KEMET CORPORATION 
By GREENVILLE, S.C., Nov. 1, 2012 /PRNewswire/ -- KEMET Corporation (the "Company") (NYSE: KEM), a leading manufacturer of tantalum, ceramic, aluminum, film, paper and electrolytic capacitors, today reported preliminary results for the second fiscal quarter ended September 30, 2012.
Net sales for the quarter ended September 30, 2012 were $216.0 million and on a U.S. GAAP basis, the net loss was $24.9 million, or $(0.55) loss per basic and diluted share for the second quarter of fiscal year 2013 compared to net income of $14.3 million or a $0.27 per diluted share for the same quarter last year. The net loss for the quarters ended September 30, 2012 and 2011 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 $6.2 million or $(0.14) loss per basic and diluted share for the second quarter of fiscal year 2013 compared to a $22.4 million Non-U.S. GAAP adjusted net income or $0.43 per diluted share for the same quarter last year. Non-U.S. GAAP adjusted gross margin increased to 16.3% compared to 15.2% in the prior quarter.
"Revenue for this quarter came in about as we expected, more or less flat to slightly down from our first quarter, with a higher consolidated operating margin resulting in some improvement in our bottom line from a Non-GAAP basis over our first quarter as we forecasted. As with other technology companies the global economic conditions, primarily in Europe, will continue to provide headwinds into the next quarter for us," said Per Loof, KEMET's Chief Executive Officer. "We are focused on achieving improvement in our operating margins and bottom line even if revenues continue to decline in the near- term. Actions we have already implemented, and continue to implement, over the next two months will substantially change our cost structure in our fourth fiscal quarter ending March 31 and into our next fiscal year beginning in April. Our efforts are focused on improving our bottom line and returning to profitability as we enter our next fiscal year even under these tough economic conditions," 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 January 1, 2013, we will observe a quiet period during which the information provided in this news release and 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 the Company's 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) 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) 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) 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
Consolidated Statements of Operations
(Amounts in thousands, except per share data)
(Unaudited)
Quarters Ended September Six Months Ended
30, September 30,
------------------------- -----------------
2012 2011 2012 2011
---- ---- ---- ----
Net sales $215,991 $265,514 $439,623 $555,370
Operating costs and expenses:
Cost of sales 183,053 203,319 374,374 413,823
Selling, general and administrative
expenses 27,983 28,355 55,238 58,631
Research and development 6,833 7,362 14,566 14,448
Restructuring charges 8,522 1,605 9,786 2,630
Goodwill impairment 1,092 - 1,092 -
Write down of long-lived assets 4,234 - 4,234 -
Settlement gain on benefit plan (1,675) - (1,675) -
Net (gain) loss on sales and disposals of
assets (31) (40) 73 83
Total operating costs and expenses 230,011 240,601 457,688 489,615
------- ------- ------- -------
Operating income (loss) (14,020) 24,913 (18,065) 65,755
Other (income) expense:
Interest income (26) (31) (57) (74)
Interest expense 10,136 7,282 20,593 14,682
Other (income) expense, net (996) 1,297 515 1,202
Income (loss) before income taxes (23,134) 16,365 (39,116) 49,945
Income tax expense 1,787 2,047 3,558 3,778
Net income (loss) $(24,921) $14,318 $(42,674) $46,167
======== ======= ======== =======
Net income (loss) per share:
Basic $(0.55) $0.32 $(0.95) $1.10
Diluted $(0.55) $0.27 $(0.95) $0.88
Weighted-average shares outstanding:
Basic 44,911 44,370 44,860 41,924
Diluted 44,911 52,230 44,860 52,307
KEMET CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(Amounts in thousands, except per share data)
September 30, March 31,
2012 2012
---- ----
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $160,495 $210,521
Accounts receivable, net 99,160 104,950
Inventories, net 224,773 212,234
Prepaid expenses and other 41,041 32,259
Deferred income taxes 5,658 6,370
Total current assets 531,127 566,334
Property and equipment, net of accumulated depreciation of
$773,184
and $761,522 as of September 30, 2012 and March 31, 2012,
respectively 316,182 315,848
Goodwill 35,584 36,676
Intangible assets, net 40,102 41,527
Other assets 17,802 15,167
Total assets $940,797 $975,552
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $1,576 $1,951
Accounts payable 82,156 74,404
Accrued expenses 88,623 89,079
Income taxes payable 622 2,256
Total current liabilities 172,977 167,690
Long-term debt, less current portion 359,621 345,380
Other non-current obligations 90,098 101,229
Deferred income taxes 4,788 2,257
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 September 30, 2012 and March 31, 2012 465 465
Additional paid-in capital 466,906 470,059
Retained deficit (123,727) (81,053)
Accumulated other comprehensive income 6,658 12,020
Treasury stock, at cost (1,600 and 1,839 shares at September 30,
2012 and
March 31, 2012, respectively) (36,989) (42,495)
Total stockholders' equity 313,313 358,996
------- -------
Total liabilities and stockholders' equity $940,797 $975,552
======== ========
KEMET CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Amounts in thousands)
(Unaudited)
Six Months Ended September 30,
------------------------------
2012 2011
---- ----
Net income (loss) $(42,674) $46,167
Adjustments to reconcile net income (loss) to net
cash
provided by (used in) operating
activities:
Depreciation and amortization 23,177 $23,011
Amortization of debt discount and debt issuance
costs 1,924 2,056
Net (gain) loss on sales and disposals of
assets (31) 83
Stock-based compensation expense 2,506 2,175
Goodwill impairment 1,092 -
Write down of long-lived assets 4,234 -
Settlement gain on benefit plan (1,675) -
Change in deferred income taxes 838 379
Change in operating assets (18,656) 18,438
Change in operating liabilities 2,520 (42,517)
Other 121 1,197
Net cash provided by (used in) operating
activities (26,624) 50,989
------- ------
Investing activities:
Capital expenditures (30,343) (20,105)
Acquisition, net of cash received - (11,584)
Net cash used in investing activities (30,343) (31,689)
------- -------
Financing activities:
Proceeds from issuance of debt 15,825 -
Deferred acquisition payments (6,617) -
Payments of long-term debt (1,576) (4,084)
Net borrowings (payments) under other credit
facilities - (3,153)
Proceeds from exercise of stock options 42 159
Debt issuance costs (275) (29)
Change in restricted cash - (36,497)
Net cash provided by (used in) financing
activities 7,399 (43,604)
----- -------
Net decrease in cash and cash
equivalents (49,568) (24,304)
Effect of foreign currency fluctuations on cash (458) (584)
Cash and cash equivalents at beginning of fiscal
period 210,521 152,051
Cash and cash equivalents at end of fiscal period $160,495 $127,163
======== ========
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", "Adjusted EBITDA" and "Adjusted gross margin". 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 restructuring charges related primarily to equipment moves and employee severance, write down of long-lived assets, ERP integration costs, plant start-up costs, stock-based compensation expense, goodwill impairment, amortization related to debt issuance costs and debt discount/premium, acquisition related fees, settlement gain on benefit plan, net foreign exchange gain/loss, net gain/loss on sales and disposals of assets, registration related fees and income tax effect on Non-U.S. 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):
U.S. GAAP to Non-U.S.GAAP Reconciliation
Quarters Ended
--------------
September 30, 2012 June 30, 2012 September 30, 2011
------------------ ------------- ------------------
(Unaudited) (Amounts in thousands, except per share data)
U.S. GAAP
Net sales $215,991 $223,632 $265,514
Net income (loss) $(24,921) $(17,753) $14,318
Basic net income (loss) per share $(0.55) $(0.40) $0.32
Diluted net income (loss) per share $(0.55) $(0.40) $0.27
Excluding the following items (Non-U.S. GAAP)
Net income (loss) $(24,921) $(17,753) $14,318
Adjustments:
Restructuring charges 8,522 1,264 1,605
Write down of long-lived assets 4,234 - -
ERP integration costs 2,099 1,676 1,918
Plant start-up costs 1,930 1,361 718
Stock-based compensation expense 1,242 1,264 984
Goodwill impairment 1,092 - -
Amortization included in interest expense 954 971 1,012
Acquisition related fees 866 542 -
Settlement gain on benefit plan (1,675) - -
Net foreign exchange (gain) loss (442) 1,789 1,391
Net (gain) loss on sales and disposals of assets (31) 104 (40)
Registration related fees - 20 77
Income tax effect of non-U.S. GAAP adjustments (1) (90) 4 406
--- --- ---
Adjusted net income (loss)(excluding adjustments) $(6,220) $(8,758) $22,389
======= ======= =======
Adjusted net income (loss) per share (excluding adjustments)
Basic $(0.14) $(0.20) $0.50
Diluted $(0.14) $(0.20) $0.43
(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 net interest expense, income tax expense, and depreciation and amortization expense, adjusted to exclude: restructuring charges, write down of long-lived assets, ERP integration costs, plant start-up costs, stock-based compensation expense, goodwill impairment, acquisition related fees, settlement gain on benefit plan, net foreign exchange gain/loss, net loss on sales and disposals of assets, and registration related fees. 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.
"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 table provides a reconciliation from U.S. GAAP net income (loss) to Adjusted EBITDA (amounts in thousands):
Quarters Ended
--------------
September 30, June 30, September 30,
2012 2012 2011
---- ---- ----
U.S. GAAP
Net income (loss) $(24,921) $(17,753) $14,318
Interest expense, net 10,110 10,426 7,251
Income tax expense 1,787 1,771 2,047
Depreciation and amortization 11,521 11,656 11,852
------ ------ ------
EBITDA (1,503) 6,100 35,468
Excluding the following items (Non-U.S. GAAP):
Restructuring charges 8,522 1,264 1,605
Write down of long-lived assets 4,234 - -
ERP integration costs 2,099 1,676 1,918
Plant start-up costs 1,930 1,361 718
Stock-based compensation expense 1,242 1,264 984
Goodwill impairment 1,092 - -
Acquisition related fees 866 542 -
Settlement gain on benefit plan (1,675) - -
Net foreign exchange (gain) loss (442) 1,789 1,391
Net (gain) loss on sales and disposals of assets (31) 104 (40)
Registration related fees - 20 77
--- --- ---
Adjusted EBITDA $16,334 $14,120 $42,121
======= ======= =======
Adjusted gross margin
"Adjusted gross margin" represents net sales less cost of sales excluding adjustments which are outlined in the quantitative reconciliation provided below. Management uses Adjusted gross margin to facilitate our analysis and understanding of our business operations and believes that Adjusted gross margin is useful to investors because it provides a supplemental way to understand the underlying operating performance of the Company. Adjusted gross margin should not be considered as an alternative to gross margin or any other performance measure derived in accordance with U.S. GAAP.
The following table provides a reconciliation from U.S. GAAP gross margin to Adjusted gross margin (amounts in thousands):
Quarters Ended
--------------
September 30, June 30, September 30,
2012 2012 2011
---- ---- ----
U.S. GAAP
Net sales $215,991 $223,632 $265,514
Gross margin $32,938 $32,311 $62,195
Excluding the following items (Non-U.S. GAAP):
Plant start-up costs 1,930 1,361 718
Stock-based compensation expense 423 401 206
Adjusted gross margin $35,291 $34,073 $63,119
======= ======= =======
Adjusted gross margin as a percentage of net sales 16.3% 15.2% 23.8%
Contact:
Dean W. Dimke
Senior Director of Marketing
Communications & Investor Relations
deandimke@kemet.com
954-766-2800
William M. Lowe, Jr.
Executive Vice President and Chief Financial Officer
williamlowe@kemet.com
864-963-6484
SOURCE KEMET Corporation
