expense primarily represents employee stock-based compensation expenses and
those expenses associated with the company’s operation as a public entity such as board
compensation, audit expense and fees related to the listing of our stock.
</div></td>
</tr>
</table>
</div>
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<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><b>(10) Long-Term Obligations. </b>
The Company’s debt consisted of the following (in thousands):
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<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>October 31,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>July 31,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
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<td>
<div style="margin-left:15px; text-indent:-15px">Senior Secured Debt:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Note Purchase Agreement, maturing on December 31, 2014, interest rate of 7.43%
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">20,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">20,000</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Secured Debt:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Term Loan Facility, maturing on December 31, 2012, variable interest rates based on LIBOR plus 2.00%
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">11,333</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Revolving Loan Facility, maturing on December 31, 2016, variable interest rates based on LIBOR plus
2.00% (2.24% at October 31, 2011)
</div></td>
<td> </td>
<td> </td>
<td align="right">24,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">17,946</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total debt
</div></td>
<td> </td>
<td> </td>
<td align="right">44,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">49,279</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Current portion of long-term debt
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(8,000</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Long-term debt, net of current portion
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">44,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">41,279</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
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<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">To finance the acquisition of the electronic chemicals business in December 2007, the Company
entered into a credit agreement and a note purchase agreement with Wachovia Bank, National
Association, a subsidiary of Wells Fargo & Co., Bank of America, N.A., The Prudential Insurance
Company of America, and Pruco Life Insurance Company. The credit agreement included a term loan
facility and a revolving loan facility. The Company amended the credit agreement in March 2010,
and amended it again in November 2011. The November 2011 amendment of the credit facility raised
the maximum amount that may be borrowed under the revolving loan facility from $50.0 million to
$60.0 million, extended the maturity date of the credit agreement to December 31, 2016 and allowed
advances under the revolving loan facility without reference to a borrowing base restriction. The
financial covenant for debt to capitalization was replaced by a current ratio of 1.5 to 1.0. The
Company had previously paid off all outstanding advances under the credit facility’s term loan
commitment, and in the November 2011 amendment, that aspect of the facility was deleted. The
revolving loan bears interest at a varying rate of LIBOR plus a margin based on our funded debt to
earnings before interest, taxes, depreciation and amortization (“EBITDA”).
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<td width="86%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><b>Ratio of Funded Debt to EBITDA</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Margin</b></td>
<td> </td>
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<div style="margin-left:15px; text-indent:-15px">Equal to or greater than 3.0 to 1.0
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">2.75</td>
<td nowrap="nowrap">%</td>
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<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Equal to or greater than 2.5 to 1.0, but less than 3.0 to 1.0
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">2.50</td>
<td nowrap="nowrap">%</td>
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<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Equal to or greater than 2.0 to 1.0, but less than 2.5 to 1.0
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">2.25</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Equal to or greater than 1.5 to 1.0, but less than 2.0 to 1.0
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">2.00</td>
<td nowrap="nowrap">%</td>
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<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Less than 1.5 to 1.0
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">1.75</td>
<td nowrap="nowrap">%</td>
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<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Advances outstanding under the revolving loan bear interest currently at 2.26% per year (LIBOR
plus 2.00%).
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Before the term loan facility was paid off and removed from the credit facility, the term
facility required, principal payments of $458,333 per month for the first 24 months, then,
beginning January 2010, principal payments became $666,667 per month for the balance of the term
prior to maturity. The purchase of the electronic chemical assets from General Chemical on March
29, 2010 was funded with available cash and borrowings on the revolving loan. Additionally, during
the first quarter of fiscal year 2012 the Company repaid the outstanding balance of the term loan
with borrowings on the revolving loan. At October 31, 2011, the amount outstanding on the revolving
loan was $24.0 million.
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<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In fiscal year 2008 the Company also entered into a $20.0 million note purchase agreement with
the Prudential Insurance Company of America. Advances under the note purchase agreement mature
December 31, 2014, and bear interest at 7.43% per annum. Principal is payable at maturity. At
October 31, 2011, $20.0 million was outstanding under the note purchase agreement.
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<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Loans under the amended and restated credit facility and the note purchase agreement are
secured by the Company’s assets, including inventory, accounts receivable, equipment, intangible
assets, and real property. The credit facility and the note purchase agreement have restrictive
covenants, including that the Company must maintain a fixed charge coverage ratio of 1.5 to 1.0, a
ratio of funded debt to EBITDA of 3.0 to 1.0, and a current ratio of at least 1.5 to 1.0. For
purposes of calculating these financial covenant ratios, we use a pro forma EBITDA. On October 31,
2011, the Company was in compliance with all of its debt covenants.
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<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><b>(11) Income Taxes. </b>
Income tax expense for the interim periods was computed using the effective
tax rate estimated to be applicable for the full fiscal year. The effective tax rate for the first
three months of fiscal years 2012 and 2011 was 39.3% and 29.9%,
respectively. Income tax expense for the first quarter of fiscal year
2011 was reduced by $410,000 for the reversal of a portion of the valuation allowance related to a
foreign subsidiary.
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<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><b>(12) Discontinued Operations</b>.
In fiscal year 2008 the Company discontinued operations of its
herbicide product line that had comprised the agricultural chemical segment. During the three
months ended October 31, 2011, there were no sales reported in discontinued operations, and the
Company reported a net loss from discontinued operations of $33,000 from the dismantling of related
equipment. No amounts were recorded for the three months ended October 31, 2010.
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<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><b>(13) Litigation and Other Contingencies. </b>
The Company is subject to contingencies, including
litigation relating to environmental laws and regulations, commercial disputes and other matters.
Certain of these contingencies are discussed below. The ultimate resolution of these contingencies
is subject to significant uncertainty, and should the Company fail to prevail in any of them or
should several of them be resolved against the Company in the same reporting period, these matters
could, individually or in the aggregate, be material to the consolidated financial statements. The
ultimate outcome of these matters, however, cannot be determined at this time, nor can the amount
of any potential loss be reasonably estimated, and as a result no amounts have been recorded in the
Company’s condensed consolidated financial statements.
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<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">On November 29, 2011, there was an explosion in the unit at the Matamoros facility of our
subsidiary where an agricultural herbicide product, referred to as MSMA, had once been made. The
MSMA unit was being demolished by a third-party contractor when the accident occurred. Two of the
contractor’s employees were seriously injured. The event had no impact on penta operations or
production, and the penta unit is operating normally. Our internal investigation of the event and
investigations by government authorities are underway. At present no claim has been made with
respect to the event, and if claims are made their ultimate outcome cannot be determined at this
time. Management believes, however, that any liability that might be incurred in connection with
the event is not likely to have a material adverse effect on our business, financial condition or
results of operation.
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<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company discontinued the operation of MSMA, but in connection with that product line it
was a member of the MSMA task force. In 2007 Albaugh, Inc. sued an entity related to the MSMA task
force, Arsonate Herbicide Products, Limited) (“AHP”), claiming that AHP overbilled it for certain
task force expenses. The Company had been a member of the task force with two other companies.
Although Albaugh, Inc. had agreed to reimburse AHP for certain task force expenses for MSMA studies
and registration support costs, it claims that it was overbilled for many years. The case was tried
in October 2009 in the U.S. District Court for the So. District
of Iowa, and styled as <i>Albaugh, Inc. vs. Arsonate Herbicide Products, Limited. </i>The court
rendered a judgment on May 6, 2011 against AHP for approximately $945,000, plus interest. AHP has
appealed that verdict to the United States Court of Appeals for the Eighth Circuit, No. 11-2284.
The Company intends to vigorously defend against any attempt to collect the judgment against AHP
from the Company.
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<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">A lawsuit was filed against our subsidiary, KMG de Mexico, relating to the title to the land
on which our facility in Matamoros is located. The plaintiffs claim that their title to the land is
superior to the person from whom our subsidiary bought the land. The plaintiffs are seeking to have
our subsidiary’s purchase overturned, and to recover the land and certain improvements or their
value. The lawsuit was initially filed in 1998 in Matamoros, Mexico under <i>Adolfo Cazares Rosas, et
al vs. KMG de Mexico and Guillermo Villarreal</i>. In January 2008, the case was sent by the appeals
court back to the lower court to obtain additional factual information, and on April 20, 2009 the
plaintiffs were required to re-file the case in the First Civil Court in Matamoros, Tamaulipas,
Mexico as <i>Adolfo Cazares, Luis Escudero and Juan Cue vs. KMG de Mexico and Guillermo Villarreal</i>. In
June 2011 the lower court ruled against KMG de Mexico, and held that the plaintiffs had superior
title to the land. The Company has appealed that verdict, and intends to vigorously defend KMG de
Mexico in the appellate court.
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<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">When it purchased assets from Air Products, Inc. (“Air Products”) in December 2007, the
Company agreed to be responsible for the applicable sales tax on the personal property that it
purchased. The Colorado Department of Revenue audited the purchase, and in November 2009 issued a
deficiency notice to Air Products for unpaid sales tax on the purchase of approximately $819,000,
before interest and penalties. The Company assumed the defense of the matter as allowed under its
indemnity of Air Products. The issue is whether certain property at the Company’s Pueblo, Co
facility should be classified as personal property subject to sales tax, or whether the property
should be classified as real property not subject to tax. The matter is now being reviewed
internally at the Colorado Department of Revenue. If a satisfactory resolution is not reached, the
dispute would be subject to arbitration.
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<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In 2007 the Company was sued in Superior Court, Fulton County, Georgia (Atlanta) styled <i>John
Bailey, et al vs Cleveland G. Meredith et al</i>. The case was consolidated in the Superior Court with
other plaintiffs’ cases as <i>Thompson et al vs Meredith et al. </i>The plaintiffs are persons living near
the wood treating facility of one of our customers. The plaintiffs complain that emissions from the
wood treating facility caused harm to their property and person, and claim that the Company is also
responsible because it sold wood treating chemicals to the facility. In fiscal year 2010, the trial
court granted a motion for summary judgment, and dismissed the Company from the case. The
plaintiffs appealed but the Court of Appeals of Georgia, Fourth Division, affirmed the trial
court’s dismissal of the Company. The judgment of the appeals
court is now final and non-appealable.
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<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company is subject to federal, state, local and foreign laws and regulations and potential
liabilities relating to the protection of the environment and human health and safety including,
among other things, the cleanup of contaminated sites, the treatment, storage and disposal of
wastes, the emission of substances into the air or waterways, and various health and safety
matters. The Company expects to incur substantial costs for ongoing compliance with such laws and
regulations. The Company may also face governmental or third-party claims, or otherwise incur
costs, relating to cleanup of, or for injuries resulting from, contamination at sites associated
with past and present operations. The Company accrues for environmental liabilities when a
determination can be made that they are probable and reasonably estimable.
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