KEMET CORPORATION 
By GREENVILLE, S.C., May 10, 2012 /PRNewswire/ -- KEMET Corporation ("KEMET" or the "Company") (NYSE: KEM) today reported preliminary results for the fourth fiscal quarter and fiscal year ended March 31, 2012. Net sales for the twelve months ended March 31, 2012 were $984.8 million which is a 3.3% decrease over the same period last fiscal year. On a U.S. GAAP basis, for the fiscal year ended March 31, 2012, net income was $6.7 million, or $0.13 per diluted share compared to net income of $63.0 million or $1.22 per diluted share for fiscal year ended March 31, 2011. Non-GAAP adjusted net income for the fiscal year ended March 31, 2012 was $54.5 million, or $1.04 per diluted share compared to adjusted net income of $114.2 million or $2.22 per diluted share for the fiscal year ended March 31, 2011. Adjusted EBITDA for the fiscal year ended March 31, 2012 was $128.4 million which was within our forecasted range of $128-$132 million.
On a U.S. GAAP basis, fiscal year 2012 net income includes a $15.8 million impairment charge related to the Tantalum Business Group. In addition, fiscal year 2012 net income includes $14.3 million of restructuring charges primarily comprised of termination benefits of $6.1 million related to planned facility closures in Italy and charges of $4.5 million to participate in a plan to save labor costs whereby a company may temporarily "lay off" employees while the government continues to pay their wages for a certain period of time. This restructuring activity is a continuation of the Company's efforts to restructure its manufacturing operations within Europe, primarily within the Film and Electrolytic segment. Fiscal year 2012 net income also includes ERP integration costs of $7.7 million, plant start-up costs of $3.6 million and acquisition related fees of $1.5 million. Fiscal year 2011 net income includes a loss on early extinguishment of debt of $38.2 million, restructuring charges of $7.2 million and ERP integration costs of $1.9 million.
Net sales for the quarter ended March 31, 2012 were $210.7 million which is a 19.4% decrease over the same quarter last fiscal year. On a U.S. GAAP basis, for the fourth fiscal quarter of fiscal year 2012, net loss was $(11.7) million, or $(0.26) per basic and diluted share compared to net income of $21.1 million or $0.40 per diluted share for the same quarter last year. Non-GAAP adjusted net loss was $(7.0) million or $(0.16) per basic and diluted share for the fourth quarter of fiscal year 2012 compared to $25.6 million of adjusted net income or $0.49 per diluted share for the same quarter last year. Adjusted EBITDA for the quarter ended March 31, 2012 was $9.7 million as compared to $44.4 million for the quarter ended March 31, 2011.
On a U.S. GAAP basis, the fourth quarter of fiscal year 2012 includes $2.2 million of plant start-up costs and $0.9 million of restructuring charges primarily comprised of termination benefits of $0.6 million. This restructuring activity is a continuation of the Company's efforts to restructure its manufacturing operations within Europe, primarily within the Film and Electrolytic segment. The fourth quarter of fiscal year 2011 included a $3.0 million inventory adjustment, $2.0 million of restructuring charges primarily associated with the relocation of equipment and $0.6 million of registration related fees.
"We began this quarter knowing again that the distribution channel inventory rebalancing would continue to have impact on our financial results," said Per Loof, Chief Executive Officer of KEMET. "However, our book to bill ratio is increasing and we are pleased overall with our position in the marketplace. Our efforts to secure certain materials in our supply chain have been successful and will reduce our operating costs later this fiscal year. We are looking forward to beginning our relationship with NEC TOKIN in the coming months and creating greater value for all of our stakeholders," 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://ir.kemet.com/, 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 July 1, 2012, we will observe a quiet period during which the information provided in this news release and our annual report on Form 10-K 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 raw 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) inability to attract, train and retain effective employees and management; (xi) 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) subject to international laws relating to trade, export controls and foreign corrupt practices; (xv) volatility of financial and credit markets affecting our access to capital; (xvi) needing 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 which could potentially result in the existence of a significant stockholder who could seek to influence our corporate decisions.
Contact:
Dean W. Dimke
Director of Corporate and Investor Communications
deandimke@kemet.com
954-766-2800
William M. Lowe, Jr.
Executive Vice President and Chief Financial Officer
williamlowe@kemet.com
864-963-6484
KEMET CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(Amounts in thousands, except per share data)
(Unaudited)
Quarters Ended Fiscal Years Ended
-------------- ------------------
March 31, 2012 March 31, 2011 March 31, 2012 March 31, 2011
-------------- -------------- -------------- --------------
Net sales $210,668 $261,452 $984,833 $1,018,488
Operating costs and expenses:
Cost of sales 183,542 198,958 775,670 752,846
Selling, general and
administrative
expenses 28,196 27,940 111,564 104,607
Research and
development 7,820 6,662 29,440 25,864
Restructuring charges 876 1,974 14,254 7,171
Net (gain) loss on
sales and disposals
of assets 226 145 318 (1,261)
Write down of long-
lived assets - - 15,786 -
Total operating
costs and expenses 220,660 235,679 947,032 889,227
------- ------- ------- -------
Operating
income (loss) (9,992) 25,773 37,801 129,261
Other (income) expense:
Interest income (39) (85) (175) (218)
Interest expense 6,849 7,627 28,567 30,175
Other (income)
expense, net (953) (3,045) 965 (4,692)
Loss on early
extinguishment of
debt - - - 38,248
Income (loss)
before income
taxes (15,849) 21,276 8,444 65,748
Income tax expense (benefit) (4,145) 211 1,752 2,704
Net income
(loss) $(11,704) $21,065 $6,692 $63,044
======== ======= ====== =======
Net income (loss) per share (basic) $(0.26) $0.57 $0.15 $2.11
Net income (loss) per share (diluted) $(0.26) $0.40 $0.13 $1.22
Weighted-average shares outstanding:
Basic 44,662 37,127 43,285 29,847
Diluted 44,662 52,293 52,320 51,477
KEMET CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(Amounts in thousands, except per share data)
March 31,
---------
2012 2011
---- ----
ASSETS
Current assets:
Cash and cash equivalents $210,521 $152,051
Accounts receivable, net 104,950 150,370
Inventories, net 212,234 206,440
Prepaid and other current
assets 32,259 28,097
Deferred income taxes 6,370 5,301
Total current assets 566,334 542,259
------- -------
Property, plant and equipment, net 315,848 310,412
Goodwill 36,676 -
Intangible assets, net 41,527 20,092
Other assets 15,167 11,546
Total assets $975,552 $884,309
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-
term debt $1,951 $42,101
Accounts payable 74,404 90,997
Accrued expenses 89,079 88,291
Income taxes payable 2,256 4,265
Total current
liabilities 167,690 225,654
------- -------
Long-term debt 345,380 231,215
Other non-current obligations 101,229 59,727
Deferred income taxes 2,257 7,960
Commitments and contingencies
Stockholders' equity:
Preferred stock, par value
$0.01, authorized 10,000
shares, none issued - -
Common stock, par value
$0.01, authorized 175,000
and 300,000 shares, issued
46,508 and 39,508
shares at March 31,
2012 and 2011,
respectively 465 395
Additional paid-in capital 470,059 479,322
Retained deficit (81,053) (87,745)
Accumulated other
comprehensive income 12,020 22,555
Treasury stock, at cost
(1,839 and 2,370
shares at March 31,
2012
and 2011, respectively) (42,495) (54,774)
Total stockholders'
equity 358,996 359,753
------- -------
Total liabilities and stockholders' equity $975,552 $884,309
======== ========
KEMET CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Amounts in thousands)
(Unaudited)
Fiscal Years Ended March 31,
----------------------------
2012 2011 2010
---- ---- ----
Sources (uses) of cash and cash equivalents
Operating
activities:
Net income (loss) $6,692 $63,044 $(69,447)
Adjustments to reconcile
net income (loss) to net
cash provided by
operating
activities:
Depreciation and
amortization 44,124 52,932 52,644
Amortization of debt
discount and debt
issuance costs 3,599 4,930 13,392
Net (gain) loss on
sales and disposals
of assets 318 (1,261) (1,003)
Stock-based
compensation expense 3,075 1,783 1,865
Pension and other
post-retirement
benefits (2,991) (2,319) (2,716)
Deferred income taxes (4,554) (3,403) 2,051
Write down of long-
lived assets 15,786 - 656
(Gain) loss on early
extinguishment of
debt - 38,248 (38,921)
Increase in value of
warrant - - 81,088
Other, net 702 (2,446) 339
Changes in assets
and liabilities:
Accounts receivable 47,298 (15,423) (18,236)
Other receivables (3,698) 957 (27)
Inventories 5,375 (48,817) 7,168
Prepaid expenses and
other current assets (2,484) (6,647) (5,647)
Accounts payable (22,052) 9,567 26,605
Accrued income taxes (1,893) 4,315 421
Other operating
liabilities (8,567) 18,508 4,388
Net cash provided
by operating
activities 80,730 113,968 54,620
------ ------- ------
Investing
activities:
Capital expenditures (49,314) (34,989) (12,921)
Acquisitions, net of cash
received (42,613) - -
Proceeds from sales of
assets 74 5,425 1,500
--- ----- -----
Net cash used in
investing
activities (91,853) (29,564) (11,421)
------- ------- -------
Financing
activities:
Proceeds from issuance of
debt 116,050 227,525 58,949
Payment of long-term debt (40,581) (230,413) (54,525)
Net (payments) borrowings
under other credit
facilities (3,154) (2,479) 475
Debt issuance costs (2,313) (7,853) (4,206)
Proceeds from exercise of
stock options 290 89 -
Debt extinguishment costs - (207) (3,605)
Net cash provided
by (used in)
financing
activities 70,292 (13,338) (2,912)
------ ------- ------
Net increase in
cash and cash
equivalents 59,169 71,066 40,287
Effect of foreign currency
fluctuations on cash (699) 1,786 (292)
Cash and cash equivalents at
beginning of fiscal year 152,051 79,199 39,204
Cash and cash equivalents at
end of fiscal year $210,521 $152,051 $79,199
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 income (loss)", "Adjusted net income (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 Income (Loss) and Adjusted Net Income (loss) Per Share
"Adjusted net income (loss)" and "Adjusted net income (loss) per share" represent net income (loss) and net income (loss) per share excluding write down of long-lived assets, restructuring charges related primarily to equipment moves and employee severance, plant start-up costs, amortization related to debt issuance costs and debt discount, net gain/loss on sales and disposals of assets, ERP integration costs, stock-based compensation expense/recovery, net foreign exchange gain/loss, inventory write-downs, registration related fees, acquisition related fees, gain on licensing of patents, loss on early extinguishment of debt, income tax expense related to foreign tax law changes which limit the utilization of net operating losses, and income tax effect on non-GAAP adjustments. 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 income (loss) to Non-U.S. GAAP adjusted net income (loss):
GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation
(Unaudited)
Quarters Ended Fiscal Years Ended
-------------- ------------------
March 31, 2012 December 31, 2011 March 31, 2011 March 31, 2012 March 31, 2011
-------------- ----------------- -------------- -------------- --------------
(Amounts in thousands, except per share data)
Including adjustments (GAAP)
Net sales $210,668 $218,795 $261,452 $984,833 $1,018,488
Net income (loss) $(11,704) $(27,771) $21,065 $6,692 $63,044
Net income (loss) per share (basic) $(0.26) $(0.62) $0.57 $0.15 $2.11
Net income (loss) per share (diluted) $(0.26) $(0.62) $0.40 $0.13 $1.22
Excluding the following items (Non-GAAP)
Net income (loss) $(11,704) $(27,771) $21,065 $6,692 $63,044
Adjustments:
ERP integration costs 2,772 1,812 658 7,707 1,915
Plant start-up costs 2,190 666 - 3,574 -
Stock-based compensation expense (recovery) 1,697 (797) 872 3,075 1,783
Restructuring charges 876 10,748 1,974 14,254 7,171
Acquisition related fees 866 - - 1,476 -
Amortization included in interest expense 696 847 966 3,599 4,930
(Gain) loss on sales and disposals of assets 226 9 145 318 (1,261)
Net foreign exchange (gain) loss (652) 303 (3,266) 919 (2,888)
Write down of long lived assets - 15,786 - 15,786 -
Inventory write-downs - - 2,991 - 2,991
Registration related fees - - 581 281 1,531
Loss on early extinguishment of debt - - - - 38,248
Gain on licensing of patents - - - - (2,000)
Income tax effect of non-GAAP adjustments (1) (3,991) 398 (428) (3,203) (1,256)
------ --- ---- ------ ------
Adjusted net income (loss) (excluding adjustments) $(7,024) $2,001 $25,558 $54,478 $114,208
======= ====== ======= ======= ========
Adjusted net income (loss) per basic
share (excluding adjustments) $(0.16) $0.04 $0.69 $1.26 $3.83
Adjusted net income (loss) per diluted
share (excluding adjustments) $(0.16) $0.04 $0.49 $1.04 $2.22
(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 income (loss) before income tax expense (benefit), net interest expense, and depreciation and amortization expense, adjusted to exclude: write down of long-lived assets, restructuring charges, plant start-up costs, net foreign exchange gain/loss, stock-based compensation expense/recovery, gain/loss on sales and disposals of assets, ERP integration costs, registration related fees, acquisition related fees, gain on licensing of patents, loss on early extinguishment of debt and inventory write downs. 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 income (loss) to Adjusted EBITDA (amounts in thousands):
Fiscal Year 2012
----------------
Q1 Q2 Q3 Q4 Total
--- --- --- --- -----
Net income (loss) $31,849 $14,318 $(27,771) $(11,704) $6,692
Adjustments:
Income tax expense
(benefit) 1,731 2,047 2,119 (4,145) 1,752
Interest expense, net 7,357 7,251 6,974 6,810 28,392
Depreciation and
amortization expense 11,159 11,852 10,373 10,740 44,124
Stock-based
compensation expense
(recovery) 1,191 984 (797) 1,697 3,075
Restructuring charges 1,025 1,605 10,748 876 14,254
Registration related
fees 204 77 - - 281
ERP integration costs 1,205 1,918 1,812 2,772 7,707
(Gain) loss on sales
and disposals of
assets 123 (40) 9 226 318
Net foreign exchange
(gain) loss (123) 1,391 303 (652) 919
Acquisition related
fees 610 - - 866 1,476
Plant start-up costs - 718 666 2,190 3,574
Write down of long
lived assets - - 15,786 - 15,786
Adjusted EBITDA $56,331 $42,121 $20,222 $9,676 $128,350
======= ======= ======= ====== ========
Fiscal Year 2011
----------------
Q1 Q2 Q3 Q4 Total
--- --- --- --- -----
Net income (loss) $(20,099) $34,911 $27,167 $21,065 $63,044
Adjustments:
Income tax expense 1,275 593 625 211 2,704
Interest expense, net 7,437 7,250 7,728 7,542 29,957
Depreciation and
amortization expense 14,510 14,132 12,661 11,629 52,932
Loss on early
extinguishment of debt 38,248 - - - 38,248
Restructuring charges 1,792 2,303 1,102 1,974 7,171
Net foreign exchange
(gain) loss 1,272 (2,679) 1,785 (3,266) (2,888)
(Gain) loss on sales
and disposals of
assets 335 (1,770) 29 145 (1,261)
ERP integration costs 280 375 602 658 1,915
Stock-based
compensation expense 149 333 429 872 1,783
Gain on licensing of
patents - (2,000) - - (2,000)
Registration related
fees - - 950 581 1,531
Inventory write downs - - - 2,991 2,991
Adjusted EBITDA $45,199 $53,448 $53,078 $44,402 $196,127
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SOURCE KEMET Corporation
