KEMET Reports First Quarter Fiscal Year 2010 Results

GREENVILLE, S.C., July 30 /PRNewswire-FirstCall/ --

Financial Highlights:

    --  Net sales for the first quarter of fiscal year 2010 were $150.2 million
        compared to $136.0 million for the fourth quarter of fiscal year 2009
    --  Gross margin as a percentage of net sales for the first quarter of
        fiscal year 2010 was 13.6% compared to 7.0% for the first quarter of
        fiscal year 2009
    --  First quarter GAAP net income per share of $0.31 compared to $0.03 for
        the fourth quarter of fiscal year 2009
    --  First quarter Non-GAAP net loss per share of $(0.17) compared to $(0.25)
        for the fourth quarter of fiscal year 2009

    --  Consummated tender offer on 53.7% of outstanding convertible senior
        notes

KEMET Corporation (OTC Bulletin Board: KEME) today reported preliminary results for the first fiscal quarter ended June 30, 2009. Net sales for the quarter ended June 30, 2009, were $150.2 million, which is a 38.1% decrease over the same quarter last year and a 10.4% increase over the prior quarter ended March 31, 2009.

On a U.S. GAAP basis, net income was $25.1 million, or $0.31 per share for the first quarter of fiscal year 2010 compared to net loss of $189.4 million or $(2.36) per share for the same quarter last year and compare to net income of $2.4 million or $0.03 per share for the prior quarter ended March 31, 2009. The Non-GAAP net loss, excluding special charges, was $13.6 million or $(0.17) per share for the current quarter compared to net loss of $19.5 million, or $(0.24) per share for the same quarter last year and compares to a net loss of $20.6 million, or $(0.25) per share for the prior quarter ended March 31, 2009.

The current quarter includes a $38.9 million pre-tax gain related to the early extinguishment of 53.7% of the Company's convertible senior notes, $0.2 million pre-tax loss on the disposal of fixed assets and interest accretion of $2.3 million recorded in interest expense as a result of adopting FSP APB 14-1 related to the Company's convertible senior notes. During the last four quarters the Company's total debt as reflected on its balance sheet has been reduced by approximately $150 million. Included in this reduction was an $11.1 million reduction to debt based on the adoption of FSP APB 14-1, which the Company was required to adopt at the beginning of this quarter with respect to its outstanding convertible debt, a $31.4 million allocation attributable to the warrant issued to Platinum Equity which has the effect of reducing the amount recorded for the Platinum credit facility, and $14.5 million related to the devaluation of the Euro against the US dollar.

"We believe that our first quarter for fiscal year 2010 reflects a turning point, both in the underlying economic conditions, and financial position of the Company. Our initiatives over the past twelve months to reduce our cost structure, strengthen our balance sheet, and change our business model, are all bearing fruit for our Company today," stated Per Loof, KEMET's Chief Executive Officer. "For our first quarter of fiscal year 2010, we saw revenue increase 10% over the previous quarter, however more significant and encouraging is the performance of our Tantalum and Ceramics business groups and our order book. Our book-to-bill remains strong across our business and we see demand increasing at a moderate pace. The partnership with Platinum Equity LLC will allow us to significantly improve our ability to fully implement our restructuring plans. Much work remains of course and stalls are always possible, but our efforts are delivering results and we remain focused on profitability in the near term," continued Loof.

Management believes that investors may find it useful to review the Company's financial results that exclude special items as determined by management. These special items include gain on extinguishment of debt, impairment charges associated with goodwill and long-lived assets, integration costs incurred as a result of recent business acquisitions, restructuring charges related primarily to employee severance and equipment moves, certain inventory adjustments, and sales or disposals of certain asset groups. Management believes that this Non-GAAP disclosure is useful to investors in that it provides a supplemental way to possibly better understand the underlying operating performance of the Company. Management uses Non-GAAP financial reporting to evaluate operating performance; however Non-GAAP financial performance 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 net loss:

    GAAP to Non-GAAP Reconciliation
    (Unaudited)                                Quarters Ended

                                              March 31, 2009   June 30, 2008
                              June 30, 2009  (As Adjusted)(1) (As Adjusted)(1)

                                (Amounts in millions, except per share data)
    Including special
     items (GAAP)
    Net sales                       $150.2         $136.0        $242.8

    Net income (loss)                $25.1           $2.4       $(189.4)
    Basic net income (loss)
     per share                       $0.31          $0.03        $(2.36)
    Diluted net income
     (loss) per share                $0.31          $0.03        $(2.36)

     Excluding special items
     (Non-GAAP)

    Net income (loss)                $25.1           $2.4       $(189.4)
        Special items (after tax):
             Restructuring charges       -            1.3           6.5
             Goodwill impairment         -              -          88.6
             Gain on early
              Extinguishment
              of debt                (38.9)             -             -
             Write down of long
              lived assets               -            2.5          63.8
             Loss on disposals
              of fixed assets          0.2              -           0.2
             Net benefit plan
              adjustments                -          (28.6)            -
             Non-recurring interest
              amortization charges       -            1.3             -
             Inventory adjustment        -              -           8.6
             Acquisitions integration
              costs                      -            0.5           2.2
     Adjusted net income (loss)
     (excluding special items)      $(13.6)        $(20.6)       $(19.5)
     Adjusted net income (loss)
     (excluding special charges)
                      Basic         $(0.17)        $(0.25)       $(0.24)
                      Diluted       $(0.17)        $(0.25)       $(0.24)


    (1) Net income for each of the quarters ended March 31, 2009 and June 30,
        2008 includes a reduction of $2.1 million related to a required
        retrospective change in accounting for convertible debt.  In addition,
        the Company recorded $2.3 million in non-cash interest expense related
        to the adoption of FSP APB 14-1 in the first quarter of fiscal year
        2010.

KEMET's common stock is listed on the OTC Bulletin Board and on the Pink OTC Markets, Inc., Pink Quote System under the symbol KEME. 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.

QUIET PERIOD

Beginning October 1, 2009, 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) generally adverse economic and industry conditions, including a decline in demand for the Company's products; (ii) the ability to maintain sufficient liquidity to realize current operating plans; (iii) the effect of receiving a going concern statement in our auditor's report on our 2009 audited financial statements; (iv) adverse economic conditions could cause further reevaluation of the fair value of our reporting segments and the write down of long-lived assets; (v) the cost and availability of raw materials; (vi) changes in the competitive environment of the Company; (vii) economic, political, or regulatory changes in the countries in which the Company operates; (viii) the ability to successfully integrate the operations of acquired businesses; (ix) the ability to attract, train and retain effective employees and management; (x) the ability to develop innovative products to maintain customer relationships; (xi) the impact of environmental issues, laws, and regulations; (xii) the Company's ability to finance and achieve the expected benefits of its manufacturing relocation plan or other restructuring plan; (xiii) volatility of financial and credit markets which would affect access to capital for the Company; (xiv) increased difficulty or expense in accessing capital because of the Company's delisting of common stock from the New York Stock Exchange; (xv) exposure to foreign exchange (gains) and losses; (xvi) need to reduce costs to offset downward price trends; (xvii) potential limitation on use of net operating losses to offset possible future taxable income; (xviii) dilution as a result of the issuance of a warrant to K Financing; and (xix) exercise of the warrant by K Financing may result in the existence of a controlling shareholder. Other risks and uncertainties may be described from time to time in the Company's other reports and filings with the Securities and Exchange Commission.

                           KEMET CORPORATION AND SUBSIDIARIES
                   Condensed Consolidated Statements of Operations
                     (Amounts in thousands, except per share data)
                                       (Unaudited)

                                              Quarters Ended June 30,

                                                               2008
                                               2009       (As Adjusted)(1)

    Net sales                               $150,167         $242,844

    Operating costs and expenses:
    Cost of sales                            129,806          225,788
    Selling, general and administrative
     Expenses                                 18,083           28,219
    Research and development                   4,779           10,096
    Restructuring charges                          -            6,797
    Goodwill impairment                            -           88,647
    Write down of long-lived assets                -           63,928
         Total operating costs and expenses  152,668          423,475

             Operating loss                   (2,501)        (180,631)

    Other expense (income):
       Interest income                           (31)            (238)
       Interest and amortization of debt
        discount and expense                   5,819            7,729
       Gain on early extinguishment of debt  (38,921)               -
       Other expense (income), net             4,512            1,333

          Income (loss) before income taxes   26,120         (189,455)

    Income tax expense (benefit)               1,030              (80)

             Net income (loss)               $25,090        $(189,375)

    Net income (loss) per share:
       Basic                                  $ 0.31           $(2.36)
       Diluted                                $ 0.31           $(2.36)

    (1) Results are adjusted for retrospective application of changes in
        accounting for convertible notes.  See table: "Changes in Accounting
        for Convertible Notes."



                   KEMET CORPORATION AND SUBSIDIARIES
                  Condensed Consolidated Balance Sheet
              (Amounts in thousands, except per share data)
                                (Unaudited)

                                                            31-Mar-09
                                         June 30, 2009  (As Adjusted)(1)
    ASSETS
    Current assets:
       Cash and cash equivalents            $   34,135    $   39,204
       Accounts receivable, net                123,976       120,139
       Inventories                             150,807       154,981
       Prepaid expenses and other current
        assets                                  14,809        11,245
       Deferred income taxes                     1,850           151
             Total current assets              325,577       325,720
       Property and equipment, net of
        accumulated depreciation of $647.1
        million and $623.0 million as of
        June 30, 2009 and March 31, 2009,
        respectively                           356,911       357,977
       Intangible assets, net                   24,418        24,094
       Other assets                             16,197         6,360
    Total assets                             $ 723,103     $ 714,151

    LIABILITIES AND STOCKHOLDERS' EQUITY
       Current liabilities:
       Current portion of long-term debt    $   19,879    $   25,994
       Accounts payable, trade                  51,299        52,332
       Accrued expenses                         52,587        51,125
       Income taxes payable                        954         1,127
              Total current liabilities        124,719       130,578
       Long-term debt, less current portion    222,502       280,752
       Warrant liability                        31,400             -
       Post-retirement benefits and other
        non-current obligations                 65,539        57,316
       Deferred income taxes                     7,151         5,466

    Stockholders' equity:
       Common stock, par value $0.01,
        authorized 300,000 shares, issued
        88,525 and 88,525 shares at June 30,
        2009 and March 31, 2009, respectively      885           885
       Additional paid-in capital              367,064       367,257
       Retained deficit                        (56,252)      (81,342)
       Accumulated other comprehensive income   19,084        12,663
       Treasury stock, at cost (7,658 and
        7,714 shares at June 30, 2009 and
        March 31, 2009, respectively)          (58,989)      (59,424)
    Total stockholders' equity                 271,792       240,039

    Total liabilities and stockholders'
     equity                                  $ 723,103     $ 714,151

    (1) Results are adjusted for retrospective application of changes in
        accounting for convertible notes.  See table: "Changes in Accounting
        for Convertible Notes."



                            KEMET CORPORATION AND SUBSIDIARIES
                  Condensed Consolidated Statements of Cash Flows
                                  (Amounts in thousands)
                                        (Unaudited)


                                                   Quarters Ended June 30,

                                                                   2008
                                                   2009      (As Adjusted)(1)

    Sources (uses) of cash and cash equivalents
       Operating activities:
         Net income (loss)                          $25,090     $(189,375)
         Adjustments to reconcile net income
          (loss) to net cash provided by (used in)
           operating activities:
           Gain on early extinguishment of debt     (38,921)            -
           Depreciation and amortization             14,766        18,114
           Goodwill impairment                            -        88,647
           Write down of long-lived assets                -        63,928
           Stock-based compensation expense             241           539
           Change in deferred income taxes             (390)          558
           Change in operating assets                 4,523         7,808
           Change in operating liabilities           (1,946)       (5,898)
           Other                                        612           207
             Net cash provided by (used in) operating
              activities                              3,975       (15,472)
       Investing activities:
         Capital expenditures                        (1,387)      (11,209)
         Acquisitions, net of cash received               -        (1,000)
             Net cash used in investing activities   (1,387)      (12,209)
       Financing activities:
         Proceeds from issuance debt                 49,818         4,311
         Payments of long-term debt                 (49,832)      (22,390)
         Debt extinguishment and issuance costs      (7,811)            -
         Proceeds from sale of common stock to
          employee savings plan                           -            85
             Net cash used in financing activities   (7,825)      (17,994)
               Net decrease in cash and cash
                equivalents                          (5,237)      (45,675)
       Effect of foreign currency fluctuations
        on cash                                         168          (207)
       Cash and cash equivalents at beginning of
        fiscal period                                39,204        81,383
       Cash and cash equivalents at end of fiscal
        Period                                      $34,135      $ 35,501

    (1) Results are adjusted for retrospective application of changes in
        accounting for convertible notes.  See table: "Changes in Accounting
        for Convertible Notes."



                           KEMET CORPORATION AND SUBSIDIARIES
                     Changes in Accounting for Convertible Notes
                    (Amounts in thousands, except per share data)

                  Condensed Consolidated Statements of Operations

                                              Quarter Ended June 30, 2008

                                                                 Following the
                                          As Previously           Adoption of
                                            Presented  Adjustments  APB 14-1

    Interest accretion                     $    382      $2,083      $2,465
    Net income                             (187,292)     (2,083)   (189,375)

    Net income (loss) per share:
       Basic                                $ (2.33)    $ (0.03)     $(2.36)
       Diluted                              $ (2.33)    $ (0.03)     $(2.36)



    Condensed Consolidated Balance Sheets

                                                     March 31, 2009

                                                                 Following the
                                          As Previously           Adoption of
                                            Presented  Adjustments  APB 14-1

    Other assets                             $ 7,010      $(650)       6,360
    Long-term debt                           307,111    (26,359)     280,752
    Total stockholders' equity               214,330     25,709      240,039
    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
    billlowe@KEMET.com
    864-963-6484

SOURCE KEMET Corporation