KEMET CORPORATION 
By GREENVILLE, S.C., July 25, 2013 /PRNewswire/ -- KEMET Corporation ("KEMET" or the "Company") (NYSE: KEM) today reported preliminary results for the first fiscal quarter ended June 30, 2013.
Net sales for the quarter ended June 30, 2013 were $202.7 million, and on a U.S. GAAP basis, the net loss was $35.1 million, or $0.78 loss per basic and diluted share compared to a net loss of $17.8 million or $0.40 loss per basic and diluted share for the quarter ended June 30, 2012. The net loss for the quarters ended June 30, 2013 and 2012 include various items affecting comparability as denoted in the U.S. GAAP to Non-U.S. GAAP reconciliation below.
Non-U.S. GAAP adjusted net loss was $17.0 million or $0.38 loss per basic and diluted share for the quarter ended June 30, 2013 compared to $8.8 million or $0.20 loss per basic and diluted share for the quarter ended June 30, 2012.
"Revenue was right on forecast and indicators point to a slight increase in our second quarter. This quarter saw the full impact on our financial results of the raw material supply chain disruption that occurred in our last quarter. However, we have corrections underway and this area is under our control," stated Per Loof, KEMET's Chief Executive Officer. "I expect to see good improvement in our operating margins this next quarter as we get our Tantalum raw material supply back on track and our European business rolls into its final stage of reorganizing into low-cost countries. A little assistance from an improving economy would be appreciated, but we expect a significant positive change to our financial results this fiscal year even with the economy just moving sideways," continued Loof.
About KEMET
The Company's common stock is listed on the NYSE under the ticker symbol "KEM" (NYSE: KEM). At the Investor Relations section of our web site at http://www.kemet.com/IR, users may subscribe to KEMET news releases and find additional information about our Company. KEMET applies world class service and quality to deliver industry leading, high performance capacitance solutions to its customers around the world and offers the world's most complete line of surface mount and through hole capacitor technologies across tantalum, ceramic, film, aluminum, electrolytic, and paper dielectrics. Additional information about KEMET can be found at http://www.kemet.com.
QUIET PERIOD
Beginning October 1, 2013, we will observe a quiet period during which the information provided in this news release and our quarterly report on Form 10-Q will no longer constitute our current expectations. During the quiet period, this information should be considered to be historical, applying prior to the quiet period only and not subject to update by management. The quiet period will extend until the day when our next quarterly earnings release is published.
CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
Certain statements included herein contain forward-looking statements within the meaning of federal securities laws about KEMET Corporation's (the "Company") financial condition and results of operations that are based on management's current expectations, estimates and projections about the markets, in which the Company operates, as well as management's beliefs and assumptions. Words such as "expects," "anticipates," "believes," "estimates," variations of such words and other similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in, or implied by, such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's judgment only as of the date hereof. The Company undertakes no obligation to update publicly any of these forward-looking statements to reflect new information, future events or otherwise.
Factors that may cause actual outcome and results to differ materially from those expressed in, or implied by, these forward-looking statements include, but are not necessarily limited to the following:
(i) adverse economic conditions could impact our ability to realize operating plans if the demand for our products declines, and such conditions could adversely affect our liquidity and ability to continue to operate; (ii) adverse economic conditions could cause the write down of long-lived assets or goodwill; (iii) an increase in the cost or a decrease in the availability of our principal or single-sourced purchased materials; (iv) changes in the competitive environment; (v) uncertainty of the timing of customer product qualifications in heavily regulated industries; (vi) economic, political, or regulatory changes in the countries in which we operate; (vii) difficulties, delays or unexpected costs in completing the restructuring plan; (viii) equity method investments expose us to a variety of risks; (ix) acquisitions and other strategic transactions expose us to a variety of risks; (x) the inability to attract, train and retain effective employees and management; (xi) the inability to develop innovative products to maintain customer relationships and offset potential price erosion in older products; (xii) exposure to claims alleging product defects; (xiii) the impact of laws and regulations that apply to our business, including those relating to environmental matters; (xiv) the impact of international laws relating to trade, export controls and foreign corrupt practices; (xv) volatility of financial and credit markets affecting our access to capital; (xvi) the need to reduce the total costs of our products to remain competitive; (xvii) potential limitation on the use of net operating losses to offset possible future taxable income; (xviii) restrictions in our debt agreements that limit our flexibility in operating our business; and (xix) additional exercise of the warrant by K Equity, LLC which could potentially result in the existence of a significant stockholder who could seek to influence our corporate decisions.
KEMET CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Amounts in thousands, except per share data)
(Unaudited)
Quarters Ended
June 30,
--------------
2013 2012
---- ----
Net sales $202,723 $223,632
Operating
costs and
expenses:
Cost of
sales 185,189 191,321
Selling,
general
and
administrative
expenses 26,502 27,255
Research
and
development 6,380 7,733
Restructuring
charges 4,610 1,264
Net loss on
sales and
disposals
of assets - 104
--- ---
Total
operating
costs and
expenses 222,681 227,677
------- -------
Operating
loss (19,958) (4,045)
Other
(income)
expense:
Interest
income (164) (31)
Interest
expense 10,034 10,457
Other
expense,
net 354 1,511
--- -----
Loss before
income
taxes and
equity
loss from
NEC TOKIN (30,182) (15,982)
Income tax
expense 1,580 1,771
----- -----
Loss before
equity
loss from
NEC TOKIN (31,762) (17,753)
Equity loss
from NEC
TOKIN (3,377) -
Net loss $(35,139) $(17,753)
======== ========
Net loss
per share:
Basic $(0.78) $(0.40)
Diluted $(0.78) $(0.40)
Weighted-
average
shares
outstanding:
Basic 45,022 44,808
Diluted 45,022 44,808
KEMET CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Amounts in thousands, except per share data)
June 30, March 31,
2013 2013
---- ----
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $53,155 $95,978
Accounts receivable, net 101,254 96,564
Inventories, net 217,543 205,615
Prepaid expenses and other 39,377 41,101
Deferred income taxes 4,250 4,167
Total current assets 415,579 443,425
Property and equipment, net of accumulated depreciation
of $785,335
and $771,398 as of June 30, 2013 and March 31, 2013,
respectively 309,877 304,508
Goodwill 35,584 35,584
Intangible assets, net 38,310 38,646
Investment in NEC TOKIN 48,709 52,738
Restricted cash 15,851 17,397
Deferred income taxes 8,321 7,994
Other assets 8,939 11,299
Total assets $881,170 $911,591
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $7,648 $10,793
Accounts payable 89,854 73,669
Accrued expenses 83,313 95,944
Income taxes payable and deferred income taxes 2,063 1,074
Total current
liabilities 182,878 181,480
Long-term debt, less current portion 375,645 372,707
Other non-current obligations 69,584 71,946
Deferred income taxes 8,694 8,542
Stockholders' equity:
Preferred stock, par value $0.01, authorized 10,000
shares, none issued - -
Common stock, par value $0.01, authorized 175,000
shares, issued
46,508 shares at June 30, 2013 and
March 31, 2013 465 465
Additional paid-in capital 465,766 467,096
Retained deficit (198,374) (163,235)
Accumulated other comprehensive income 9,420 7,694
Treasury stock, at cost (1,431 and 1,519 shares at June
30, 2013 and
March 31, 2013, respectively) (32,908) (35,104)
Total stockholders'
equity 244,369 276,916
------- -------
Total liabilities and stockholders' equity $881,170 $911,591
======== ========
KEMET CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Amounts in thousands)
(Unaudited)
Quarters Ended June 30,
-----------------------
2013 2012
---- ----
Net loss $(35,139) $(17,753)
Adjustments to reconcile net loss to net
cash provided by
(used in) operating activities:
Depreciation and amortization 13,731 11,656
Amortization of debt discount and debt
issuance costs 1,014 971
Equity loss from NEC TOKIN 3,377 -
Long-term receivable write down 1,444 -
Net loss on sales and disposals of assets - 104
Stock-based compensation expense 968 1,264
Change in deferred income taxes (241) 122
Change in operating assets (14,385) (12,029)
Change in operating liabilities 1,706 (5,490)
Other (106) (52)
Net cash used in operating activities (27,631) (21,207)
------- -------
Investing activities:
Capital expenditures (15,481) (13,101)
Change in restricted cash 1,591 -
Net cash used in investing activities (13,890) (13,101)
------- -------
Financing activities:
Proceeds from issuance of debt - 15,825
Deferred acquisition payments (1,204) (1,439)
Payments of long-term debt (306) (1,576)
Proceeds from exercise of stock options 19 41
Debt issuance costs - (275)
Net cash provided by (used in) financing
activities (1,491) 12,576
------ ------
Net decrease in cash and cash
equivalents (43,012) (21,732)
Effect of foreign currency fluctuations
on cash 189 (943)
Cash and cash equivalents at beginning of
fiscal period 95,978 210,521
Cash and cash equivalents at end of
fiscal period $53,155 $187,846
======= ========
Non-U.S. GAAP Financial Measures
In this news release, the Company makes reference to certain Non-U.S. GAAP financial measures, including "Adjusted net loss", "Adjusted net loss per share" and "Adjusted EBITDA". Management believes that investors may find it useful to review the Company's financial results as adjusted to exclude items as determined by management.
Adjusted Net Loss and Adjusted Net Loss Per Share
"Adjusted net loss" and "Adjusted net loss per share" represent net loss and net loss per share excluding adjustments which are outlined in the quantitative reconciliation provided below. Management believes that these Non-U.S. GAAP financial measures are useful to investors because they provide a supplemental way to understand the underlying operating performance of the Company. Management uses these Non-U.S. GAAP financial measures to evaluate operating performance. Non-U.S. GAAP financial measures should not be considered as an alternative to net income, operating income or any other performance measures derived in accordance with U.S. GAAP.
The following table provides reconciliation from U.S. GAAP net loss to Non-U.S. GAAP adjusted net loss:
Quarters Ended
--------------
June 30, 2013 March 31, 2013 June 30, 2012
------------- -------------- -------------
(Unaudited) (Amounts in thousands, except per share
data)
U.S. GAAP
Net sales $202,723 $203,034 $223,632
Net loss $(35,139) $(25,251) $(17,753)
Net loss per basic and diluted share $(0.78) $(0.56) $(0.40)
Excluding the following items (Non-U.S. GAAP)
Net loss $(35,139) $(25,251) $(17,753)
Adjustments:
Restructuring charges 4,610 5,047 1,264
Inventory write down 3,886 - -
Equity loss from NEC TOKIN 3,377 1,254 -
Long-term receivable write down 1,444 - -
NEC TOKIN investment related expenses 1,307 3,009 542
Plant start-up costs 1,133 1,307 1,361
Amortization included in interest expense 1,014 1,092 971
ERP integration costs 1,010 2,469 1,676
Stock-based compensation expense 968 1,015 1,264
Net foreign exchange (gain) loss (577) (911) 1,789
Net curtailment and settlement gain on benefit plans - 1,354 -
Write down of long-lived assets - 264 -
Net loss on sales and disposals of assets - 141 104
Registration related fees - - 20
Income tax effect of non-U.S. GAAP adjustments (1) (56) (591) 4
--- ---- ---
Adjusted net loss (excluding adjustments) $(17,023) $(9,801) $(8,758)
======== ======= =======
Adjusted net loss per basic and diluted share (excluding
adjustments) $(0.38) $(0.22) $(0.20)
_____________________
(1) The income tax effect of the excluded items is calculated by applying the applicable jurisdictional income tax rate, considering the deferred tax valuation for each applicable jurisdiction, and includes the income tax affect of law changes related to the utilization of net operating loss carryforwards.
Adjusted EBITDA
Adjusted EBITDA represents net loss before income tax expense, net interest expense, and depreciation and amortization expense excluding adjustments which are outlined in the quantitative reconciliation below. We use Adjusted EBITDA to monitor and evaluate our operating performance and to facilitate internal and external comparisons of the historical operating performance of our business. We present Adjusted EBITDA as a supplemental measure of our performance and ability to service debt. We also present Adjusted EBITDA because we believe such measure is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry.
We believe Adjusted EBITDA is an appropriate supplemental measure of debt service capacity, because cash expenditures on interest are, by definition, available to pay interest, and tax expense is inversely correlated to interest expense because tax expense goes down as deductible interest expense goes up; depreciation and amortization are non-cash charges. The other items excluded from Adjusted EBITDA are excluded in order to better reflect our continuing operations.
In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses similar to the adjustments noted below. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by these types of adjustments. Adjusted EBITDA is not a measurement of our financial performance under U.S. GAAP and should not be considered as an alternative to net income, operating income or any other performance measures derived in accordance with U.S. GAAP or as an alternative to cash flow from operating activities as a measure of our liquidity.
Our Adjusted EBITDA measure has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. Some of these limitations are:
-- it does not reflect our cash expenditures, future requirements for
capital expenditures or contractual commitments;
-- it does not reflect changes in, or cash requirements for, our working
capital needs;
-- it does not reflect the significant interest expense or the cash
requirements necessary to service interest or principal payment on our
debt;
-- although depreciation and amortization are non-cash charges, the assets
being depreciated and amortized will often have to be replaced in the
future, and our Adjusted EBITDA measure does not reflect any cash
requirements for such replacements;
-- it is not adjusted for all non-cash income or expense items that are
reflected in our statements of cash flows;
-- it does not reflect the impact of earnings or charges resulting from
matters we consider not to be indicative of our ongoing operations;
-- it does not reflect limitations on or costs related to transferring
earnings from our subsidiaries to us; and
-- other companies in our industry may calculate this measure differently
than we do, limiting its usefulness as a comparative measure.
Because of these limitations, Adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business or as a measure of cash that will be available to us to meet our obligations. You should compensate for these limitations by relying primarily on our U.S. GAAP results and using Adjusted EBITDA only supplementally.
The following tables provide a reconciliation from U.S. GAAP net loss to Adjusted EBITDA (amounts in thousands):
Quarters Ended
June 30,
--------------
2013 2012
---- ----
Net loss $(35,139) $(17,753)
Adjustments:
Interest expense, net 9,870 10,426
Income tax expense 1,580 1,771
Depreciation and
amortization 13,731 11,656
Restructuring charges 4,610 1,264
Inventory write down 3,886 -
Equity loss from NEC TOKIN 3,377 -
Long-term receivable
write down 1,444 -
NEC TOKIN investment
related expenses 1,307 542
Plant start-up costs 1,133 1,361
ERP integration costs 1,010 1,676
Stock-based compensation
expense 968 1,264
Net foreign exchange
(gain) loss (577) 1,789
Net loss on sales and
disposals of assets - 104
Registration related fees - 20
--- ---
Adjusted EBITDA $7,200 $14,120
====== =======
Contact:
William M. Lowe, Jr.
Executive Vice President and
Chief Financial Officer
williamlowe@kemet.com
864-963-6484
Richard J. Vatinelle
Director of Finance
and Investor Relations
richardvatinelle@kemet.com
954-766-2800
SOURCE KEMET Corporation
