KEMET CORPORATION 
By GREENVILLE, S.C., May 8, 2014 /PRNewswire/ -- KEMET Corporation (the "Company") (NYSE: KEM), a leading global supplier of electronic components, today reported preliminary results for the fourth quarter and fiscal year ended March 31, 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 $215.8 million for the quarter ended March 31, 2014 increased 4.1% from net sales of $207.3 million for the prior quarter ended December 31, 2013, and increased 8.2% compared to net sales of $199.5 million for the quarter ended March 31, 2013. For the fiscal year ended March 31, 2014 net sales were $833.7 million compared to $823.9 million for the fiscal year ended March 31, 2013.
"We are encouraged by the continued and growing strength of our markets around the globe," stated Per Loof, KEMET's Chief Executive Officer. "Revenue exceeded our expectations, cost reduction actions are seeing their way to the bottom line, and we are well positioned to continue improving our financial performance into our next fiscal year. While we have some more work to complete, we are pleased with the general improvement of our operating margins this past fiscal year and we plan to build upon our efforts this past year to improve them further," continued Loof.
The U.S. GAAP net loss from continuing operations was $15.2 million, or $0.34 loss per basic and diluted share for the quarter ended March 31, 2014, compared to a net loss from continuing operations of $23.7 million or $0.53 loss per basic and diluted share for the quarter ended March 31, 2013. For the fiscal year ended March 31, 2014, the net loss from continuing operations was $65.5 million, or $1.45 per basic and diluted share compared a net loss from continuing operations of $77.9 million, or $1.74 per basic and diluted share for the fiscal year ended March 31, 2013.
Non-U.S. GAAP Adjusted net income improved to $0.4 million or $0.01 per diluted share for the quarter ended March 31, 2014, compared to a non-U.S. GAAP Adjusted net loss of $8.3 million or $0.18 loss per basic and diluted share for the period ended March 31, 2013. For the fiscal year ended March 31, 2014, the non-U.S. GAAP net loss from continuing operations was $18.8 million, or $0.42 loss per basic and diluted share compared to a net loss from continuing operations of $23.2 million, or $0.51 loss per basic and diluted share for the fiscal year ended March 31, 2013.
The net loss for the quarters ended March 31, 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 July 1, 2014, we will observe a quiet period during which the information provided in this news release and 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 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
Consolidated Statements of Operations
(Amounts in thousands, except per share data)
(Unaudited)
Quarters Ended
March 31, Fiscal Year Ended
--------------- -----------------
2014 2013 2014 2013
---- ---- ---- ----
Net sales $215,821 $199,540 $833,666 $823,903
Operating costs and expenses:
Cost of sales 181,315 171,342 712,037 697,076
Selling, general and administrative expenses 24,055 30,501 94,881 107,620
Research and development 6,763 6,693 24,466 26,876
Restructuring charges 5,953 5,047 14,122 18,719
Goodwill impairment - - - 1,092
Write down of long-lived assets 1,118 264 4,476 7,582
Net (gain) loss on sales and disposals of assets (39) 141 32 18
Total operating costs and expenses 219,165 213,988 850,014 858,983
------- -------
Operating loss (3,344) (14,448) (16,348) (35,080)
Other (income) expense:
Interest income (13) (28) (195) (139)
Interest expense 10,671 10,491 40,962 41,331
Other income, net (2,632) (1,738) (2,681) (2,864)
------ ------ ------ ------
Loss from continuing operations before income taxes and
equity loss from NEC TOKIN (11,370) (23,173) (54,434) (73,408)
Income tax expense (benefit) (754) (735) 3,539 3,269
---- ---- ----- -----
Loss from continuing operations before equity loss from
NEC TOKIN (10,616) (22,438) (57,973) (76,677)
Equity loss from NEC TOKIN (4,580) (1,254) (7,542) (1,254)
------ ------ ------ ------
Loss from continuing operations (15,196) (23,692) (65,515) (77,931)
Loss from discontinued operations (63) (1,559) (3,800) (4,251)
--- ------ ------ ------
Net loss $(15,259) $(25,251) $(69,315) $(82,182)
======= ======= ======= =======
Net loss per basic and diluted share:
Loss from continuing operations $(0.34) $(0.53) $(1.45) $(1.74)
Loss from discontinued operations $ - $(0.03) $(0.08) $(0.09)
Net loss $(0.34) $(0.56) $(1.54) $(1.83)
Weighted-average shares outstanding:
Basic and diluted 45,174 44,953 45,102 44,897
KEMET CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(Amounts in thousands, except per share data)
March 31, March
2014 31,
2013
---------- ------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $57,929 $95,978
Accounts receivable, net 98,947 93,774
Inventories, net 187,784 198,888
Prepaid expenses and
other 36,871 41,101
Deferred income taxes 6,681 4,167
Current assets of
discontinued operations 12,160 9,517
------ -----
Total current assets 400,372 443,425
Property and equipment 292,648 303,682
Goodwill 35,584 35,584
Intangible assets, net 37,184 38,646
Investment in NEC TOKIN 45,970 52,738
Restricted cash 13,512 17,397
Deferred income taxes 6,778 7,994
Other assets 10,130 10,149
Noncurrent assets of
discontinued operations 836 1,976
Total assets $843,014 $911,591
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-
term debt $7,297 $10,793
Accounts payable 73,370 70,774
Accrued expenses 75,868 93,178
Income taxes payable and
deferred income taxes 1,342 1,074
Current liabilities of
discontinued operations 7,269 5,661
----- -----
Total current liabilities 165,146 181,480
Long-term debt, less
current portion 391,292 372,707
Other non-current
obligations 55,864 69,022
Deferred income taxes 5,189 8,542
Noncurrent liabilities of
discontinued operations 2,592 2,924
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 shares, issued
46,508 shares at March
31, 2014 and March 31,
2013 465 465
Additional paid-in
capital 465,026 467,096
Retained deficit (232,550) (163,235)
Accumulated other
comprehensive income 20,044 7,694
Treasury stock, at cost
(1,301 and 1,519 shares
at March 31, 2014 and
March 31, 2013,
respectively) (30,054) (35,104)
Total stockholders'
equity 222,931 276,916
Total liabilities and
stockholders' equity $843,014 $911,591
======== ========
KEMET CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Amounts in thousands)
(Unaudited)
Fiscal Years
Ended March 31,
----------------
2014 2013
---- ----
Net loss $(69,315) $(82,182)
Adjustments to reconcile net loss to
net cash provided by operating
activities:
Net cash provided by
operating activities of
discontinued operations 29 4,440
Depreciation and
amortization 49,842 45,559
Amortization of debt
discount and debt issuance
costs 3,596 4,138
Equity loss from NEC TOKIN 7,542 1,254
Change in value of NEC TOKIN
options (3,111) -
Net loss on sales and
disposals of assets 32 18
Stock-based compensation
expense 2,909 4,599
Pension and other post-
retirement benefits (78) 1,071
Deferred income taxes (4,676) (317)
Write down of long-lived
assets 4,476 7,582
Write down of receivables 1,484 -
Goodwill impairment - 1,092
Other, net (372) 554
Changes in assets and liabilities:
Accounts receivable (4,618) 4,882
Inventories 14,921 (324)
Prepaid expenses and other
current assets 3,748 (11,151)
Accounts payable (3,523) 300
Accrued income taxes 535 (1,052)
Other operating liabilities (8,346) (3,290)
------ ------
Net cash used in operating
activities (4,925) (22,827)
Investing activities:
Capital expenditures (32,147) (46,174)
Investment in NEC TOKIN - (50,917)
Change in restricted cash 4,047 (15,284)
Proceeds from sales of
assets 1,026 398
Net cash used in investing
activities (27,074) (111,977)
------- --------
Financing activities:
Proceeds from revolving line
of credit 21,000 -
Payment of revolving line of
credit (2,551) -
Deferred acquisition
payments (21,977) (16,900)
Proceeds from issuance of
debt - 39,825
Payments of long-term debt (3,599) (1,909)
Proceeds from exercise of
stock options 250 111
Debt issuance costs - (275)
--- ----
Net cash (used in) provided
by financing activities (6,877) 20,852
------ ------
Net decrease in cash and
cash equivalents (38,876) (113,952)
Effect of foreign currency
fluctuations on cash 827 (591)
Cash and cash equivalents at
beginning of fiscal period 95,978 210,521
------ -------
Cash and cash equivalents at
end of fiscal period $57,929 $95,978
======= =======
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 Fiscal Years Ended
-------------- ------------------
March 31, December March 31, March 31, March 31,
2014 31, 2013 2013 2014 2013
--------- --------- --------- ---------- ---------
(Unaudited)
Net sales $215,821 $207,339 $199,540 $833,666 $823,903
Gross margin 34,506 37,662 28,198 121,629 126,827
Non-U.S. GAAP-
adjustments:
Plant shut-
down costs 2,668 - - 2,668 -
Plant start-up
costs 669 485 1,307 3,336 6,122
Stock-based
compensation
expense 186 278 373 1,006 1,554
Inventory
write-down - - - 3,886 -
--- --- --- ----- ---
Adjusted gross
margin $38,029 $38,425 $29,878 $132,525 $134,503
======= ======= ======= ======== ========
17.6% 18.5% 15.0% 15.9% 16.3%
Adjusted Operating Income
Adjusted operating loss represents operating income, excluding adjustments which are outlined in the quantitative reconciliation provided above. We use Adjusted operating loss to facilitate our analysis and understanding of our business operations and believe that Adjusted operating 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 is calculated as follows (amounts in thousands):
Quarters Ended
--------------
March December March
31, 31, 2013 31,
2014 2013
------ --------- ------
(Unaudited)
Operating income
(loss) $(3,344) $3,623 $(14,448)
Adjustments:
Restructuring
charges 5,953 2,194 5,047
Plant shut-down
costs 2,668 - -
Write down of
long-lived
assets 1,118 3,358 -
ERP integration
costs 837 994 2,404
Plant start-up
costs 669 485 1,307
NEC TOKIN
investment
related expenses 618 249 3,009
Stock-based
compensation
expense 579 702 1,018
Net loss (gain)
on sales and
disposals of
assets (39) 29 141
Net curtailment
and settlement
loss on benefit
plans - - 1,354
Adjusted
operating income
(loss) $9,059 $11,634 $(168)
====== ======= =====
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
Fiscal Year
Ended Quarters Ended
----------- --------------
March 31, March 31, December 31, March 31,
2014 2014 2013 2013
---------- ---------- ------------ ----------
(Unaudited, Amounts in thousands, except per
share data)
U.S. GAAP
Net sales $833,666 $215,821 $207,339 $199,540
Net loss from continuing operations (65,515) (15,196) (4,746) (23,692)
Loss from discontinued operations (3,800) (63) (1,076) (1,559)
------ --- ------ ------
Net loss $(69,315) $(15,259) $(5,822) $(25,251)
Net loss from continuing operations -
basic and diluted $(1.45) $(0.34) $(0.11) $(0.53)
Loss from discontinued operations -
basic and diluted $(0.08) $ - $(0.02) $(0.03)
Net loss - basic and diluted $(1.54) $(0.34) $(0.13) $(0.56)
Non-U.S. GAAP
Loss from continuing operations (65,515) (15,196) (4,746) (23,692)
Adjustments:
Restructuring charges 14,122 5,953 2,194 5,047
Equity loss (gain) from NEC TOKIN 7,542 4,580 (1,657) 1,254
Write down of long-lived assets 4,476 1,118 3,358 264
Inventory write down 3,886 - - -
ERP integration expenses 3,880 837 994 2,404
Amortization included in interest
expense 3,596 779 858 1,092
Plant start-up costs 3,336 669 485 1,307
Stock-based compensation expense 2,909 579 702 1,018
Plant shut-down costs 2,668 2,668 - -
Acquisition related fees 2,299 618 249 3,009
Note receivable write off 1,444 - - -
Loss (gain) on sales and disposals of
assets 32 (39) 29 141
Income tax effect of non-GAAP
adjustments (1) (27) 99 (52) (591)
Net curtailment and settlement gain on
benefit plans - - - 1,354
Intangible write down - - -
Net foreign exchange loss (gain) (304) (449) 207 (911)
Change in value of NEC TOKIN Option (3,111) (1,777) (1,716) -
Adjusted net income (loss) from
continuing operations $(18,767) $439 $905 $(8,304)
======== ==== ==== =======
Adjusted net income (loss) per basic
share from continuing operations $(0.42) $0.01 $0.02 $(0.18)
Adjusted net income (loss) per diluted
share from continuing operations $(0.42) $0.01 $0.02 $(0.18)
Weighted average shares outstanding:
Basic 45,102 45,174 45,120 44,953
Diluted 45,102 52,524 52,494 44,953
(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):
Fiscal Year 2014
----------------
Q1 Q2 Q3 Q4 Total
--- --- --- --- -----
Net loss $(35,138) $(13,096) $(5,822) $(15,259) $(69,315)
Adjustments:
Income tax expense (benefit) 1,816 1,444 1,033 (754) 3,539
Interest expense, net 9,870 9,897 10,342 10,658 40,767
Depreciation and amortization
expense 13,639 11,951 11,762 12,182 49,534
Restructuring charges 4,611 1,364 2,194 5,953 14,122
Net loss from discontinued
operations 1,510 1,151 1,076 63 3,800
Write down of long lived assets - - 3,358 1,118 4,476
ERP integration costs 978 1,071 994 837 3,880
Plant start-up costs 1,132 1,050 485 669 3,336
Plant shut-down costs - - - 2,668 2,668
NEC TOKIN investment related
expenses 1,308 124 249 618 2,299
Stock-based compensation expense 969 659 702 579 2,909
Loss (gain) on sales and disposals
of assets - 42 29 (39) 32
Change in value of NEC TOKIN option - 382 (1,716) (1,777) (3,111)
Inventory write-down 3,886 - - - 3,886
Long-term receivable write down 1,444 - - - 1,444
Equity loss (gain) from NEC TOKIN 3,376 1,243 (1,657) 4,580 7,542
Net foreign exchange loss (gain) (577) 515 207 (449) (304)
Adjusted EBITDA $8,824 $17,797 $23,236 $21,647 $71,504
====== ======= ======= ======= =======
Fiscal Year 2013
----------------
Q1 Q2 Q3 Q4 Total
--- --- --- --- -----
Net loss $(17,754) $(24,920) $(14,257) $(25,251) $(82,182)
Adjustments:
Income tax expense (benefit) 1,736 1,657 611 (735) 3,269
Interest expense, net 10,427 10,109 10,193 10,464 41,193
Depreciation and amortization
expense 11,558 11,426 10,405 11,781 45,170
Net (income) loss from discontinued
operations (278) 1,313 1,657 1,559 4,251
Restructuring charges 1,264 8,522 3,886 5,047 18,719
Write down of long lived assets - 4,234 3,083 264 7,582
ERP integration costs 1,601 2,018 1,375 2,404 7,398
Plant start-up costs 1,361 1,930 1,524 1,307 6,122
NEC TOKIN investment related
expenses 542 866 164 3,009 4,581
Stock-based compensation expense 1,262 1,242 1,078 1,018 4,600
Goodwill impairment - 1,092 - - 1,092
Loss (gain) on sales and disposals
of assets 104 (31) (196) 141 18
Net curtailment and settlement gain
on benefit plans - (1,675) 588 1,354 267
Equity loss (gain) from NEC TOKIN - - - 1,254 1,254
Net foreign exchange loss (gain) 1,789 (442) (464) (911) (28)
Registration related fees 20 - - - 20
--- --- --- --- ---
Adjusted EBITDA $13,632 $17,341 $19,647 $12,705 $63,326
======= ======= ======= ======= =======
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
