KEMET Reports Third Quarter of Fiscal Year 2011 Results

- Net sales up 32.4% to $264.7 million compared to $199.9 million for the same quarter last fiscal year

- GAAP Earnings per Share of $0.96 per basic share and $0.52 per diluted share

- Adjusted EBITDA of $53.1 million and $151.7 million for the quarter and nine month period ended December 31, 2010, respectively

GREENVILLE, S.C., Feb. 3, 2011 /PRNewswire/ -- KEMET Corporation (NYSE: KEM) today reported preliminary results for the third fiscal quarter ended December 31, 2010.  Net sales for the quarter ended December 31, 2010 were $264.7 million, which is a 32.4% increase over the same quarter last fiscal year and a 6.5% increase over the prior fiscal quarter ended September 30, 2010 of $248.6 million.

On a U.S. GAAP basis, net income was $27.2 million, or $0.96 per basic share and $0.52 per diluted share for the third quarter of fiscal year 2011 compared to a net loss of $1.8 million or $(0.07) per basic and diluted share for the same quarter last year.  The current fiscal quarter included $1.1 million of restructuring charges primarily associated with the relocation of equipment and $1.0 million of debt and stock registration related fees.  The third quarter of fiscal year 2010 included $1.3 million of restructuring charges and a $0.7 million loss on write down of long-lived assets.  

Non-U.S. GAAP Adjusted net income was $33.1 million or $1.17 per basic share and $0.64 per diluted share for the current fiscal quarter compared to a Non-U.S. GAAP Adjusted net income of $4.7 million, or $0.18 per basic share and $0.10 per diluted share for the same quarter last year.

All share and per share data gives effect to the November 2010 one-for-three reverse stock split.

"The quarter continued our trend of strong sales as demand remained solid in all of our geographic regions and segments making this our seventh straight quarter of increasing revenue," said Per Loof KEMET's Chief Executive Officer.  "We accomplished another of our goals during this quarter by relisting on the New York Stock Exchange and thereby obtaining greater visibility of the company to both new and existing shareholders.  The management team remains focused on the fundamentals that will continue to bring increased value to our shareholders," 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, 2011, 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 further reevaluation and the write down of long-lived assets; (iii) an increase in the cost or a decrease in the availability of our principle 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) inability to attract, train and retain effective employees and management; (ix) the inability to develop innovative products to maintain customer relationships and offset potential price erosion in older products; (x) exposure to claims alleging product defects; (xi) the impact of laws and regulations that apply to our business, including those relating to environmental matters; (xii) volatility of financial and credit markets which would affect our access to capital; (xiii) needing to reduce costs of our products to remain competitive; (xiv) potential limitation on use of net operating losses to offset possible future taxable income; and (xv) 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.




Contact: William M. Lowe, Jr.         Dean W. Dimke

         Executive Vice President and Director of Corporate and

         Chief Financial Officer      Investor Communications

         williamlowe@KEMET.com        deandimke@KEMET.com

         864-963-6484                 954-788-2806








KEMET CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(Amounts in thousands, except per share data)

(Unaudited)



                    Quarters Ended December 31,  Nine Months Ended December 31,

                    2010       2009              2010       2009

Net sales           $ 264,654  $ 199,923         $ 757,036  $ 523,355



Operating costs and
expenses:

Cost of sales       192,132    163,670           553,888    442,082

Selling, general
and administrative
expenses            27,453     22,162            76,667     60,697

Research and
development         6,947      5,637             19,202     15,985

Restructuring
charges             1,102      1,322             5,197      2,589

Write down of
long-lived assets   -          656               -          656

Net (gain) loss on
sales and disposals
of assets           29         240               (1,406)    498

Total operating
costs and expenses  227,663    193,687           653,548    522,507

Operating income    36,991     6,236             103,488    848



Other (income)
expense:

Interest income     (28)       (14)              (133)      (147)

Interest expense    7,756      7,434             22,548     19,744

Increase in value
of warrant          -          -                 -          81,088

(Gain) loss on
early
extinguishment of
debt                -          -                 38,248     (38,921)

Other (income)
expense, net        1,471      688               (1,647)    6,199

Income (loss)
before income taxes 27,792     (1,872)           44,472     (67,115)

Income tax expense
(benefit)           625        (93)              2,493      2,649

Net income (loss)   $ 27,167   $ (1,779)         $ 41,979   $ (69,764)





Net income (loss)
per share (basic)   $ 0.96     $ (0.07)          $ 1.53     $ (2.59)

Net income (loss)
per share (diluted) $ 0.52     $ (0.07)          $ 0.82     $ (2.59)










KEMET CORPORATION AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Amounts in thousands, except per share data)





                                            December 31, 2010  March 31, 2010

ASSETS                                      (Unaudited)

Current assets:

 Cash and cash equivalents                  $ 127,772          $ 79,199

 Accounts receivable, net                   147,630            137,385

 Inventories, net                           207,506            150,508

 Prepaid expenses and other                 15,421             18,790

 Deferred income taxes                      6,052              2,129

  Total current assets                      504,381            388,011

 Property and equipment, net of accumulated
 depreciation of $721,744

 and $686,958 as of December 31, 2010 and
 March 31, 2010, respectively               298,331            319,878

 Intangible assets, net                     19,797             21,806

 Other assets                               11,355             11,266

Total assets                                $ 833,864          $ 740,961



LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

 Current portion of long-term debt          $ 41,650           $ 17,880

 Accounts payable, trade                    90,164             78,829

 Accrued expenses                           70,885             63,606

 Income taxes payable                       2,530              1,096

  Total current liabilities                 205,229            161,411

 Long-term debt, less current portion       230,611            231,629

 Other non-current obligations              57,514             55,626

 Deferred income taxes                      10,650             8,023



Stockholders' equity:

 Common stock, par value $0.01, authorized
 300,000 shares, issued 39,508 and 29,508

 shares at December 31, 2010 and March 31,
 2010, respectively                         395                295

 Additional paid-in capital                 479,201            479,705

 Retained deficit                           (108,810)          (150,789)

 Accumulated other comprehensive income     14,667             11,990

 Treasury stock, at cost (2,403 and 2,463
 shares at December 31, 2010 and

 March 31, 2010, respectively)              (55,593)           (56,929)

Total stockholders' equity                  329,860            284,272

Total liabilities and stockholders' equity  $ 833,864          $ 740,961








KEMET CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Amounts in thousands)

(Unaudited)





                                                 Nine Months Ended December 31,

                                                 2010       2009

Sources (uses) of cash and cash equivalents

 Operating activities:

  Net income (loss)                              $ 41,979   $ (69,764)

  Adjustments to reconcile net income (loss) to
  net cash provided by

   operating activities:

   (Gain) loss on early extinguishment of debt   38,248     (38,921)

   Increase in value of warrant                  -          81,088

   Depreciation and amortization                 41,303     39,191

   Amortization of debt discount and debt
   issuance costs                                3,964      9,586

   Write down of long-lived assets               -          656

   Net (gain) loss on sales and disposals of
   assets                                        (1,406)    498

   Stock-based compensation expense              911        1,788

   Change in deferred income taxes               (1,186)    (751)

   Change in operating assets                    (64,485)   1,653

   Change in operating liabilities               17,658     11,895

   Other                                         (1,885)    (997)

    Net cash provided by operating activities    75,101     35,922



 Investing activities:

  Capital expenditures                           (19,559)   (7,593)

  Proceeds from sales of assets                  5,425      -

  Change in restricted cash                      -          (1,495)

    Net cash used in investing activities        (14,134)   (9,088)



 Financing activities:

  Proceeds from issuance of debt                 227,525    58,949

  Payments of long-term debt                     (230,300)  (51,628)

  Net payments under other credit facilities     (2,626)    (650)

  Debt issuance costs                            (7,750)    (4,206)

  Debt extinguishment costs                      (207)      (3,605)

  Proceeds from exercise of stock options        21         -

    Net cash used in financing activities        (13,337)   (1,140)

     Net increase in cash and cash equivalents   47,630     25,694

 Effect of foreign currency fluctuations on cash 943        76

 Cash and cash equivalents at beginning of
 fiscal period                                   79,199     39,204

 Cash and cash equivalents at end of fiscal
 period                                          $ 127,772  $ 64,974







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", "Adjusted net income 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 Income and Adjusted Net Income Per Share

"Adjusted net income" and "Adjusted net income per share" represent net income/loss and net income/loss per share excluding increase in value of warrant, gain/loss on early extinguishment of debt, ERP integration costs, restructuring charges related primarily to equipment moves and employee severance, gain/loss on sales and disposals of assets, amortization related to debt issuance costs and debt discount, debt and stock registration related fees, cancellation of incentive plan, write down of long-lived assets, foreign exchange transaction gain/loss, stock-based compensation expense, write off of capitalized advisor fee and gain on licensing of patents.  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:




               Quarters Ended                   Nine Months Ended

               Dec. 31,   Sept. 30,  Dec. 31,
               2010       2010       2009       Dec. 31, 2010  Dec. 31, 2009

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

GAAP



Net sales      $ 264,654  $ 248,588  $ 199,923  $ 757,036      $ 523,355



Net income
(loss)         $ 27,167   $ 34,911   $ (1,779)  $ 41,979       $ (69,764)

Basic net
income (loss)
per share      $ 0.96     $ 1.29     $ (0.07)   $ 1.53         $ (2.59)

Diluted net
income (loss)
per share      $ 0.52     $ 0.68     $ (0.07)   $ 0.82         $ (2.59)



Excluding the
following
items
(Non-GAAP)



Net income
(loss)         $ 27,167   $ 34,911   $ (1,779)  $ 41,979       $ (69,764)

Adjustments:

Restructuring
charges        1,102      2,303      1,322      5,197          2,589

Amortization
included in
interest
expense        1,210      830        3,703      3,964          9,586

Foreign
exchange
transaction
(gain) loss    1,785      (2,679)    562        378            6,199

Stock-based
compensation
expense        429        333        168        911            1,788

(Gain) loss on
sales and
disposals of
assets         29         (1,770)    240        (1,406)        498

Debt and stock
registration
related fees   950        -          -          950            -

ERP
integration
costs          602        375        -          1,257          -

Gain on
licensing of
patents        -          (2,000)    -          (2,000)        -

Write down of
long lived
assets         -          -          656        -              656

(Gain) loss on
early
extinguishment
of debt        -          -          -          38,248         (38,921)

Cancellation
of incentive
plan           -          -          -          -              1,161

Increase in
value of
warrant        -          -          -          -              81,088

Write off of
capitalized
advisor fee    -          -          -          -              413

Income tax
effect of
non-GAAP
adjustments
(1)            (196)      (364)      (143)      (828)          528



Adjusted net
income (loss)
(excluding
adjustments)   $ 33,078   $ 31,939   $ 4,729    $ 88,650       $ (4,179)

Adjusted net
income (loss)
per share
(excluding

adjustments)

Basic          $ 1.17     $ 1.18     $ 0.18     $ 3.23         $ (0.16)

Diluted        $ 0.64     $ 0.62     $ 0.10     $ 1.73         $ (0.16)





(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 income/loss before income tax expense, net interest expense, and depreciation and amortization expense, adjusted to exclude: restructuring charges, stock-based compensation expense, debt and stock registration related fees, gain/loss on sales and disposals of assets, write down of long-lived assets, gain/loss on early extinguishment of debt, ERP integration costs, foreign exchange transaction gain/loss, increase in value of warrant and gain on licensing of patents.  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 reconciliation from U.S. GAAP net income (loss) to Adjusted EBITDA (amounts in thousands):




                                     Q1 FY11    Q2 FY11    Q3 FY11   YTD FY11

Net income (loss)                    $ (20,099) $ 34,911   $ 27,167  $ 41,979

Income tax expense                   1,275      593        625       2,493

Interest expense, net                7,437      7,250      7,728     22,415

Depreciation and amortization
expense                              14,510     14,132     12,661    41,303

Stock-based compensation expense     149        333        429       911

Debt and stock registration related
fees                                 -          -          950       950

(Gain) loss on sales and disposals
of assets                            335        (1,770)    29        (1,406)

Loss on early extinguishment of
debt                                 38,248     -          -         38,248

Foreign exchange transaction (gain)
loss                                 1,272      (2,679)    1,785     378

ERP integration costs                280        375        602       1,257

Restructuring charges                1,792      2,303      1,102     5,197

Gain on licensing of patents         -          (2,000)    -         (2,000)

Adjusted EBITDA                      $ 45,199   $ 53,448   $ 53,078  $ 151,725





                                     Q1 FY10    Q2 FY10    Q3 FY10   YTD FY10

Net income (loss)                    $ 25,090   $ (93,075) $ (1,779) $ (69,764)

Income tax expense (benefit)         1,030      1,712      (93)      2,649

Interest expense, net                5,788      6,389      7,420     19,597

Depreciation and amortization
expense                              12,264     13,226     13,701    39,191

Gain on early extinguishment of
debt                                 (38,921)   -          -         (38,921)

Stock-based compensation expense     241        1,379      168       1,788

Loss on sales and disposals of
assets                               206        52         240       498

Foreign exchange transaction loss    4,221      1,416      562       6,199

Increase in value of warrant         -          81,088     -         81,088

Restructuring charges                -          1,267      1,322     2,589

Write down of long-lived assets      -          -          656       656

Adjusted EBITDA                      $ 9,919    $ 13,454   $ 22,197  $ 45,570





SOURCE KEMET Corporation