2014

KEMET Reports Preliminary Fourth Quarter and Fiscal Year 2014 Results

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, 2014


March 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, 2014


December 31, 2013


March 31, 2013


March 31, 2014


March 31, 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 31, 2014


December 31, 2013


March 31, 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, 2014


March 31, 2014


December 31, 2013


March 31, 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



RELATED LINKS
http://www.kemet.com

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