KEMET Reports Fourth Quarter And Fiscal Year 2012 Results

GREENVILLE, S.C., May 10, 2012 /PRNewswire/ -- KEMET Corporation ("KEMET" or the "Company") (NYSE: KEM) today reported preliminary results for the fourth fiscal quarter and fiscal year ended March 31, 2012.  Net sales for the twelve months ended March 31, 2012 were $984.8 million which is a 3.3% decrease over the same period last fiscal year.  On a U.S. GAAP basis, for the fiscal year ended March 31, 2012, net income was $6.7 million, or $0.13 per diluted share compared to net income of $63.0 million or $1.22 per diluted share for fiscal year ended March 31, 2011.  Non-GAAP adjusted net income for the fiscal year ended March 31, 2012 was $54.5 million, or $1.04 per diluted share compared to adjusted net income of $114.2 million or $2.22 per diluted share for the fiscal year ended March 31, 2011.  Adjusted EBITDA for the fiscal year ended March 31, 2012 was $128.4 million which was within our forecasted range of $128-$132 million.

On a U.S. GAAP basis, fiscal year 2012 net income includes a $15.8 million impairment charge related to the Tantalum Business Group.  In addition, fiscal year 2012 net income includes $14.3 million of restructuring charges primarily comprised of termination benefits of $6.1 million related to planned facility closures in Italy and charges of $4.5 million to participate in a plan to save labor costs whereby a company may temporarily "lay off" employees while the government continues to pay their wages for a certain period of time.  This restructuring activity is a continuation of the Company's efforts to restructure its manufacturing operations within Europe, primarily within the Film and Electrolytic segment.  Fiscal year 2012 net income also includes ERP integration costs of $7.7 million, plant start-up costs of $3.6 million and acquisition related fees of $1.5 million.  Fiscal year 2011 net income includes a loss on early extinguishment of debt of $38.2 million, restructuring charges of $7.2 million and ERP integration costs of $1.9 million

Net sales for the quarter ended March 31, 2012 were $210.7 million which is a 19.4% decrease over the same quarter last fiscal year.  On a U.S. GAAP basis, for the fourth fiscal quarter of fiscal year 2012, net loss was $(11.7) million, or $(0.26) per basic and diluted share compared to net income of $21.1 million or $0.40 per diluted share for the same quarter last year.  Non-GAAP adjusted net loss was $(7.0) million or $(0.16) per basic and diluted share for the fourth quarter of fiscal year 2012 compared to $25.6 million of adjusted net income or $0.49 per diluted share for the same quarter last year.  Adjusted EBITDA for the quarter ended March 31, 2012 was $9.7 million as compared to $44.4 million for the quarter ended March 31, 2011.

On a U.S. GAAP basis, the fourth quarter of fiscal year 2012 includes $2.2 million of plant start-up costs and $0.9 million of restructuring charges primarily comprised of termination benefits of $0.6 million.  This restructuring activity is a continuation of the Company's efforts to restructure its manufacturing operations within Europe, primarily within the Film and Electrolytic segment.  The fourth quarter of fiscal year 2011 included a $3.0 million inventory adjustment, $2.0 million of restructuring charges primarily associated with the relocation of equipment and $0.6 million of registration related fees. 

"We began this quarter knowing again that the distribution channel inventory rebalancing would continue to have impact on our financial results," said Per Loof, Chief Executive Officer of KEMET.  "However, our book to bill ratio is increasing and we are pleased overall with our position in the marketplace.  Our efforts to secure certain materials in our supply chain have been successful and will reduce our operating costs later this fiscal year.   We are looking forward to beginning our relationship with NEC TOKIN in the coming months and creating greater value for all of our stakeholders," 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://ir.kemet.com/, 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, 2012, we will observe a quiet period during which the information provided in this news release and our 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 KEMET Corporation's (the "Company") financial condition and results of operations that are based on management's current expectations, estimates and projections about the markets, in which the Company operates, as well as management's beliefs and assumptions. Words such as "expects," "anticipates," "believes," "estimates," variations of such words and other similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in, or implied by, such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's judgment only as of the date hereof. The Company undertakes no obligation to update publicly any of these forward-looking statements to reflect new information, future events or otherwise.

Factors that may cause actual outcome and results to differ materially from those expressed in, or implied by, these forward-looking statements include, but are not necessarily limited to the following:

(i) adverse economic conditions could impact our ability to realize operating plans if the demand for our products declines, and such conditions could adversely affect our liquidity and ability to continue to operate; (ii) adverse economic conditions could cause the write down of long-lived assets or goodwill; (iii) an increase in the cost or a decrease in the availability of our principal 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) equity method investments expose us to a variety of risks; (ix) acquisitions and other strategic transactions expose us to a variety of risks; (x) inability to attract, train and retain effective employees and management; (xi) inability to develop innovative products to maintain customer relationships and offset potential price erosion in older products; (xii) exposure to claims alleging product defects; (xiii) the impact of laws and regulations that apply to our business, including those relating to environmental matters; (xiv) subject to international laws relating to trade, export controls and foreign corrupt practices; (xv) volatility of financial and credit markets affecting our access to capital; (xvi) needing to reduce the total costs of our products to remain competitive; (xvii) potential limitation on the use of net operating losses to offset possible future taxable income; (xviii) restrictions in our debt agreements that limit our flexibility in operating our business; and (xix) additional exercise of the warrant by K Equity which could potentially result in the existence of a significant stockholder who could seek to influence our corporate decisions. 

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

















KEMET CORPORATION AND SUBSIDIARIES

Consolidated Statements of Operations

(Amounts in thousands, except per share data)

(Unaudited)


























Quarters Ended


Fiscal Years Ended










March 31, 2012


March 31, 2011


March 31, 2012


March 31, 2011











Net sales


$             210,668


$      261,452


$         984,833


$    1,018,488

















Operating costs and expenses:












Cost of sales


183,542


198,958


775,670


752,846


Selling, general and administrative expenses


28,196


27,940


111,564


104,607


Research and development


7,820


6,662


29,440


25,864


Restructuring charges


876


1,974


14,254


7,171


Net (gain) loss on sales and disposals of assets


226


145


318


(1,261)


Write down of long-lived assets


-


-


15,786


-



Total operating costs and expenses


220,660


235,679


947,032


889,227




Operating income (loss)


(9,992)


25,773


37,801


129,261

















Other (income) expense:













Interest income


(39)


(85)


(175)


(218)


Interest expense


6,849


7,627


28,567


30,175


Other (income) expense, net


(953)


(3,045)


965


(4,692)


Loss on early extinguishment of debt


-


-


-


38,248



Income (loss) before income taxes


(15,849)


21,276


8,444


65,748

Income tax expense (benefit)


(4,145)


211


1,752


2,704




Net income (loss)


$             (11,704)


$        21,065


$             6,692


$         63,044

















Net income (loss) per share (basic)


$                 (0.26)


$            0.57


$               0.15


$             2.11

Net income (loss) per share (diluted)


$                 (0.26)


$            0.40


$               0.13


$             1.22

















Weighted-average shares outstanding:










Basic


44,662


37,127


43,285


29,847

Diluted


44,662


52,293


52,320


51,477

















 

 














KEMET CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

(Amounts in thousands, except per share data)
























March 31,











2012


2011














ASSETS











Current assets:











Cash and cash equivalents


$         210,521


$         152,051


Accounts receivable, net


104,950


150,370


Inventories, net


212,234


206,440


Prepaid and other current assets


32,259


28,097


Deferred income taxes


6,370


5,301



Total current assets


566,334


542,259

Property, plant and equipment, net


315,848


310,412

Goodwill


36,676


-

Intangible assets, net


41,527


20,092

Other assets


15,167


11,546



Total assets


$         975,552


$         884,309














LIABILITIES AND STOCKHOLDERS' EQUITY








Current liabilities:











Current portion of long-term debt


$             1,951


$           42,101


Accounts payable


74,404


90,997


Accrued expenses


89,079


88,291


Income taxes payable


2,256


4,265



Total current liabilities


167,690


225,654

Long-term debt


345,380


231,215

Other non-current obligations


101,229


59,727

Deferred income taxes


2,257


7,960

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 and 300,000 shares, issued






46,508 and 39,508 shares at March 31, 2012 and 2011, respectively


465


395


Additional paid-in capital


470,059


479,322


Retained deficit


(81,053)


(87,745)


Accumulated other comprehensive income


12,020


22,555


Treasury stock, at cost (1,839 and  2,370 shares at March 31, 2012








and 2011, respectively)


(42,495)


(54,774)



Total stockholders' equity


358,996


359,753

Total liabilities and stockholders' equity


$         975,552


$         884,309






























KEMET CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Amounts in thousands)

(Unaudited)




























Fiscal Years Ended March 31,












2012


2011


2010

Sources (uses) of cash and cash equivalents










Operating activities:













Net income (loss)


$          6,692


$        63,044


$      (69,447)



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










operating activities:













Depreciation and amortization


44,124


52,932


52,644




Amortization of debt discount and debt issuance costs


3,599


4,930


13,392




Net (gain) loss on sales and disposals of assets


318


(1,261)


(1,003)




Stock-based compensation expense 


3,075


1,783


1,865




Pension and other post-retirement benefits


(2,991)


(2,319)


(2,716)




Deferred income taxes


(4,554)


(3,403)


2,051




Write down of long-lived assets


15,786


-


656




(Gain) loss on early extinguishment of debt


-


38,248


(38,921)




Increase in value of warrant


-


-


81,088




Other, net


702


(2,446)


339


Changes in assets and liabilities:













Accounts receivable


47,298


(15,423)


(18,236)




Other receivables


(3,698)


957


(27)




Inventories


5,375


(48,817)


7,168




Prepaid expenses and other current assets


(2,484)


(6,647)


(5,647)




Accounts payable


(22,052)


9,567


26,605




Accrued income taxes


(1,893)


4,315


421




Other operating liabilities


(8,567)


18,508


4,388





Net cash provided by operating activities


80,730


113,968


54,620


















Investing activities:













Capital expenditures


(49,314)


(34,989)


(12,921)



Acquisitions, net of cash received


(42,613)


-


-



Proceeds from sales of assets


74


5,425


1,500





Net cash used in investing activities


(91,853)


(29,564)


(11,421)


















Financing activities:













Proceeds from issuance of debt


116,050


227,525


58,949



Payment of long-term debt


(40,581)


(230,413)


(54,525)



Net (payments) borrowings under other credit facilities


(3,154)


(2,479)


475



Debt issuance costs


(2,313)


(7,853)


(4,206)



Proceeds from exercise of stock options


290


89


-



Debt extinguishment costs


-


(207)


(3,605)





Net cash provided by (used in) financing activities


70,292


(13,338)


(2,912)






Net increase in cash and cash equivalents


59,169


71,066


40,287


Effect of foreign currency fluctuations on cash


(699)


1,786


(292)


Cash and cash equivalents at beginning of fiscal year


152,051


79,199


39,204


Cash and cash equivalents at end of fiscal year


$      210,521


$      152,051


$        79,199

















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 (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

"Adjusted net income (loss)" and "Adjusted net income (loss) per share" represent net income (loss) and net income (loss) per share excluding write down of long-lived assets, restructuring charges related primarily to equipment moves and employee severance, plant start-up costs, amortization related to debt issuance costs and debt discount, net gain/loss on sales and disposals of assets, ERP integration costs, stock-based compensation expense/recovery, net foreign exchange gain/loss, inventory write-downs, registration related fees, acquisition related fees, gain on licensing of patents, loss on early extinguishment of debt, income tax expense related to foreign tax law changes which limit the utilization of net operating losses, and income tax effect on non-GAAP adjustments.  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):

GAAP to Non-GAAP Reconciliation


GAAP to Non-GAAP Reconciliation

(Unaudited)













Quarters Ended


Fiscal Years Ended



March 31, 2012


December 31, 2011


March 31, 2011


March 31, 2012


March 31, 2011



(Amounts in thousands, except per share data)

Including adjustments (GAAP)











Net sales


$           210,668


$             218,795


$          261,452


$       984,833


$    1,018,488












Net income (loss)


$           (11,704)


$             (27,771)


$            21,065


$           6,692


$         63,044

Net income (loss) per share (basic)


$               (0.26)


$                 (0.62)


$                0.57


$             0.15


$             2.11

Net income (loss) per share (diluted)


$               (0.26)


$                 (0.62)


$                0.40


$             0.13


$             1.22












Excluding the following items (Non-GAAP)






















Net income (loss)


$           (11,704)


$             (27,771)


$            21,065


$           6,692


$         63,044

 Adjustments: 











         ERP integration costs


2,772


1,812


658


7,707


1,915

         Plant start-up costs


2,190


666


-


3,574


-

         Stock-based compensation expense (recovery)


1,697


(797)


872


3,075


1,783

         Restructuring charges 


876


10,748


1,974


14,254


7,171

         Acquisition related fees


866


-


-


1,476


-

         Amortization included in interest expense


696


847


966


3,599


4,930

         (Gain) loss on sales and disposals of assets


226


9


145


318


(1,261)

         Net foreign exchange (gain) loss


(652)


303


(3,266)


919


(2,888)

         Write down of long lived assets


-


15,786


-


15,786


-

         Inventory write-downs


-


-


2,991


-


2,991

         Registration related fees


-


-


581


281


1,531

         Loss on early extinguishment of debt


-


-


-


-


38,248

         Gain on licensing of patents


-


-


-


-


(2,000)

         Income tax effect of non-GAAP adjustments (1)


(3,991)


398


(428)


(3,203)


(1,256)












 Adjusted net income (loss) (excluding adjustments)


$             (7,024)


$                 2,001


$            25,558


$         54,478


$       114,208

 Adjusted net income (loss) per basic  











         share (excluding adjustments)


$               (0.16)


$                   0.04


$                0.69


$             1.26


$             3.83

 Adjusted net income (loss) per diluted 











         share (excluding adjustments)


$               (0.16)


$                   0.04


$                0.49


$             1.04


$             2.22












(1) The income tax effect of the excluded items is calculated by applying the applicable jurisdictional income tax rate, considering the deferred tax

      valuation for each applicable jurisdiction, and includes the income tax affect of law changes related to the utilization of net operating loss carryforwards.


 

Adjusted EBITDA

Adjusted EBITDA represents net income (loss) before income tax expense (benefit), net interest expense, and depreciation and amortization expense, adjusted to exclude: write down of long-lived assets, restructuring charges, plant start-up costs, net foreign exchange gain/loss, stock-based compensation expense/recovery, gain/loss on sales and disposals of assets, ERP integration costs, registration related fees, acquisition related fees, gain on licensing of patents, loss on early extinguishment of debt and inventory write downs.  We use Adjusted EBITDA to monitor and evaluate our operating performance and to facilitate internal and external comparisons of the historical operating performance of our business.  We present Adjusted EBITDA as a supplemental measure of our performance and ability to service debt.  We also present Adjusted EBITDA because we believe such measure is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry.

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

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

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

  • it does not reflect our cash expenditures, future requirements for capital expenditures or contractual commitments;

  • it does not reflect changes in, or cash requirements for, our working capital needs;

  • it does not reflect the significant interest expense or the cash requirements necessary to service interest or principal payment on our debt;

  • although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and our Adjusted EBITDA measure does not reflect any cash requirements for such replacements;

  • it is not adjusted for all non-cash income or expense items that are reflected in our statements of cash flows;

  • it does not reflect the impact of earnings or charges resulting from matters we consider not to be indicative of our ongoing operations;

  • it does not reflect limitations on or costs related to transferring earnings from our subsidiaries to us; and

  • other companies in our industry may calculate this measure differently than we do, limiting its usefulness as a comparative measure.

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

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


Fiscal Year 2012


Q1

Q2

Q3

Q4

Total

Net income (loss)

$        31,849

$        14,318

$      (27,771)

$      (11,704)

$          6,692







Adjustments:






Income tax expense (benefit)

1,731

2,047

2,119

(4,145)

1,752

Interest expense, net

7,357

7,251

6,974

6,810

28,392

Depreciation and amortization expense

11,159

11,852

10,373

10,740

44,124

Stock-based compensation expense (recovery)

1,191

984

(797)

1,697

3,075

Restructuring charges

1,025

1,605

10,748

876

14,254

Registration related fees

204

77

-

-

281

ERP integration costs

1,205

1,918

1,812

2,772

7,707

(Gain) loss on sales and disposals of assets

123

(40)

9

226

318

Net foreign exchange (gain) loss

(123)

1,391

303

(652)

919

Acquisition related fees

610

-

-

866

1,476

Plant start-up costs

-

718

666

2,190

3,574

Write down of long lived assets

-

-

15,786

-

15,786

Adjusted EBITDA

$        56,331

$        42,121

$        20,222

$          9,676

$      128,350








Fiscal Year 2011


Q1

Q2

Q3

Q4

Total

Net income (loss)

$      (20,099)

$        34,911

$        27,167

$        21,065

$        63,044







Adjustments:






Income tax expense

1,275

593

625

211

2,704

Interest expense, net

7,437

7,250

7,728

7,542

29,957

Depreciation and amortization expense

14,510

14,132

12,661

11,629

52,932

Loss on early extinguishment of debt

38,248

-

-

-

38,248

Restructuring charges

1,792

2,303

1,102

1,974

7,171

Net foreign exchange (gain) loss

1,272

(2,679)

1,785

(3,266)

(2,888)

(Gain) loss on sales and disposals of assets

335

(1,770)

29

145

(1,261)

ERP integration costs

280

375

602

658

1,915

Stock-based compensation expense

149

333

429

872

1,783

Gain on licensing of patents

-

(2,000)

-

-

(2,000)

Registration related fees

-

-

950

581

1,531

Inventory write downs

-

-

-

2,991

2,991

Adjusted EBITDA

$        45,199

$        53,448

$        53,078

$        44,402

$      196,127

                    

 

SOURCE KEMET Corporation