KEMET CORPORATION GREENVILLE, S.C., July 24, 2014 /PRNewswire/ -- KEMET Corporation (the "Company") (NYSE: KEM), a leading global supplier of electronic components, today reported preliminary results for our first quarter ended June 30, 2014. Results included in this earnings release have been adjusted to reflect discontinued operations as the Film and Electrolytic Business group completed the sale of its machinery division on April 30, 2014.
Net sales of $212.9 million for the quarter ended June 30, 2014 increased 5.4% compared to net sales of $202.1 million for the quarter ended June 30, 2013. The U.S. GAAP net loss from continuing operations was $10.5 million, or $0.23 loss per basic and diluted share for the quarter ended June 30, 2014, compared to a net loss from continuing operations of $33.6 million or $0.75 loss per basic and diluted share for the quarter ended June 30, 2013.
Non-U.S. GAAP Adjusted net loss improved to $1.9 million or $0.04 loss per basic and diluted share for the quarter ended June 30, 2014, compared to a non-U.S. GAAP Adjusted net loss of $15.5 million or $0.35 loss per basic and diluted share for the period ended June 30, 2013.
"We were pleased that the financial results for the quarter were consistent with our expectations. Our operating margins continued to improve even though revenue, in line with our forecast, declined slightly from the prior quarter," stated Per Loof, KEMET's Chief Executive Officer. "Margins remain our primary focus now that the majority of our restructuring efforts have concluded and we expect to see noteworthy improvement in our operating margins next quarter with continued improvement each quarter throughout this fiscal year driven by our prior cost reduction actions," continued Loof.
The net loss for the quarters ended June 30, 2014 and 2013 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 October 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 investment in NEC TOKIN 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
Consolidated Statements of Operations
(Amounts in thousands, except per share data)
(Unaudited)
Quarters Ended June 30,
-----------------------
2014 2013
---- ----
Net sales $212,881 $202,057
Operating costs and
expenses:
Cost of
sales 179,924 183,513
Selling,
general
and
administrative
expenses 24,779 26,080
Research
and
development 6,589 6,066
Restructuring
charges 1,830 4,610
Net loss
on sales
and
disposals
of
assets 365 -
Total
operating
costs
and
expenses 213,487 220,269
------- -------
Operating
loss (606) (18,212)
Non-operating (income)
expense:
Interest
income (3) (164)
Interest
expense 10,456 10,034
Other
(income)
expense,
net (3,533) 355
------ ---
Loss from
continuing
operations
before
income
taxes
and
equity
loss
from NEC
TOKIN (7,526) (28,437)
Income
tax
expense 1,282 1,816
----- -----
Loss from
continuing
operations
before
equity
loss
from NEC
TOKIN (8,808) (30,253)
Equity
loss
from NEC
TOKIN (1,675) (3,377)
------ ------
Loss from
continuing
operations (10,483) (33,630)
Income
(loss) and
from $(236),
discontinued respectively
operations,
net of
income
tax
expense
(benefit)
of $918 6,943 (1,510)
----- ------
Net loss $(3,540) $(35,140)
======= ========
Net income (loss) per
basic share:
Loss from
continuing
operations $(0.23) $(0.75)
Income
(loss)
from
discontinued
operations $0.15 $(0.03)
Net loss $(0.08) $(0.78)
Net income (loss) per
diluted share:
Loss from
continuing
operations $(0.23) $(0.75)
Income
(loss)
from
discontinued
operations $0.15 $(0.03)
Net loss $(0.08) $(0.78)
Weighted-average
shares outstanding:
Basic 45,274 45,022
Diluted 45,274 45,022
KEMET CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(Amounts in thousands, except per share data)
June 30, 2014 March 31, 2014
------------- --------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $58,422 $57,929
Accounts receivable, net 100,551 98,947
Inventories, net 189,405 187,974
Prepaid expenses and other 41,886 36,871
Deferred income taxes 6,664 6,695
Current assets of discontinued
operations - 12,160
--- ------
Total current assets 396,928 400,576
Property, plant and equipment, net
of accumulated depreciation of
$810,224 and $805,687 as of June
30, 2014 and March 31, 2014,
respectively 290,572 292,648
Goodwill 35,584 35,584
Intangible assets, net 36,567 37,184
Investment in NEC TOKIN 45,235 46,419
Restricted cash 13,210 13,512
Deferred income taxes 6,659 6,778
Other assets 13,888 10,130
Noncurrent assets of discontinued
operations - 836
Total assets $838,643 $843,667
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $19,910 $7,297
Accounts payable 83,623 74,818
Accrued expenses 70,372 76,468
Income taxes payable and deferred
income taxes 612 980
Current liabilities of discontinued
operations - 7,269
--- -----
Total current liabilities 174,517 166,832
Long-term debt, less current portion 383,927 391,292
Other non-current obligations 55,978 55,864
Deferred income taxes 5,970 5,203
Noncurrent liabilities of
discontinued operations - 2,592
Stockholders' equity:
Preferred stock, par value $0.10,
authorized 10,000 shares, none
issued - -
Common stock, par value $0.01,
authorized 175,000 shares, issued
46,508 shares at June 30, 2014 and
March 31, 2014 465 465
Additional paid-in capital 461,216 465,027
Retained deficit (235,278) (231,738)
Accumulated other comprehensive
income 17,583 18,184
Treasury stock, at cost (1,140 and
1,301 shares at June 30, 2014 and
March 31, 2014, respectively) (25,735) (30,054)
Total stockholders' equity 218,251 221,884
------- -------
Total liabilities and stockholders'
equity $838,643 $843,667
======== ========
KEMET CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Amounts in thousands)
(Unaudited)
Three Month Periods Ended June 30,
----------------------------------
2014 2013
---- ----
Net loss $(3,540) $(35,140)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Gain on sale of discontinued
operations (7,374) -
Net cash provided by operating
activities of discontinued
operations (905) (2,845)
Depreciation and amortization 10,797 13,639
Equity loss from NEC TOKIN 1,675 3,377
Amortization of debt discount
and debt issuance costs 665 1,014
Stock-based compensation expense 994 969
Long-term receivable write down 59 1,444
Change in value of NEC TOKIN
options (4,100) -
Net (gain) loss on sales and
disposals of assets 365 -
Pension and other post-
retirement benefits 8 (42)
Change in deferred income taxes 156 (241)
Change in operating assets (6,887) (12,108)
Change in operating liabilities (1,160) 2,613
Other (1,085) (311)
------ ----
Net cash used in operating
activities (10,332) (27,631)
Investing activities:
Capital expenditures (5,182) (15,481)
Proceeds from sale of assets 632 -
Change in restricted cash 303 1,591
Proceeds from sale of
discontinued operations 10,125 -
------ ---
Net cash provided by (used in)
investing activities 5,878 (13,890)
Financing activities:
Proceeds from revolving line of
credit 7,500 -
Deferred acquisition payments (296) (1,204)
Payments of long-term debt (2,205) (306)
Proceeds from exercise of stock
options 11 19
--- ---
Net cash provided by (used in)
financing activities 5,010 (1,491)
----- ------
Net increase (decrease) in cash
and cash equivalents 556 (43,012)
Effect of foreign currency
fluctuations on cash (63) 189
Cash and cash equivalents at
beginning of fiscal period 57,929 95,978
------ ------
Cash and cash equivalents at end
of fiscal period $58,422 $53,155
======= =======
Non-U.S. GAAP Financial Measures
In this news release, the Company makes reference to certain Non-U.S. GAAP financial measures, including "Adjusted gross margin", "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
--------------
June 30, 2014 March 31, 2014 June 30, 2013
------------- -------------- -------------
(Unaudited)
Net sales $212,881 $215,821 $202,057
Gross margin 32,957 33,619 18,544
Non-U.S. GAAP-
adjustments:
Plant start-up costs 1,647 669 1,132
Stock-based
compensation expense 346 186 315
Plant shut-down costs 889 2,668 -
Infrastructure tax - 1,079 -
Inventory revaluation 2,676 - -
Inventory write down - - 3,886
--- --- -----
Adjusted gross margin $38,515 $38,221 $23,877
======= ======= =======
18.1% 17.7% 11.8%
Adjusted Operating Income
Adjusted operating income (loss) represents operating income, excluding adjustments which are outlined in the quantitative reconciliation provided above. We use Adjusted operating income (loss) to facilitate our analysis and understanding of our business operations and believe that Adjusted operating income (loss) is useful to investors because it provides a supplemental way to understand our underlying operating performance. Adjusted operating loss should not be considered as an alternative to operating income or any other performance measure derived in accordance with U.S. GAAP.
Adjusted operating income (loss) is calculated as follows (amounts in thousands):
Quarters Ended
--------------
June 30, 2014 March 31, 2014 June 30, 2013
------------- -------------- -------------
(Unaudited)
Operating loss $(606) $(5,207) $(18,212)
Adjustments:
Restructuring
charges 1,830 5,954 4,610
Write down long-
lived assets - 1,118 -
Stock-based
compensation
expense 994 579 969
ERP integration
costs 895 837 978
Plant start-up
costs 1,647 669 1,132
Plant shut-down
costs 889 2,668 -
NEC TOKIN
investment-
related expenses 580 618 1,308
Infrastructure tax - 1,079 -
Inventory write
down - - 3,886
Net (gain) loss on
sales and
disposals of
assets 365 (39) -
Inventory
revaluation 2,676 - -
----- --- ---
Adjusted operating
income (loss) $9,270 $8,276 $(5,329)
====== ====== =======
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
--------------
June 30, 2014 March 31, 2014 June 30, 2013
------------- -------------- -------------
(Unaudited)
U.S. GAAP
Net sales $212,881 $215,821 $202,057
Net loss from continuing
operations (10,483) (14,550) (33,630)
Income (loss) from discontinued
operations 6,943 103 (1,510)
----- --- ------
Net loss $(3,540) $(14,447) $(35,140)
Net loss from continuing
operations -basic and diluted $(0.23) $(0.32) $(0.75)
Income (loss) from discontinued
operations -basic and diluted $0.15 $ - $(0.03)
Net loss - basic and diluted $(0.08) $(0.32) $(0.78)
Non-U.S. GAAP
Net loss (3,540) (14,447) (35,140)
Adjustments:
Restructuring charges 1,830 5,954 4,610
Equity loss from NEC TOKIN 1,675 4,127 3,377
Inventory revaluation 2,676 - -
Net (gain) loss on sales and
disposals of assets 365 (39) -
Write down long-lived assets - 1,118 -
Stock-based compensation expense 994 579 969
ERP integration costs 895 837 978
Change in value of NEC TOKIN
options (4,100) (1,777) -
Plant start-up costs 1,647 669 1,132
Plant shut-down costs 889 2,668 -
Net foreign exchange (gain) loss 527 (449) (577)
NEC TOKIN investment-related
expenses 580 618 1,308
Infrastructure tax - 1,079 -
Inventory write down - - 3,886
Long-term receivable write down - - 1,444
(Income) loss from discontinued
operations (6,943) (103) 1,510
Amortization included in interest
expense 665 779 1,013
Income tax effect of non-GAAP
adjustments (24) 100 (56)
Adjusted net income (loss) $(1,864) $1,713 $(15,546)
======= ====== ========
Adjusted net income (loss) per
basic share $(0.04) $0.04 $(0.35)
Adjusted net income (loss) per
diluted share $(0.04) $0.03 $(0.35)
Weighted average shares
outstanding:
Basic 45,274 45,174 45,022
Diluted 45,274 52,524 45,022
(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 from continuing operations represents net loss from continuing operations before net interest expense, income tax expense, and depreciation and amortization expense, adjusted to exclude certain item which are outlined in the quantitative reconciliation provided below. We use Adjusted EBITDA from continuing operations 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 from continuing operations as a supplemental measure of our performance and ability to service debt. We also present Adjusted EBITDA from continuing operations 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 from continuing operations 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 adjustments to arrive at Adjusted EBITDA from continuing operations are excluded in order to better reflect our continuing operations.
In evaluating Adjusted EBITDA from continuing operations, you should be aware that in the future we may incur expenses similar to the adjustments noted below. Our presentation of Adjusted EBITDA from continuing operations should not be construed as an inference that our future results will be unaffected by these types of adjustments. Adjusted EBITDA from continuing operations 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 from continuing operations measure has limitations as an analytical tool, and should not be considered 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 from continuing operations 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 from continuing operations 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 from continuing operations only supplementally.
The following table provides a reconciliation from U.S. GAAP net loss to Adjusted EBITDA from continuing operations (amounts in thousands):
For the Quarters Ended
----------------------
(Amounts in
thousands) June 30, 2014 March 31, 2014 June 30, 2013
------------- -------------- -------------
U.S. GAAP
Net loss $(3,540) $(14,447) $(35,140)
Interest expense,
net 10,453 10,658 9,870
Income tax expense
(benefit) 1,282 (2,811) 1,816
Depreciation and
amortization 10,797 12,175 13,639
------ ------ ------
EBITDA 18,992 5,575 (9,815)
Excluding the
following items
(non-GAAP):
Restructuring
charges 1,830 5,954 4,610
Equity loss from
NEC TOKIN 1,675 4,127 3,377
Inventory
revaluation 2,676 - -
Net (gain) loss on
sales and
disposals of
assets 365 (39) -
Goodwill impairment - - -
Write down long-
lived assets - 1,118 -
Stock-based
compensation
expense 994 579 969
ERP integration
costs 895 837 978
Change in value of
NEC TOKIN options (4,100) (1,777) -
Plant start-up
costs 1,647 669 1,132
Plant shut-down
costs 889 2,668 -
Net foreign
exchange (gain)
loss 527 (449) (577)
NEC TOKIN
investment-
related expenses 580 618 1,308
Infrastructure tax - 1,079 -
Inventory write
down - - 3,886
Long-term
receivable write
down - - 1,444
(Income) loss from
discontinued
operations (6,943) (103) 1,510
Adjusted EBITDA $20,027 $20,856 $8,822
======= ======= ======
Contact:
William M. Lowe, Jr.
Executive Vice President and
Chief Financial Officer
williamlowe@kemet.com
864-963-6484
Richard J. Vatinelle
Vice President and
Treasurer
richardvatinelle@kemet.com
954-766-2800
SOURCE KEMET Corporation
