KEMET CORPORATION 
By GREENVILLE, S.C., Oct. 31, 2013 /PRNewswire/ -- KEMET Corporation (the "Company") (NYSE: KEM), a leading global supplier of electronic components, today reported preliminary results for the second fiscal quarter ended September 30, 2013.
Net sales for the quarter ended September 30, 2013 were $212.7 million, an increase of 4.9% over the prior quarter ended June 30, 2013 net sales of $202.7 million and a 1.5% decrease compared to net sales of $216.0 million for the quarter ended September 30, 2012. The U.S. GAAP net loss was $13.1 million, or $0.29 per basic and diluted share for the quarter ended September 30, 2013 compared to a U.S. GAAP net loss of $35.1 million or $0.78 per basic and diluted share for the prior quarter ended June 30, 2013. For the quarter ended September 30, 2012 the U.S. GAAP net loss was $24.9 million or $0.55 per basic and diluted share.
Non-U.S. GAAP Adjusted net loss improved to $5.7 million or $0.13 loss per basic and diluted share for the quarter ended September 30, 2013 compared to a non-U.S. GAAP Adjusted net loss of $17.0 million or $0.38 per basic and diluted share for the prior quarter ended June 30, 2013. For the quarter ended September 30, 2012 the non-U.S. GAAP Adjusted net loss was $6.2 million or $0.14 per basic and diluted share.
"We communicated last quarter that we expected a significant positive change in our margins and net results this quarter as we straightened out our supply chain issues and it is clear through our financial results that we are putting those issues behind us," stated Per Loof, KEMET's Chief Executive Officer. "Revenue exceeded our expectations in a challenging economic environment and we continue to see a slow growth scenario over the next couple of quarters for the top line. Regardless of the top line we expect that our margins will continue to improve quarter over quarter through the remaining two quarters of our fiscal year," continued Loof.
The net loss for the quarters ended September 30, 2013 and 2012 include various items affecting comparability as denoted in the U.S. GAAP to Non-U.S. GAAP reconciliation table included hereafter.
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, 2014, 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) continued net losses could impact our ability to realize current operating plans and could materially adversely affect our liquidity and our ability to continue to operate; (iii) adverse economic conditions could cause the write down of long-lived assets or goodwill; (iv) an increase in the cost or a decrease in the availability of our principal or single-sourced purchased materials; (v) changes in the competitive environment; (vi) uncertainty of the timing of customer product qualifications in heavily regulated industries; (vii) economic, political, or regulatory changes in the countries in which we operate; (viii) difficulties, delays or unexpected costs in completing the restructuring plan; (ix) equity method investments expose us to a variety of risks; (x) acquisitions and other strategic transactions expose us to a variety of risks; (xi) inability to attract, train and retain effective employees and management; (xii) inability to develop innovative products to maintain customer relationships and offset potential price erosion in older products; (xiii) exposure to claims alleging product defects; (xiv) the impact of laws and regulations that apply to our business, including those relating to environmental matters; (xv) the impact of international laws relating to trade, export controls and foreign corrupt practices; (xvi) volatility of financial and credit markets affecting our access to capital; (xvii) the need to reduce the total costs of our products to remain competitive; (xviii) potential limitation on the use of net operating losses to offset possible future taxable income; (xix) restrictions in our debt agreements that limit our flexibility in operating our business; and (xx) 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.
KEMET CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Amounts in thousands, except per share data)
(Unaudited)
Quarters Ended Six Month Periods Ended
September 30, September 30,
------------- -------------
2013 2012 2013 2012
---- ---- ---- ----
Net sales $212,740 $215,991 $415,463 $439,623
Operating costs and expenses:
Cost of sales 182,501 183,053 367,690 374,374
Selling, general and administrative expenses 22,662 26,308 49,164 53,563
Research and development 5,861 6,833 12,241 14,566
Restructuring charges 1,365 8,522 5,975 9,786
Goodwill impairment - 1,092 - 1,092
Write down of long-lived assets - 4,234 - 4,234
Net (gain) loss on sales and disposals of assets 42 (31) 42 73
--- --- --- ---
Total operating costs and expenses 212,431 230,011 435,112 457,688
------- ------- ------- -------
Operating income (loss) 309 (14,020) (19,649) (18,065)
Other (income) expense:
Interest income (11) (26) (175) (57)
Interest expense 9,908 10,136 19,942 20,593
Other (income) expense, net 947 (996) 1,301 515
--- ---- ----- ---
Loss before income taxes and equity loss from NEC TOKIN (10,535) (23,134) (40,717) (39,116)
Income tax expense 1,320 1,787 2,900 3,558
----- ----- ----- -----
Loss before equity loss from NEC TOKIN (11,855) (24,921) $(43,617) $(42,674)
Equity loss from NEC TOKIN (1,243) - (4,620) -
Net loss $(13,098) $(24,921) $(48,237) $(42,674)
======== ======== ======== ========
Net loss per share:
Basic $(0.29) $(0.55) $(1.07) $(0.95)
Diluted $(0.29) $(0.55) $(1.07) $(0.95)
Weighted-average shares outstanding:
Basic 45,092 44,911 45,057 44,860
Diluted 45,092 44,911 45,057 44,860
KEMET CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Amounts in thousands, except per share data)
September 30, March 31,
2013 2013
---- ----
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $57,700 $95,978
Accounts receivable, net 103,365 96,564
Inventories, net 208,836 205,615
Prepaid expenses and other 42,713 41,101
Deferred income taxes 4,453 4,167
Total current assets 417,067 443,425
Property and equipment, net of accumulated depreciation of
$794,798 and
$771,398 as of September 30, 2013 and March 31, 2013, respectively 311,434 304,508
Goodwill 35,584 35,584
Intangible assets, net 38,068 38,646
Investment in NEC TOKIN 46,942 52,738
Restricted cash 14,638 17,397
Deferred income taxes 8,717 7,994
Other assets 7,761 11,299
Total assets $880,211 $911,591
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $29,772 $10,793
Accounts payable 80,892 73,669
Accrued expenses 86,892 95,944
Income taxes payable and deferred income taxes 1,811 1,074
Total current liabilities 199,367 181,480
Long-term debt, less current portion 373,506 372,707
Other non-current obligations 60,864 71,946
Deferred income taxes 8,567 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 September 30, 2013 and March 31,
2013 465 465
Additional paid-in capital 465,747 467,096
Retained deficit (211,472) (163,235)
Accumulated other comprehensive income 15,315 7,694
Treasury stock, at cost (1,391 and 1,519 shares at
September 30, 2013
and March 31, 2013, respectively) (32,148) (35,104)
Total stockholders' equity 237,907 276,916
------- -------
Total liabilities and stockholders' equity $880,211 $911,591
======== ========
KEMET CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Amounts in thousands)
(Unaudited)
Six Month Periods Ended
September 30,
-------------
2013 2012
---- ----
Net loss $(48,237) $(42,674)
Adjustments to reconcile net loss to net cash
provided by
(used in) operating
activities:
Depreciation and amortization 25,780 23,177
Equity loss from NEC TOKIN 4,620 -
Amortization of debt discount and debt
issuance costs 1,959 1,924
Stock-based compensation expense 1,628 2,506
Long-term receivable write down 1,444 -
Change in value of NEC TOKIN options 383 -
Net loss on sales and disposals of assets 42 73
Pension and other post-retirement benefits 27 205
Write down of long-lived assets - 4,234
Settlement gain on benefit plans - (1,675)
Goodwill impairment - 1,092
Change in deferred income taxes (957) 838
Change in operating assets (6,156) (18,656)
Change in operating liabilities (12,107) 2,154
Other (32) 178
Net cash used in operating activities (31,606) (26,624)
------- -------
Investing activities:
Capital expenditures (18,337) (30,343)
Change in restricted cash 2,874 -
Net cash used in investing activities (15,463) (30,343)
------- -------
Financing activities:
Proceeds from revolving line of credit 21,000 -
Proceeds from issuance of debt - 15,825
Deferred acquisition payments (11,452) (6,617)
Payments of long-term debt (1,422) (1,576)
Proceeds from exercise of stock options 57 42
Debt issuance costs - (275)
Net cash provided by financing
activities 8,183 7,399
----- -----
Net decrease in cash and cash
equivalents (38,886) (49,568)
Effect of foreign currency fluctuations on cash 608 (458)
Cash and cash equivalents at beginning of fiscal
period 95,978 210,521
Cash and cash equivalents at end of fiscal period $57,700 $160,495
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 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 reconciliation from U.S. GAAP Gross margin to Non-U.S. GAAP Adjusted gross margin (amounts in thousands):
Quarters Ended
--------------
September 30, June 30,
2013 2013
---- ----
(Unaudited)
Net sales $212,740 $202,723
Gross margin 30,239 17,534
Excluding the following items
(Non-U.S. GAAP):
Stock-based compensation 229 314
Plant start-up costs 1,050 1,133
Inventory write down - 3,886
--- -----
Adjusted gross margin $31,518 $22,867
======= =======
14.8% 11.3%
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:
U.S. GAAP to Non- U.S. GAAP Reconciliation
Quarters Ended
--------------
September 30, June 30, 2013 September 30,
2013 2012
---- ----
(Unaudited) (Amounts in thousands, except per share data)
U.S. GAAP
Net sales $212,740 $202,723 $215,991
Net loss $(13,098) $(35,139) $(24,921)
Net loss per basic and diluted share $(0.29) $(0.78) $(0.55)
Excluding the following items (Non-U.S. GAAP)
Net loss $(13,098) $(35,139) $(24,921)
Adjustments:
Restructuring charges 1,365 4,610 8,522
Equity loss from NEC TOKIN 1,243 3,377 -
ERP integration costs 1,079 1,010 2,099
Change in value of NEC TOKIN options 383 - -
Plant start-up costs 1,050 1,133 1,930
Amortization included in interest expense 945 1,014 954
Stock-based compensation expense 660 968 1,242
Net foreign exchange (gain) loss 514 (577) (442)
NEC TOKIN investment related expenses 125 1,307 866
Net (gain) loss on sales and disposals of assets 42 - (31)
Inventory write down - 3,886 -
Long-term receivable write down - 1,444 -
Write down of long-lived assets - - 4,234
Goodwill impairment - - 1,092
Settlement gain on benefit plans - - (1,675)
Income tax effect of non-U.S. GAAP adjustments (1) (18) (56) (90)
--- --- ---
Adjusted net loss (excluding adjustments) $(5,710) $(17,023) $(6,220)
======= ======== =======
Adjusted net loss per basic and diluted share (excluding
adjustments) $(0.13) $(0.38) $(0.14)
$(0.13) $(0.14)
(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.
Adjusted EBITDA
Adjusted EBITDA represents net loss before net interest expense, income tax expense, and depreciation and amortization expense, adjusted to exclude adjustments which are outlined in the quantitative reconciliation provided 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 table provides a reconciliation from U.S. GAAP net loss to Adjusted EBITDA (amounts in thousands):
Quarters Ended
--------------
September 30, June 30, September 30,
2013 2013 2012
---- ---- ----
U.S. GAAP
Net loss $(13,098) $(35,139) $(24,921)
Interest expense, net 9,897 9,870 10,110
Income tax expense 1,320 1,580 1,787
Depreciation and amortization 12,049 13,731 11,521
------ ------ ------
EBITDA 10,168 (9,958) (1,503)
Excluding the following items (Non-U.S. GAAP):
Restructuring charges 1,365 4,610 8,522
Equity loss from NEC TOKIN 1,243 3,377 -
ERP integration costs 1,079 1,010 2,099
Change in value of NEC TOKIN options 383 - -
Plant start-up costs 1,050 1,133 1,930
Stock-based compensation expense 660 968 1,242
Net foreign exchange (gain) loss 514 (577) (442)
NEC TOKIN investment related expenses 125 1,307 866
Net (gain) loss on sales and disposals of assets 42 - (31)
Inventory write down - 3,886 -
Long-term receivable write down - 1,444 -
Write down long-lived assets - - 4,234
Goodwill impairment - - 1,092
Settlement gain on benefit plan - - (1,675)
--- --- ------
Adjusted EBITDA $16,629 $7,200 $16,334
======= ====== =======
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
