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Exhibit 99.1

KMG Chemicals Reports First Quarter 2013 Financial Results

HOUSTON – December 7, 2012 – KMG Chemicals, Inc. (NYSE: KMG), a global provider of specialty chemicals in select markets, today announced financial results for the fiscal 2013 first quarter ended October 31, 2012.

2013 First Fiscal Quarter Highlights


  Net sales were $65.3 million, down 8.7% from the comparable quarter in fiscal 2012, reflecting reduced volumes within our Wood Treating Chemicals business.


  Gross profit margins increased to 30.7%, from 26.1% in the first fiscal quarter of 2012.


  Operating income increased 1.6% to $7.1 million vs. $7.0 million in the same period a year ago.


  Diluted earnings per share were $0.36, up 16% from $0.31 per share in last year’s first fiscal quarter.


  Electronic Chemicals segment operating margins (after corporate allocations) improved to 12.8% vs. 6.9% in the first fiscal quarter of 2012.


  Wood Treating Chemicals segment operating margins (after corporate allocations) were 13.1% vs. 15.7% in last year’s first quarter.

Neal Butler, President and CEO of KMG, commented, “Our first quarter results underscore the progress we have made in integrating and optimizing acquired assets within our Electronic Chemicals business. Electronic Chemicals segment operating margins improved 280 bps from the fourth quarter of 2012 and 590 bps from last year’s first quarter. Although our Wood Treating Chemicals business experienced a challenging first quarter, increased profitability within our Electronic Chemicals segment helped drive solid earnings per share growth on a year-over-year basis.”

Electronic Chemicals

Electronic Chemicals sales increased 2.9% year/year to $39.5 million in the fiscal first quarter of 2013, but declined 8.2% from $43.1 million in the fourth quarter of fiscal 2012. Overall demand for KMG’s high purity electronic chemicals softened in the first quarter, as semiconductor manufacturers curtailed production in response to weakening global economic conditions.

Segment operating margins improved strongly on a sequential and year/year basis, reaching 12.8% in the first quarter of 2013 compared to 10.0% in the fourth quarter of fiscal 2012 and 6.9% in the first quarter of fiscal 2012. The improvement in operating profitability from the prior year is primarily related to the realization of previous pricing adjustments that were implemented in response to prior raw material cost increases.

Wood Treating Chemicals

Wood Treating Chemicals sales declined to $25.7 million from $33.2 million in the first quarter of 2012, reflecting lower volumes, but increased from $24.3 million in the fourth quarter of fiscal 2012. The decline in first quarter volumes relative to last year’s first quarter is primarily attributable to increased competitive pressures from alternative processes and materials in the rail tie treating market.

Wood Treating Chemicals segment operating margins decreased to 13.1% in the first quarter, from 15.7% in the first quarter of fiscal year 2012, but were essentially flat from 13.2% in the fourth quarter of fiscal 2012. While margins declined on a year/year basis, the impact from lower volumes was mitigated by continued sales strength in our pentachlorophenol (penta) product line, which continues to benefit from market demand for mid-level transmission poles.

Balance Sheet and Cash Flow Overview

John V. Sobchak, CFO of KMG, said, “KMG paid down $2 million in debt in the first quarter of fiscal year 2013, ending the quarter with long-term debt of $22 million. We have reduced our long-term debt by 50% over the past twelve months, resulting in long-term debt-to-shareholders’ equity of 19.7% as of October 31, 2012. KMG continues to maintain strong financial flexibility, with $58 million in available credit under our current revolving credit facility. Our cash flow remained solid, as KMG generated net cash from operating activities of $6.3 million in the fiscal first quarter.”


Commenting on the outlook, Mr. Butler said, “We expect demand for our electronic chemicals products to further decline in the second quarter as reported global semiconductor production slows from first quarter levels before strengthening in the second half of fiscal year 2013. Lower sales and production levels will also cause a decline in that segment’s second quarter operating margins. In our Wood Treating Chemicals segment, we anticipate that second quarter sales volumes will decline from first quarter levels before strengthening in the second half of fiscal year 2013. These challenging economic conditions will likely cause our second quarter diluted earnings per share to be essentially in line with, or slightly below, last year’s second quarter with expected improvement in the third fiscal quarter.”

Mr. Butler concluded, “Despite near-term challenges, we are optimistic on the outlook for fiscal 2013 and beyond given the opportunities that lie ahead. Backed by our strong balance sheet, we continue to pursue accretive acquisition opportunities, including the establishment of a new market platform by the end of fiscal 2014. We remain committed to generating long-term shareholder value through our proven consolidation strategy.”

Conference Call

Date: Friday, December 7, 2012

Time: 10:00 a.m. EST

Dial-in: 866-510-0704 or 617-597-5362

Participant passcode: 94597667

The conference call will also be webcast live via the “Investors” section of the Company’s website at To listen to the live call, please go to the website at least 15 minutes early to register, download and install any necessary audio software.

If you are unable to listen live, the conference call will be archived on the KMG website. A telephone replay of the call will also be available for one week, starting at 11:00 a.m. ET on December 7, 2012. To access the call, dial 888-286-8010 or 617-801-6888 using participant passcode 32793961.

About KMG

KMG Chemicals, Inc., through its subsidiaries, produces and distributes specialty chemicals to select markets. The Company grows by acquiring and optimizing stable chemical product lines and businesses with established production processes. Its current operations are focused on the electronic and industrial wood treatment chemical markets. For more information, please visit the Company’s website at

The information in this news release includes certain forward-looking statements that are based upon assumptions that in the future may prove not to have been accurate and are subject to significant risks and uncertainties, including statements as to the future performance of the company. Although the company believes that the expectations reflected in its forward-looking statements are reasonable, it can give no assurance that such expectations or any of its forward-looking statements will prove to be correct. Factors that could cause results to differ include, but are not limited to, successful performance of internal plans, product development acceptance, the impact of competitive services and pricing and general economic risks and uncertainties.


KMG Chemicals, Inc.

Eric Glover, 713-600-3865

Investor Relations Manager




(In thousands, except for per share amounts)


     Three Months Ended
October 31,
     2012     2011  

Net sales

   $ 65,336      $ 71,539   

Cost of sales

     45,248        52,864   







Gross profit

     20,088        18,675   







Distribution expenses

     7,053        6,070   

Selling, general and administrative expenses

     5,931        5,614   







Operating income

     7,104        6,991   







Other income/(expense)


Interest expense, net

     (411     (550

Other, net

     (50     (75







Total other expense, net

     (461     (625







Income from continuing operations before income taxes

     6,643        6,366   

Provision for income taxes

     (2,435     (2,505







Income from continuing operations

     4,208        3,861   







Discontinued operations:


Loss from discontinued operations, before income taxes

     (102     (526

Income tax benefit

     36        200   







Loss from discontinued operations

     (66     (326







Net income

   $ 4,142      $ 3,535   







Earnings per share:




Income from continuing operations

   $ 0.36      $ 0.34   

Loss from discontinued operations

     —          (0.03







Net income

   $ 0.36      $ 0.31   









Income from continuing operations

   $ 0.36      $ 0.34   

Loss from discontinued operations

     —          (0.03







Net income

   $ 0.36      $ 0.31   







Weighted average shares outstanding:



     11,436        11,348   


     11,564        11,511   




(In thousands, except for share and per share amounts)


     October 31,
    July 31,



Current assets


Cash and cash equivalents

   $ 4,180      $ 1,633   

Accounts receivable


Trade, net of allowances of $89 at October 31, 2012 and $16 at July 31, 2012

     26,344        28,933   


     1,280        960   

Inventories, net

     46,129        40,661   

Current deferred tax assets

     1,424        1,417   

Prepaid expenses and other

     1,595        2,057   







Total current assets

     80,952        75,661   







Property, plant and equipment, net

     68,629        68,026   

Deferred tax assets

     1,154        1,129   


     3,778        3,778   

Intangible assets, net

     14,903        14,980   

Restricted Cash

     1,000        1,000   

Other assets, net

     3,268        3,116   







Total assets

   $ 173,684      $ 167,690   







Liabilities & stockholders’ equity


Current liabilities


Accounts payable

   $ 23,953      $ 21,855   

Accrued liabilities

     4,374        4,303   

Employee incentive accrual

     839        2,227   

Income taxes payable

     2,647        292   







Total current liabilities

     31,813        28,677   







Long-term debt, net of current maturities

     22,000        24,000   

Deferred tax liabilities

     6,825        7,046   

Other long-term liabilities

     1,227        1,200   







Total liabilities

     61,865        60,923   







Commitments and contingencies


Stockholders’ equity


Preferred stock, $0.01 par value, 10,000,000 shares authorized, none issued

     —          —     

Common stock, $0.01 par value, 40,000,000 shares authorized, 11,412,400 shares issued and outstanding at October 31, 2012 and 11,405,808 shares issued and outstanding at July 31, 2012

     114        114   

Additional paid-in capital

     26,203        26,022   

Accumulated other comprehensive loss

     (3,267     (4,339

Retained earnings

     88,769        84,970   







Total stockholders’ equity

     111,819        106,767   







Total liabilities and stockholders’ equity

   $ 173,684      $ 167,690   










(In thousands)


     Three Months Ended
October 31,
     2012     2011  

Cash flows from operating activities


Net income

   $ 4,142      $ 3,535   

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


Depreciation and amortization

     1,757        1,765   

Amortization of loan costs included in interest expense

     17        27   

Stock-based compensation expense

     181        211   

Bad debt expense

     73        —     

Inventory valuation adjustment

     (209     45   

Loss on disposal of property

     9        4   

Loss on sale of animal health business

     57        —     

Deferred income tax expense (benefit)

     (221     576   

Tax deficiency from stock-based awards

     —          30   

Changes in operating assets and liabilities


Accounts receivable — trade

     2,723        4,505   

Accounts receivable — other

     (315     (385


     (5,038     524   

Other current and noncurrent assets

     310        459   

Accounts payable

     1,901        719   

Accrued liabilities and other

     (1,400     (162

Income taxes payable

     2,345        1,729   







Net cash provided by operating activities

     6,332        13,582   







Cash flows from investing activities


Additions to property, plant and equipment

     (1,523     (1,800







Net cash used in investing activities

     (1,523     (1,800







Cash flows from financing activities


Net borrowings/(payments) under revolver credit agreement

     (2,000     6,054   

Principal payments on borrowings on term loan

     —          (11,333

Tax deficiency from stock-based awards

     —          (30

Book overdraft

     —          (2,852

Payment of dividends

     (342     (283







Net cash used in financing activities

     (2,342     (8,444







Effect of exchange rate changes of cash

     80        (15

Net increase in cash and cash equivalents

     2,547        3,323   

Cash and cash equivalents at beginning of period

     1,633        1,826   







Cash and cash equivalents at end of period

   $ 4,180      $ 5,149   







Supplemental disclosures of cash flow information


Cash paid for interest

   $ 394      $ 527   

Cash paid for income taxes

   $ 295      $ 253   


Net Sales and Operating Income by Segment

($ in thousands; includes effects of rounding)

Segment Net Sales


     Three Months Ended October 31,  
     2012     2011  
     Net      % of Total     Net      % of Total  
     Sales      Segment Net Sales     Sales      Segment Net Sales  



Electronic Chemicals

   $ 39,507         61   $ 38,378         54

Wood Treating Chemicals

     25,700         39     33,161         46







Total Sales for Reportable Segments

   $ 65,207         100   $ 71,539         100







Segment Operating Income (1)


     Three Months Ended October 31,  
     2012     2011  
     Operating      % of Segment     Operating      % of Segment  
     Income      Net Sales     Income      Net Sales  



Electronic Chemicals

   $ 5,072         12.8   $ 2,663         6.9

Wood Treating Chemicals

     3,366         13.1     5,221         15.7







Total Segment Income from Operations

   $ 8,438         $ 7,884      








(1) Segment income from operations includes allocated corporate overhead expenses.