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Last updated on April 17, 2014 at 14:30 EDT

KEMET Reports Third Quarter Fiscal Year 2013 Results

January 31, 2013

GREENVILLE, S.C., Jan. 31, 2013 /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 third fiscal quarter ended December 31, 2012.

Net sales for the third quarter of fiscal year 2013 were $200.3 million and, on a U.S. GAAP basis, the net loss was $14.3 million, or $0.32 loss per basic and diluted share for the third quarter of fiscal year 2013 compared to a net loss of $27.8 million or $0.62 loss per basic and diluted share for the third quarter of fiscal year 2012. The net loss for the third quarters of fiscal year 2013 and 2012 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 $2.2 million or $0.05 loss per basic and diluted share for the third quarter of fiscal year 2013 compared to a $6.2 million or $0.14 loss per diluted share for the second quarter of fiscal year 2013. Non-U.S. GAAP adjusted net income was $2.0 million or $0.04 per basic and diluted share for the third quarter of fiscal year 2012. Consolidated Non-U.S. GAAP gross margin increased to 18.0% in the third quarter of fiscal year 2013 from 16.3% in the second quarter of fiscal year 2013.

“Revenue for this quarter was in our forecasted range, but more importantly our operating results clearly reflect that our cost reduction actions are taking hold as consolidated non-GAAP gross margins for this quarter rose 1.7% to 18.0% on less revenue compared to the September quarter,” said Per Loof KEMET’s Chief Executive Officer. “Our vertical integration efforts within our tantalum business unit are clearly working and reducing our cost of raw materials and we expect additional benefits in the next several quarters as we produce more tantalum powder internally. We are cautiously optimistic that we are at or nearing the bottom of this cycle and we remain focused on a profitable bottom line even if economic conditions do not improve,” 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 April 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) the impact of 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                        Nine Months Ended
                                                                                                                                                                          December 31,                            December 31,
                                                                                                                                                                          ------------                            ------------
                                                                                                                                                                                         2012                                    2011                                    2012                                    2011
                                                                                                                                                                                         ----                                    ----                                    ----                                    ----

    Net sales                                                                                                                                                                        $200,297                                $218,795                                $639,920                                $774,165

    Operating costs and expenses:
                                 Cost of sales                                                           166,117                             178,305                                 540,491                                 592,128
                                 Selling, general and administrative expenses                                25,411                              24,737                                  80,649                                  83,368
                                 Research and development                                                  6,698                               7,172                                  21,264                                  21,620
                                 Restructuring charges                                                     3,886                              10,748                                  13,672                                  13,378
                                 Goodwill impairment                                                           -                                             -                                   1,092                                       -
                                 Write down of long-lived assets                                           3,084                              15,786                                   7,318                                  15,786
                                  Net curtailment and settlement (gain) loss on
                                  benefit plans                                                              587                                             -                                  (1,088)                                      -
                                 Net (gain) loss on sales and disposals of assets                                  (196)                                  9                                    (123)                                     92
                                 Total operating costs and expenses                                      205,587                             236,757                                 663,275                                 726,372
                                                                                                         -------                             -------                                 -------                                 -------
                                                    Operating income (loss)                                (5,290)                            (17,962)                                (23,355)                                 47,793

    Other (income) expense:
                                 Interest income                                                             (54)                                (62)                                   (111)                                   (136)
                                 Interest expense                                                         10,247                               7,036                                  30,840                                  21,718
                                 Other (income) expense, net                                              (1,641)                                716                                  (1,126)                                  1,918

                                 Income (loss) before income taxes                                       (13,842)                            (25,652)                                (52,958)                                 24,293
    Income tax expense                                                                                                                                                                    415                                   2,119                                   3,973                                   5,897
                                                    Net income (loss)                                    $(14,257)                           $(27,771)                               $(56,931)                                $18,396
                                                                                                         ========                            ========                                ========                                 =======

    Net income (loss) per share:
       Basic                                                                                                                                                                           $(0.32)                                 $(0.62)                                 $(1.27)                                  $0.43
       Diluted                                                                                                                                                                         $(0.32)                                 $(0.62)                                 $(1.27)                                  $0.35

    Weighted-average shares outstanding:
       Basic                                                                                                                                                                           44,918                                  44,644                                  44,879                                  42,834
       Diluted                                                                                                                                                                         44,918                                  44,644                                  44,879                                  52,302

                                                                                                                                         KEMET CORPORATION AND SUBSIDIARIES
                                                                                                                                            Consolidated Balance Sheets
                                                                                                                                     (Amounts in thousands, except share data)

                                                                                                                                                                                                                        December 31, 2012                                          March 31, 2012
                                                                                                                                                                                                                        -----------------                                          --------------
    ASSETS                                                                                                                                                                                                                    (Unaudited)
    Current assets:
                                   Cash and cash equivalents                                                                                                   $137,559                         $210,521
                                   Accounts receivable, net                                                                                96,648                                     104,950
                                   Inventories, net                                                                                   221,360                                     212,234
                                   Prepaid expenses and other                                                                          36,509                                      32,259
                                   Deferred income taxes                                                                                5,383                                       6,370

                                                         Total current assets                                                          497,459                                     566,334
                                    Property and equipment, net of accumulated depreciation of
                                      $777,780
                                     and $761,522 as of December 31, 2012 and March 31, 2012,
                                      respectively                                                                                    312,911                                     315,848
                                   Goodwill                                                                                            35,584                                      36,676
                                   Intangible assets, net                                                                              39,750                                      41,527
                                   Restricted cash                                                               26,177                                       2,204
                                   Other assets                                                                                        14,459                                      12,963
    Total assets                                                                                                                                                                                                                                 $926,340                                            $975,552
                                                                                                                                                                                                                                                 ========                                            ========

    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
                                   Current portion of long-term debt                                                                                         $7,908                           $1,951
                                   Accounts payable                                                                                    61,593                                      74,404
                                   Accrued expenses                                                                                    85,077                                      89,079
                                   Income taxes payable                                                                                 1,104                                       2,256

                                                         Total current liabilities                                                     155,682                                     167,690
                                   Long-term debt, less current portion                                                               375,587                                     345,380
                                   Other non-current obligations                                                                       86,455                                     101,229
                                   Deferred income taxes                                                                                4,805                                       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 December 31, 2012 and March 31, 2012                                         465                                         465
                                   Additional paid-in capital                                                                         467,708                                     470,059
                                   Retained deficit                                                                                  (137,984)                                    (81,053)
                                   Accumulated other comprehensive income                                                              10,320                                      12,020
                                    Treasury stock, at cost (1,588 and 1,839 shares at December 31,
                                    2012 and
                                   March 31, 2012, respectively)                                                 (36,698)                                    (42,495)
    Total stockholders' equity                                                                                                                                                                                                                    303,811                                             358,996
                                                                                                                                                                                                                                                  -------                                             -------
    Total liabilities and stockholders' equity                                                                                                                                                                                                   $926,340                                            $975,552
                                                                                                                                                                                                                                                 ========                                            ========

                                                                                                                KEMET CORPORATION AND SUBSIDIARIES
                                                                                                               Consolidated Statements of Cash Flows
                                                                                                                      (Amounts in thousands)
                                                                                                                            (Unaudited)

                                                                                                                                                                         Nine Months Ended December 31,
                                                                                                                                                                         ------------------------------
                                                                                                                                                                                                      2012                                              2011
                                                                                                                                                                                                      ----                                              ----
                        Net income (loss)                                                                                     $(56,931)                       $18,396
                         Adjustments to reconcile net income (loss) to net
                         cash
                         provided by (used in) operating
                         activities:
                        Depreciation and amortization                                                   33,679                                  33,384
                         Amortization of debt discount and debt issuance
                         costs                                                                           3,046                                   2,903
                        Net (gain) loss on sales and disposals of assets                                    (123)                                     92
                        Stock-based compensation expense                                                 3,584                                   1,378
                        Goodwill impairment                                                              1,092                                                 -
                        Write down of long-lived assets                                                  7,318                                  15,786
                        Settlement gain on benefit plan                                                 (1,088)                                                -
                        Change in deferred income taxes                                                  1,517                                     909
                        Change in operating assets                                                      (5,576)                                 46,330
                        Change in operating liabilities                                                (28,173)                                (48,116)
                        Other                                                                               33                                     841
                                    Net cash provided by (used in) operating
                                    activities                                                          (41,622)                                 71,903
                                                                                                        -------                                  ------

    Investing activities:
                        Capital expenditures                                                           (38,349)                                (31,793)
                        Change in restricted cash                                                      (24,000)                                                -
                        Acquisition, net of cash received                                                                       -                        (11,584)
                                   Net cash used in investing activities                                 (62,349)                                (43,377)
                                                                                                        -------                                 -------

    Financing activities:
                        Proceeds from issuance of debt                                                  39,825                                                 -
                        Deferred acquisition payments                                                   (6,617)                                                -
                        Payments of long-term debt                                                      (1,901)                                (40,581)
                         Net borrowings (payments) under other credit
                         facilities                                                                                             -                         (3,153)
                        Proceeds from exercise of stock options                                             58                                     225
                        Debt issuance costs                                                               (275)                                    (36)
                        Change in restricted cash                                                                               -                              -
                                    Net cash provided by (used in) financing
                                    activities                                                           31,090                                 (43,545)
                                                                                                         ------                                 -------
                                                       Net decrease in cash and cash
                                                       equivalents                                                          (72,881)                       (15,019)
    Effect of foreign currency fluctuations on cash                                                                                                                                                    (81)                                             (983)
    Cash and cash equivalents at beginning of fiscal period                                                                                                                                        210,521                                           152,051
    Cash and cash equivalents at end of fiscal period                                                                                                                                             $137,559                                          $136,049
                                                                                                                                                                                                  ========                                          ========

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 certain 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 included in interest expense, acquisition related fees, net curtailment and settlement (gain) loss on benefit plans, net foreign exchange gain/loss, net gain/loss on sales and disposals of assets and income tax impact of 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
                                                                                                                                                                           --------------
                                                                                                                                                                   December 31, 2012                                              September 30, 2012                                              December 31, 2011
                                                                                                                                                                   -----------------                                              ------------------                                              -----------------
                                                                                                                                                      (Unaudited) (Amounts in thousands, except per share data)
    U.S. GAAP
    Net sales                                                                                                                                                                               $200,297                                                        $215,991                                                $218,795

    Net loss                                                                                                                                                                                $(14,257)                                                       $(24,921)                                               $(27,771)

    Basic net loss per share                                                                                                                                                                  $(0.32)                                                         $(0.55)                                                 $(0.62)
    Diluted net loss per share                                                                                                                                                                $(0.32)                                                         $(0.55)                                                 $(0.62)

     Excluding the following items (Non-U.S. GAAP)

    Net loss                                                                                                                                                                                $(14,257)                                                       $(24,921)                                               $(27,771)
        Adjustments:
            Restructuring charges                                                                                                                                                              3,886                                                           8,522                                                  10,748
            Write down of long-lived assets                                                                                                                                                    3,084                                                           4,234                                                  15,786
            ERP integration costs                                                                                                                                                              1,458                                                           2,099                                                   1,812
            Plant start-up costs                                                                                                                                                               1,524                                                           1,930                                                     666
            Stock-based compensation expense                                                                                                                                                   1,078                                                           1,242                                                    (797)
            Goodwill impairment                                                                                                                                                                    -                                                           1,092                                                       -
            Amortization included in interest expense                                                                                                                                          1,122                                                             954                                                     847
            Acquisition related fees                                                                                                                                                             164                                                             866                                                       -
            Net curtailment and settlement (gain) loss on benefit plans                                                                                                                          587                                                          (1,675)                                                      -
            Net foreign exchange (gain) loss                                                                                                                                                    (464)                                                           (442)                                                    303
            Net (gain) loss on sales and disposals of assets                                                                                                                                    (196)                                                            (31)                                                      9
            Income tax impact of non-U.S. GAAP adjustments (1)                                                                                                                                  (228)                                                            (90)                                                    398
                                                                                                                                                                                                ----                                                             ---                                                     ---
     Adjusted net income (loss)(excluding adjustments)                                                                                                                                       $(2,242)                                                        $(6,220)                                                 $2,001
                                                                                                                                                                                             =======                                                         =======                                                  ======

     Adjusted net income (loss) per share (excluding adjustments)
                      Basic                                                                                                                                                                   $(0.05)                                                         $(0.14)                                                  $0.04
                      Diluted                                                                                                                                                                 $(0.05)                                                         $(0.14)                                                  $0.04

    ____________________________
    (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 loss before net interest expense, income tax expense/benefit, 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, net curtailment and settlement gain/loss on benefit plans, net foreign exchange gain/loss and net loss on sales and disposals of assets. 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
                                                                     --------------
                                                                December 31,              September 30,           December 31,
                                                                                    2012                    2012                   2011
                                                                                    ----                    ----                   ----
    U.S. GAAP
    Net loss                                                                    $(14,257)               $(24,921)              $(27,771)
    Interest expense, net                                                         10,193                  10,110                  6,974
    Income tax expense                                                               415                   1,787                  2,119
    Depreciation and amortization                                                 10,502                  11,521                 10,373
                                                                                  ------                  ------                 ------
       EBITDA                                                                      6,853                  (1,503)                (8,305)
    Excluding the following items (Non-U.S. GAAP):
    Restructuring charges                                                          3,886                   8,522                 10,748
    Write down of long-lived assets                                                3,084                   4,234                 15,786
    ERP integration costs                                                          1,458                   2,099                  1,812
    Plant start-up costs                                                           1,524                   1,930                    666
    Stock-based compensation expense                                               1,078                   1,242                   (797)
    Goodwill impairment                                                                -                   1,092                      -
    Acquisition related fees                                                         164                     866                      -
    Net curtailment and settlement (gain) loss on benefit plans                      587                  (1,675)                     -
    Net foreign exchange (gain) loss                                                (464)                   (442)                   303
    Net (gain) loss on sales and disposals of assets                                (196)                    (31)                     9
                                                                                    ----                     ---                    ---

    Adjusted EBITDA                                                              $17,974                 $16,334                $20,222
                                                                                 =======                 =======                =======

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
                                                       --------------
                                                       December 31,         September 30,           December 31,
                                                                        2012                  2012                   2011
                                                                        ----                  ----                   ----
    U.S. GAAP
    Net sales                                                       $200,297              $215,991               $218,795

    Gross margin                                                      34,180                32,938                 40,490

    Excluding the following items (Non-U.S. GAAP):
    Plant start-up costs                                               1,524                 1,930                    666
    Stock-based compensation expense                                     359                   423                   (114)

    Adjusted gross margin                                            $36,063               $35,291                $41,042
                                                                     =======               =======                =======
    Adjusted gross margin as a percentage of net sales                  18.0%                 16.3%                  18.8%

Contact:

Dean W. Dimke
Senior 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

SOURCE KEMET Corporation


Source: PR Newswire