KEMET Reports Second Quarter Fiscal Year 2014 Results Highlights compared to prior quarter June 30, 2013:

-- Revenue at $212.7 million up 4.9% compared to $202.7 million

-- Adjusted Gross Margin up 3.5% to 14.8% versus 11.3%

-- EBITDA of $16.6 million up from $7.2 million

-- U.S. GAAP EPS of $0.29 loss per basic and diluted share versus loss of $0.78

-- Non-GAAP EPS of $0.13 loss per basic and diluted share versus loss of $0.38

GREENVILLE, S.C., Oct. 31, 2013 /PRNewswire/ -- KEMET Corporation (the "Company") (NYSE: KEM), a leading global supplier of electronic components, today reported preliminary results for the second fiscal quarter ended September 30, 2013. 

Net sales for the quarter ended September 30, 2013 were $212.7 million, an increase of 4.9% over the prior quarter ended June 30, 2013 net sales of $202.7 million and a 1.5% decrease compared to net sales of $216.0 million for the quarter ended September 30, 2012. The U.S. GAAP net loss was $13.1 million, or $0.29 per basic and diluted share for the quarter ended September 30, 2013 compared to a U.S. GAAP net loss of $35.1 million or $0.78 per basic and diluted share for the prior quarter ended June 30, 2013. For the quarter ended September 30, 2012 the U.S. GAAP net loss was $24.9 million or $0.55 per basic and diluted share.

Non-U.S. GAAP Adjusted net loss improved to $5.7 million or $0.13 loss per basic and diluted share for the quarter ended September 30, 2013 compared to a non-U.S. GAAP Adjusted net loss of $17.0 million or $0.38 per basic and diluted share for the prior quarter ended June 30, 2013.  For the quarter ended September 30, 2012 the non-U.S. GAAP Adjusted net loss was $6.2 million or $0.14 per basic and diluted share.  

"We communicated last quarter that we expected a significant positive change in our margins and net results this quarter as we straightened out our supply chain issues and it is clear through our financial results that we are putting those issues behind us," stated Per Loof, KEMET's Chief Executive Officer.  "Revenue exceeded our expectations in a challenging economic environment and we continue to see a slow growth scenario over the next couple of quarters for the top line.  Regardless of the top line we expect that our margins will continue to improve quarter over quarter through the remaining two quarters of our fiscal year," continued Loof.

The net loss for the quarters ended September 30, 2013 and 2012 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 January 1, 2014, we will observe a quiet period during which the information provided in this news release and quarterly report on Form 10-Q will no longer constitute our current expectations. During the quiet period, this information should be considered to be historical, applying prior to the quiet period only and not subject to update by management. The quiet period will extend until the day when our next quarterly earnings release is published.

CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS

Certain statements included herein contain forward-looking statements within the meaning of federal securities laws about the Company's financial condition and results of operations that are based on management's current expectations, estimates and projections about the markets, in which the Company operates, as well as management's beliefs and assumptions. Words such as "expects," "anticipates," "believes," "estimates," variations of such words and other similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in, or implied by, such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's judgment only as of the date hereof. The Company undertakes no obligation to update publicly any of these forward-looking statements to reflect new information, future events or otherwise.

Factors that may cause actual outcome and results to differ materially from those expressed in, or implied by, these forward-looking statements include, but are not necessarily limited to the following: (i) adverse economic conditions could impact our ability to realize operating plans if the demand for our products declines, and such conditions could adversely affect our liquidity and ability to continue to operate; (ii) continued net losses could impact our ability to realize current operating plans and could materially adversely affect our liquidity and our ability to continue to operate; (iii) adverse economic conditions could cause the write down of long-lived assets or goodwill; (iv) an increase in the cost or a decrease in the availability of our principal or single-sourced purchased materials; (v) changes in the competitive environment; (vi) uncertainty of the timing of customer product qualifications in heavily regulated industries; (vii) economic, political, or regulatory changes in the countries in which we operate; (viii) difficulties, delays or unexpected costs in completing the restructuring plan; (ix) equity method 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

Condensed Consolidated Statements of Operations

(Amounts in thousands, except per share data)

(Unaudited)














Quarters Ended
September 30,


Six Month Periods Ended
September 30,




2013


2012


2013


2012

Net sales


$ 212,740


$ 215,991


$    415,463


$    439,623











Operating costs and expenses:










   Cost of sales


182,501


183,053


367,690


374,374

   Selling, general and administrative expenses


22,662


26,308


49,164


53,563

   Research and development


5,861


6,833


12,241


14,566

   Restructuring charges


1,365


8,522


5,975


9,786

   Goodwill impairment


-


1,092


-


1,092

   Write down of long-lived assets


-


4,234


-


4,234

   Net (gain) loss on sales and disposals of assets


42


(31)


42


73

     Total operating costs and expenses


212,431


230,011


435,112


457,688











         Operating income (loss)


309


(14,020)


(19,649)


(18,065)











Other (income) expense:










   Interest income


(11)


(26)


(175)


(57)

   Interest expense


9,908


10,136


19,942


20,593

   Other (income) expense, net


947


(996)


1,301


515

      Loss before income taxes and equity loss from NEC TOKIN


(10,535)


(23,134)


(40,717)


(39,116)

Income tax expense


1,320


1,787


2,900


3,558

         Loss before equity loss from NEC TOKIN


(11,855)


(24,921)


$    (43,617)


$     (42,674)

Equity loss from NEC TOKIN


(1,243)


-


(4,620)


-

         Net loss


$  (13,098)


$ (24,921)


$    (48,237)


$     (42,674)











Net loss per share:










   Basic


$      (0.29)


$     (0.55)


$        (1.07)


$         (0.95)

   Diluted


$      (0.29)


$     (0.55)


$        (1.07)


$         (0.95)











Weighted-average shares outstanding:










   Basic


45,092


44,911


45,057


44,860

   Diluted


45,092


44,911


45,057


44,860











 

 

KEMET CORPORATION AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Amounts in thousands, except per share data)

























September 30,
2013


March 31,
2013

ASSETS








 (Unaudited) 



Current assets:











Cash and cash equivalents


$           57,700


$      95,978


Accounts receivable, net


103,365


96,564


Inventories, net


208,836


205,615


Prepaid expenses and other


42,713


41,101


Deferred income taxes


4,453


4,167




Total current assets


417,067


443,425


Property and equipment, net of accumulated depreciation of $794,798 and






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


311,434


304,508


Goodwill


35,584


35,584


Intangible assets, net


38,068


38,646


Investment in NEC TOKIN


46,942


52,738


Restricted cash


14,638


17,397


Deferred income taxes


8,717


7,994


Other assets


7,761


11,299

Total assets


$         880,211


$    911,591














LIABILITIES AND STOCKHOLDERS' EQUITY








Current liabilities:











Current portion of long-term debt


$           29,772


$      10,793


Accounts payable


80,892


73,669


Accrued expenses


86,892


95,944


Income taxes payable and deferred income taxes


1,811


1,074




Total current liabilities


199,367


181,480


Long-term debt, less current portion


373,506


372,707


Other non-current obligations


60,864


71,946


Deferred income taxes


8,567


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 September 30, 2013 and March 31, 2013


465


465


Additional paid-in capital


465,747


467,096


Retained deficit


(211,472)


(163,235)


Accumulated other comprehensive income


15,315


7,694


Treasury stock, at cost (1,391 and 1,519 shares at September 30, 2013







and March 31, 2013, respectively)


(32,148)


(35,104)




Total stockholders' equity


237,907


276,916














Total liabilities and stockholders' equity


$         880,211


$    911,591














 

 

KEMET CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Amounts in thousands)

(Unaudited)








































Six Month Periods Ended
September 30,












2013


2012



Net loss


$         (48,237)


$         (42,674)



Adjustments to reconcile net loss to net cash provided by








(used in) operating activities:










Depreciation and amortization


25,780


23,177




Equity loss from NEC TOKIN


4,620


-




Amortization of debt discount and debt issuance costs


1,959


1,924




Stock-based compensation expense


1,628


2,506




Long-term receivable write down


1,444


-




Change in value of NEC TOKIN options


383


-




Net loss on sales and disposals of assets


42


73




Pension and other post-retirement benefits


27


205




Write down of long-lived assets


-


4,234




Settlement gain on benefit plans


-


(1,675)




Goodwill impairment


-


1,092




Change in deferred income taxes


(957)


838




Change in operating assets


(6,156)


(18,656)




Change in operating liabilities


(12,107)


2,154




Other


(32)


178





Net cash used in operating activities


(31,606)


(26,624)
















Investing activities:











Capital expenditures


(18,337)


(30,343)



Change in restricted cash


2,874


-





Net cash used in investing activities


(15,463)


(30,343)
















Financing activities:











Proceeds from revolving line of credit


21,000


-



Proceeds from issuance of debt


-


15,825



Deferred acquisition payments


(11,452)


(6,617)



Payments of long-term debt


(1,422)


(1,576)



Proceeds from exercise of stock options


57


42



Debt issuance costs


-


(275)





Net cash provided by financing activities


8,183


7,399






Net decrease in cash and cash equivalents


(38,886)


(49,568)


Effect of foreign currency fluctuations on cash


608


(458)


Cash and cash equivalents at beginning of fiscal period


95,978


210,521


Cash and cash equivalents at end of fiscal period


$          57,700


$         160,495
















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 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


September 30,
2013


June 30,
2013


(Unaudited)

Net sales

$             212,740


$     202,723





Gross margin

30,239


17,534





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




Stock-based compensation

229


314

Plant start-up costs

1,050


1,133

Inventory write down

-


3,886





     Adjusted gross margin

$               31,518


$       22,867


14.8%


11.3%

Adjusted Net Loss and Adjusted Net Loss Per Share

"Adjusted net loss" and "Adjusted net loss per share" represent net loss and net loss per share excluding adjustments which are outlined in the quantitative reconciliation provided below.  Management believes that these Non-U.S. GAAP financial measures are useful to investors because they provide a supplemental way to understand the underlying operating performance of the Company.  Management uses these Non-U.S. GAAP financial measures to evaluate operating performance.  Non-U.S. GAAP financial measures should not be considered as an alternative to net income, operating income or any other performance measures derived in accordance with U.S. GAAP.

The following table provides reconciliation from U.S. GAAP net loss to Non-U.S. GAAP adjusted net loss:

U.S. GAAP to Non- U.S. GAAP Reconciliation



Quarters Ended



September 30,
2013


June 30, 2013


September 30,
2012



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

U.S. GAAP







Net sales


$             212,740


$             202,723


$             215,991








Net loss


$              (13,098)


$              (35,139)


$              (24,921)

Net loss per basic and diluted share


$                  (0.29)


$                  (0.78)


$                  (0.55)








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














Net loss


$              (13,098)


$              (35,139)


$              (24,921)

    Adjustments: 







        Restructuring charges   


1,365


4,610


8,522

        Equity loss from NEC TOKIN 


1,243


3,377


-

        ERP integration costs 


1,079


1,010


2,099

        Change in value of NEC TOKIN options 


383


-


-

        Plant start-up costs   


1,050


1,133


1,930

        Amortization included in interest expense 


945


1,014


954

        Stock-based compensation expense 


660


968


1,242

        Net foreign exchange (gain) loss


514


(577)


(442)

        NEC TOKIN investment related expenses 


125


1,307


866

        Net (gain) loss on sales and disposals of assets 


42


-


(31)

        Inventory write down   


-


3,886


-

        Long-term receivable write down 


-


1,444


-

        Write down of long-lived assets 


-


-


4,234

        Goodwill impairment 


-


-


1,092

        Settlement gain on benefit plans 


-


-


(1,675)

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


(18)


(56)


(90)








 Adjusted net loss (excluding adjustments) 


$                (5,710)


$              (17,023)


$                (6,220)








 Adjusted net loss per basic and diluted share (excluding  







                 adjustments) 


$                  (0.13)


$                  (0.38)


$                  (0.14)










$                  (0.13)




$                  (0.14)





(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 represents net loss before net interest expense, income tax expense, and depreciation and amortization expense, adjusted to exclude adjustments which are outlined in the quantitative reconciliation provided 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 table provides a reconciliation from U.S. GAAP net loss to Adjusted EBITDA (amounts in thousands): 


Quarters Ended


September 30,
2013


June 30,
2013


September 30,
2012

U.S. GAAP






Net loss

$              (13,098)


$              (35,139)


$              (24,921)

Interest expense, net

9,897


9,870


10,110

Income tax expense

1,320


1,580


1,787

Depreciation and amortization

12,049


13,731


11,521

     EBITDA

10,168


(9,958)


(1,503)

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






Restructuring charges

1,365


4,610


8,522

Equity loss from NEC TOKIN

1,243


3,377


-

ERP integration costs

1,079


1,010


2,099

Change in value of NEC TOKIN options

383


-


-

Plant start-up costs

1,050


1,133


1,930

Stock-based compensation expense

660


968


1,242

Net foreign exchange (gain) loss

514


(577)


(442)

NEC TOKIN investment related expenses

125


1,307


866

Net (gain) loss on sales and disposals of assets

42


-


(31)

Inventory write down

-


3,886


-

Long-term receivable write down

-


1,444


-

Write down long-lived assets

-


-


4,234

Goodwill impairment

-


-


1,092

Settlement gain on benefit plan

-


-


(1,675)







     Adjusted EBITDA

$               16,629


$                 7,200


$               16,334







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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