KEMET Reports First Quarter of Fiscal Year 2011 Results
- Net sales up 14.5% to $243.8 million compared to $213.0 million for the prior quarter ended March 31, 2010
- Gross margin up significantly to 25.0% compared to 20.2% for the prior quarter ended March 31, 2010
- Non-GAAP Adjusted net income of $0.28 per basic share and $0.15 per diluted share for the current quarter
- Adjusted EBITDA of $45.2 million
GREENVILLE, S.C., July 28 /PRNewswire-FirstCall/ -- KEMET Corporation (NYSE Amex: KEM) today reported preliminary results for the first fiscal quarter ended June 30, 2010. Net sales for the quarter ended June 30, 2010 were $243.8 million, which is a 62.3% increase over the same quarter last fiscal year and a 14.5% increase over the prior fiscal quarter ended March 31, 2010.
On a U.S. GAAP basis, the net loss was $20.1 million, or $(0.25) per basic and diluted share for the first quarter of fiscal year 2011 compared to net income of $25.1 million or $0.31 per basic and diluted share for the same quarter last year and compared to net income of $0.3 million or $0.00 per basic and diluted share for the prior fiscal quarter ended March 31, 2010. The current fiscal quarter includes a $38.2 million non-cash loss on early extinguishment of debt and $1.8 million of restructuring charges primarily associated with the relocation of equipment. Conversely, the first quarter of fiscal year 2010 included a $38.9 million non-cash gain on early extinguishment of debt.
Non-GAAP Adjusted net income was $22.3 million or $0.28 per basic share and $0.15 per diluted share for the current fiscal quarter compared to an Adjusted net loss of $10.3 million, or $(0.13) per basic and diluted share for the same quarter last year and compared to an Adjusted net income of $8.8 million, or $0.11 per basic share and $0.06 per diluted share for the prior fiscal quarter ended March 31, 2010.
"It was a great quarter as we saw our revenue return to pre-recession levels and our gross margins increase significantly," said Per Loof, KEMET's Chief Executive Officer. "Our efforts to improve operating efficiencies, maintain our cost controls established over the past year, reestablish a strong Balance Sheet, and our ability to meet the strong volume demands of our customers have combined to drive our financial results," continued Loof.
As announced on June 21, 2010, the Company's common stock was approved for listing on the NYSE Amex. Trading commenced on the NYSE Amex on Tuesday, June 22, 2010 under the ticker symbol 'KEM' (NYSE Amex: 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.
In this news release, the Company makes reference to certain Non-GAAP financial measures, including "Adjusted net income (loss)", "Adjusted net income (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 income (loss)" and "Adjusted net income (loss) per share" represent net income/loss and net income/loss per share excluding 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, and amortization related to debt issuance costs and debt discount. Management believes that these Non-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-GAAP financial measures to evaluate operating performance. Non-GAAP financial measures should not be considered as an alternative to net income, operating income or any other performance measures derived in accordance with GAAP.
The following table provides reconciliation from GAAP net income/loss to Non-GAAP adjusted net income/loss:
Quarters Ended June 30, 2010 March 31, 2010 June 30, 2009 (Unaudited) (Amounts in thousands, except per share data) Net sales $ 243,794 $ 212,980 $ 150,167 Net income (loss) $ (20,099) $ 317 $ 25,090 Basic net income (loss) per share $ (0.25) $ - $ 0.31 Diluted net income (loss) per share $ (0.25) $ - $ 0.31 Excluding the following items (Non-GAAP) Net income (loss) $ (20,099) $ 317 $ 25,090 Adjustments: Restructuring charges 1,792 6,609 - Amortization included in interest expense 1,924 3,806 2,564 (Gain) loss on early extinguishment of debt 38,248 - (38,921) (Gain) loss on sales and disposals of assets 335 (1,501) 206 ERP integration costs 280 - - Income tax effect of non-GAAP adjustments (1) (155) (462) 738 Adjusted net income (loss) (excluding adjustments) $ 22,325 $ 8,769 $ (10,323) Adjusted net income (loss) per share (excluding adjustments) Basic $ 0.28 $ 0.11 $ (0.13) Diluted $ 0.15 $ 0.06 $ (0.13) (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.
Beginning October 1, 2010, 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) continued uncertainty of the economy could impact the Company's ability to realize operating plans if the demand for the Company's products declines and could adversely affect the Company's 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 the Company's principle raw materials; (iv) changes in the competitive environment of the Company; (v) uncertainty of the timing of customer product qualifications in heavily regulated industries; (vi) economic, political, or regulatory changes in the countries in which the Company operates; (vii) difficulties, delays or unexpected costs in completing the Company's restructuring plan; (viii) the ability to attract, train and retain effective employees and management; (ix) the ability to develop innovative products to maintain customer relationships; (x) the impact of environmental issues, laws, and regulations; (xi) volatility of financial and credit markets which would affect the Company's access to capital; (xii) exposure to foreign exchange gains and losses; (xiii) need to reduce costs to offset downward price trends; (xiv) potential limitation on use of net operating losses to offset possible future taxable income; (xv) dilution as a result of the warrant held by K Equity, LLC; and (xvi) exercise of the warrant by K Equity, LLC may result in the existence of a controlling stockholder.
KEMET CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Operations (Unaudited - Amounts in thousands, except per share data) Quarters Ended June 30, 2010 June 30, 2009 Net sales $ 243,794 $ 150,167 Operating costs and expenses: Cost of sales 182,886 129,661 Selling, general and administrative expenses 24,215 18,022 Research and development 6,031 4,779 Restructuring charges 1,792 - Net loss on sales and disposals of assets 335 206 Total operating costs and expenses 215,259 152,668 Operating income (loss) 28,535 (2,501) Other (income) expense: Interest income (21) (31) Interest expense 7,458 5,819 (Gain) loss on early extinguishment of debt 38,248 (38,921) Other expense, net 1,674 4,512 Income (loss) before income taxes (18,824) 26,120 Income tax expense 1,275 1,030 Net income (loss) $ (20,099) $ 25,090 Net income (loss) per share (basic and diluted) $ (0.25) $ 0.31
KEMET CORPORATION AND SUBSIDIARIES Condensed Consolidated Balance Sheets (Amounts in thousands, except per share data) June 30, 2010 March 31, 2010 ASSETS (Unaudited) Current assets: Cash and cash equivalents $ 65,968 $ 79,199 Accounts receivable, net 156,897 141,795 Inventories, net 152,387 150,508 Prepaid expenses and other 10,675 14,380 Deferred income taxes 2,260 2,129 Total current assets 388,187 388,011 Property and equipment, net of accumulated depreciation of $719,045 and $686,958 as of June 30, 2010 and March 31, 2010, respectively 301,666 319,878 Intangible assets, net 19,967 21,806 Other assets 9,201 11,266 Total assets $ 719,021 $ 740,961 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 4,959 $ 17,880 Accounts payable, trade 69,363 78,829 Accrued expenses 61,142 63,606 Income taxes payable 955 1,096 Total current liabilities 136,419 161,411 Long-term debt, less current portion 267,440 231,629 Other non-current obligations 54,180 55,626 Deferred income taxes 7,335 8,023 Stockholders' equity: Common stock, par value $0.01, authorized 300,000 shares, issued 88,525 shares at June 30, 2010 and March 31, 2010 885 885 Additional paid-in capital 479,363 479,115 Retained deficit (170,888) (150,789) Accumulated other comprehensive income 1,216 11,990 Treasury stock, at cost (7,390 shares at June 30, 2010 and March 31, 2010) (56,929) (56,929) Total stockholders' equity 253,647 284,272 Total liabilities and stockholders' equity $ 719,021 $ 740,961
KEMET CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (Amounts in thousands) (Unaudited) Quarters Ended June 30, 2010 2009 Sources (uses) of cash and cash equivalents Operating activities: Net income (loss) $ (20,099) $ 25,090 Adjustments to reconcile net income (loss) to net cash provided by operating activities: (Gain) loss on early extinguishment of debt 38,248 (38,921) Depreciation and amortization 14,510 12,264 Amortization of debt discount and debt issuance costs 1,924 2,564 Net loss on sales and disposals of assets 335 206 Stock-based compensation expense 149 241 Change in deferred income taxes (65) (390) Change in operating assets (23,018) 4,523 Change in operating liabilities (7,898) (1,946) Other (148) 344 Net cash provided by operating activities 3,938 3,975 Investing activities: Capital expenditures (6,857) (1,387) Net cash used in investing activities (6,857) (1,387) Financing activities: Proceeds from issuance of debt 226,975 47,873 Payments of long-term debt (228,544) (47,563) Net borrowings (payments) under other credit facilities (1,688) (324) Debt issuance costs (6,593) (4,206) Debt extinguishment costs (207) (3,605) Net cash used in financing activities (10,057) (7,825) Net decrease in cash and cash equivalents (12,976) (5,237) Effect of foreign currency fluctuations on cash (255) 168 Cash and cash equivalents at beginning of fiscal period 79,199 39,204 Cash and cash equivalents at end of fiscal period $ 65,968 $ 34,135
Adjusted EBITDA-Non-GAAP Financial Measure
Adjusted EBITDA represents net income/loss before income tax expense, interest expense, and depreciation and amortization expense, adjusted to exclude restructuring charges, share-based compensation expense, loss on sales and disposals of assets, loss on early extinguishment of debt, ERP integration costs, and foreign exchange transaction gain/loss. 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 reconciliation from U.S. GAAP net loss to Adjusted EBITDA (amounts in thousands):
Q1 FY11 Net loss $ (20,099) Income tax expense 1,275 Interest expense, net 7,437 Depreciation and amortization expense 14,510 Share-based compensation expense 149 Loss on sales and disposals of assets 335 Loss on early extinguishment of debt 38,248 Foreign exchange transaction loss 1,272 ERP integration costs 280 Restructuring charges 1,792 Adjusted EBITDA $ 45,199
Contact: Dean W. Dimke Director of Corporate and Investor Communications deandimke@KEMET.com 954-766-2800 William M. Lowe, Jr. Executive Vice President and Chief Financial Officer williamlowe@KEMET.com 864-963-6484
SOURCE KEMET Corporation
Released July 28, 2010