KEMET Reports First Quarter Fiscal Year 2014 Results

GREENVILLE, S.C., July 25, 2013 /PRNewswire/ -- KEMET Corporation ("KEMET" or the "Company") (NYSE: KEM) today reported preliminary results for the first fiscal quarter ended June 30, 2013. 

Net sales for the quarter ended June 30, 2013 were $202.7 million, and on a U.S. GAAP basis, the net loss was $35.1 million, or $0.78 loss per basic and diluted share compared to a net loss of $17.8 million or $0.40 loss per basic and diluted share for the quarter ended June 30, 2012. The net loss for the quarters ended June 30, 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 $17.0 million or $0.38 loss per basic and diluted share for the quarter ended June 30, 2013 compared to $8.8 million or $0.20 loss per basic and diluted share for the quarter ended June 30, 2012. 

"Revenue was right on forecast and indicators point to a slight increase in our second quarter. This quarter saw the full impact on our financial results of the raw material supply chain disruption that occurred in our last quarter. However, we have corrections underway and this area is under our control," stated Per Loof, KEMET's Chief Executive Officer.  "I expect to see good improvement in our operating margins this next quarter as we get our Tantalum raw material supply back on track and our European business rolls into its final stage of reorganizing into low-cost countries.  A little assistance from an improving economy would be appreciated, but we expect a significant positive change to our financial results this fiscal year even with the economy just moving sideways," 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 October 1, 2013, we will observe a quiet period during which the information provided in this news release and our 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 KEMET Corporation's (the "Company") 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 or single-sourced purchased 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

Condensed Consolidated Statements of Operations

(Amounts in thousands, except per share data)

(Unaudited)











Quarters Ended June 30,





2013


2012


Net sales


$    202,723


$    223,632









Operating costs and expenses:







   Cost of sales


185,189


191,321


   Selling, general and administrative expenses


26,502


27,255


   Research and development


6,380


7,733


   Restructuring charges


4,610


1,264


   Net loss on sales and disposals of assets


-


104


     Total operating costs and expenses


222,681


227,677









         Operating loss


(19,958)


(4,045)









Other (income) expense:







   Interest income


(164)


(31)


   Interest expense


10,034


10,457


   Other expense, net


354


1,511


      Loss before income taxes and equity loss from NEC TOKIN


(30,182)


(15,982)


Income tax expense


1,580


1,771


         Loss before equity loss from NEC TOKIN


(31,762)


(17,753)


Equity loss from NEC TOKIN


(3,377)


-


         Net loss


$    (35,139)


$    (17,753)









Net loss per share:







   Basic


$        (0.78)


$        (0.40)


   Diluted


$        (0.78)


$        (0.40)









Weighted-average shares outstanding:







   Basic


45,022


44,808


   Diluted


45,022


44,808


 


KEMET CORPORATION AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Amounts in thousands, except per share data)

























June 30,

2013


March 31,

2013

ASSETS








 (Unaudited) 



Current assets:











Cash and cash equivalents


$    53,155


$      95,978


Accounts receivable, net


101,254


96,564


Inventories, net


217,543


205,615


Prepaid expenses and other


39,377


41,101


Deferred income taxes


4,250


4,167




Total current assets


415,579


443,425


Property and equipment, net of accumulated depreciation of $785,335






  and $771,398 as of June 30, 2013 and March 31, 2013, respectively


309,877


304,508


Goodwill


35,584


35,584


Intangible assets, net


38,310


38,646


Investment in NEC TOKIN


48,709


52,738


Restricted cash


15,851


17,397


Deferred income taxes


8,321


7,994


Other assets


8,939


11,299

Total assets


$  881,170


$    911,591














LIABILITIES AND STOCKHOLDERS' EQUITY








Current liabilities:











Current portion of long-term debt


$      7,648


$      10,793


Accounts payable


89,854


73,669


Accrued expenses


83,313


95,944


Income taxes payable and deferred income taxes


2,063


1,074




Total current liabilities


182,878


181,480


Long-term debt, less current portion


375,645


372,707


Other non-current obligations


69,584


71,946


Deferred income taxes


8,694


8,542














Stockholders' equity:











Preferred stock, par value $0.01, authorized 10,000 shares, none issued


-


-


Common stock, par value $0.01, authorized 175,000 shares, issued







46,508 shares at June 30, 2013 and March 31, 2013


465


465


Additional paid-in capital


465,766


467,096


Retained deficit


(198,374)


(163,235)


Accumulated other comprehensive income


9,420


7,694


Treasury stock, at cost (1,431 and 1,519 shares at June 30, 2013 and 







March 31, 2013, respectively)


(32,908)


(35,104)




Total stockholders' equity


244,369


276,916














Total liabilities and stockholders' equity


$  881,170


$    911,591

 

KEMET CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Amounts in thousands)

(Unaudited)








































Quarters Ended June 30,












2013


2012



Net loss


$         (35,139)


$         (17,753)



Adjustments to reconcile net loss to net cash provided by








(used in) operating activities:










Depreciation and amortization


13,731


11,656




Amortization of debt discount and debt issuance costs


1,014


971




Equity loss from NEC TOKIN


3,377


-




Long-term receivable write down


1,444


-




Net loss on sales and disposals of assets


-


104




Stock-based compensation expense


968


1,264




Change in deferred income taxes


(241)


122




Change in operating assets


(14,385)


(12,029)




Change in operating liabilities


1,706


(5,490)




Other


(106)


(52)





Net cash used in operating activities


(27,631)


(21,207)
















Investing activities:











Capital expenditures


(15,481)


(13,101)



Change in restricted cash


1,591


-





Net cash used in investing activities


(13,890)


(13,101)
















Financing activities:











Proceeds from issuance of debt


-


15,825



Deferred acquisition payments


(1,204)


(1,439)



Payments of long-term debt


(306)


(1,576)



Proceeds from exercise of stock options


19


41



Debt issuance costs


-


(275)





Net cash provided by (used in) financing activities


(1,491)


12,576






Net decrease in cash and cash equivalents


(43,012)


(21,732)


Effect of foreign currency fluctuations on cash


189


(943)


Cash and cash equivalents at beginning of fiscal period


95,978


210,521


Cash and cash equivalents at end of fiscal period


$          53,155


$         187,846

 


Non-U.S. GAAP Financial Measures
In this news release, the Company makes reference to certain Non-U.S. GAAP financial measures, including "Adjusted net loss", "Adjusted net loss per share" and "Adjusted EBITDA".  Management believes that investors may find it useful to review the Company's financial results as adjusted to exclude items as determined by management.

Adjusted 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:



Quarters Ended



June 30, 2013


March 31, 2013


June 30, 2012



(Unaudited) (Amounts in thousands, except per share data)

U.S. GAAP







Net sales


$             202,723


$             203,034


$             223,632








Net loss


$              (35,139)


$              (25,251)


$              (17,753)

Net loss per basic and diluted share


$                  (0.78)


$                  (0.56)


$                  (0.40)








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














Net loss


$              (35,139)


$              (25,251)


$              (17,753)

    Adjustments: 







        Restructuring charges 


4,610


5,047


1,264

        Inventory write down 


3,886


-


-

        Equity loss from NEC TOKIN 


3,377


1,254


-

        Long-term receivable write down 

1,444


-


-

        NEC TOKIN investment related expenses 


1,307


3,009


542

        Plant start-up costs  


1,133


1,307


1,361

        Amortization included in interest expense


1,014


1,092


971

        ERP integration costs


1,010


2,469


1,676

        Stock-based compensation expense


968


1,015


1,264

        Net foreign exchange (gain) loss


(577)


(911)


1,789

        Net curtailment and settlement gain on benefit plans


-


1,354


-

        Write down of long-lived assets


-


264


-

        Net loss on sales and disposals of assets


-


141


104

        Registration related fees


-


-


20

         Income tax effect of non-U.S. GAAP adjustments (1)


(56)


(591)


4








 Adjusted net loss (excluding adjustments)


$              (17,023)


$                (9,801)


$                (8,758)








 Adjusted net loss per basic and diluted share (excluding  







                 adjustments)


$                  (0.38)


$                  (0.22)


$                  (0.20)

_____________________ 

(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 income tax expense, net interest expense, and depreciation and amortization expense excluding adjustments which are outlined in the quantitative reconciliation below.  We use Adjusted EBITDA to monitor and evaluate our operating performance and to facilitate internal and external comparisons of the historical operating performance of our business.  We present Adjusted EBITDA as a supplemental measure of our performance and ability to service debt.  We also present Adjusted EBITDA because we believe such measure is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry.

We believe Adjusted EBITDA is an appropriate supplemental measure of debt service capacity, because cash expenditures on interest are, by definition, available to pay interest, and tax expense is inversely correlated to interest expense because tax expense goes down as deductible interest expense goes up; depreciation and amortization are non-cash charges. The other items excluded from Adjusted EBITDA are excluded in order to better reflect our continuing operations.

In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses similar to the adjustments noted below.  Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by these types of adjustments.  Adjusted EBITDA is not a measurement of our financial performance under U.S. GAAP and should not be considered as an alternative to net income, operating income or any other performance measures derived in accordance with U.S. GAAP or as an alternative to cash flow from operating activities as a measure of our liquidity.

Our Adjusted EBITDA measure has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under U.S. GAAP.  Some of these limitations are:

  • it does not reflect our cash expenditures, future requirements for capital expenditures or contractual commitments;
  • it does not reflect changes in, or cash requirements for, our working capital needs;
  • it does not reflect the significant interest expense or the cash requirements necessary to service interest or principal payment on our debt;
  • although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and our Adjusted EBITDA measure does not reflect any cash requirements for such replacements;
  • it is not adjusted for all non-cash income or expense items that are reflected in our statements of cash flows;
  • it does not reflect the impact of earnings or charges resulting from matters we consider not to be indicative of our ongoing operations;
  • it does not reflect limitations on or costs related to transferring earnings from our subsidiaries to us; and
  • other companies in our industry may calculate this measure differently than we do, limiting its usefulness as a comparative measure.

Because of these limitations, Adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business or as a measure of cash that will be available to us to meet our obligations.  You should compensate for these limitations by relying primarily on our U.S. GAAP results and using Adjusted EBITDA only supplementally.

The following tables provide a reconciliation from U.S. GAAP net loss to Adjusted EBITDA (amounts in thousands):


Quarters Ended June 30,


2013


2012

Net loss

$   (35,139)


$(17,753)





Adjustments:




Interest expense, net

9,870


10,426

Income tax expense

1,580


1,771

Depreciation and amortization

13,731


11,656

Restructuring charges

4,610


1,264

Inventory write down

3,886


-

Equity loss from NEC TOKIN

3,377


-

Long-term receivable write down

1,444


-

NEC TOKIN investment related expenses

1,307


542

Plant start-up costs

1,133


1,361

ERP integration costs

1,010


1,676

Stock-based compensation expense

968


1,264

Net foreign exchange (gain) loss

(577)


1,789

Net loss on sales and disposals of assets

-


104

Registration related fees

-


20





Adjusted EBITDA

$      7,200


$ 14,120





 

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



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