KEMET Reports Fourth Quarter and Fiscal Year 2011 Financial Results

-Net sales of $261.5 million for the March 2011 quarter up 22.8% compared to prior year fourth quarter

-Net sales of $1.018 billion for the fiscal year ended March 2011 up 38.3% compared to prior fiscal year

-Cash and cash equivalents of $152.1 million at March 31, 2011 up from $79.2 million at March 31, 2010

-Adjusted EBITDA of $196.1 million for the fiscal year ended March 31, 2011

-GAAP net income per diluted share for the fourth quarter and fiscal year 2011 was $0.40, and $1.22, respectively

-Non-GAAP net income per diluted share for the fourth quarter and fiscal year 2011 was $0.49, and $2.22, respectively

GREENVILLE, S.C., May 12, 2011 /PRNewswire/ -- KEMET Corporation (NYSE: KEM) today reported preliminary results for the fourth fiscal quarter ended March 31, 2011.  Net sales for the quarter ended March 31, 2011 were $261.5 million, which is a 22.8% increase over the same quarter last fiscal year.

On a U.S. GAAP basis, net income was $21.1 million, or $0.40 per diluted share for the fourth quarter of fiscal year 2011 compared to net income of $0.3 million or $0.01 per diluted share for the same quarter last year. The current fiscal quarter includes $2.0 million of restructuring charges primarily associated with the relocation of equipment, a $3.0 million inventory adjustment and $0.6 million of debt and stock registration related fees.  The fourth quarter of fiscal year 2010 included $6.6 million of restructuring charges and a $1.5 million net gain on sales and disposals of assets.

Non-GAAP adjusted net income was $25.6 million or $0.49 per diluted share for the current fiscal quarter compared to a $6.8 million adjusted net income or $0.14 per diluted share for the same quarter last year.  

"Our revenue remained strong and exceeded expectations in the last quarter of our year with revenue surpassing one billion dollars for our full fiscal year," said Per Loof, KEMET's Chief Executive Officer.  "Our accomplishments on cost containment over the past year have continued to benefit our operating results and we expect that margins will hold in the near-term at or above our fourth quarter results despite rising raw material prices.  We remain optimistic about the industry trend and demand for our products in all of our geographic regions and we remain focused on creating additional value as we begin our next fiscal year," continued Loof.

For the fiscal year ended March 31, 2011, net sales were $1,018.5 million up from $736.3 million in the prior fiscal year.  On a U.S. GAAP basis, net income for the year was $63.0 million, or $1.22 per diluted share, compared to a net loss of $69.4 million, or $ (2.57) per share, for the fiscal year ended March 31, 2010.  Non-GAAP net income was $114.2 million, or $2.22 per diluted share for the fiscal year ended March 31, 2011 compared to a net income of $2.6 million or $0.10 per diluted share for the fiscal year ended March 31, 2010.

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 July 1, 2011, 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; (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) inability to attract, train and retain effective employees and management; (ix) 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 affecting our access to capital;  (xiii) needing to reduce the total costs of our products to remain competitive; (xiv) potential limitation on the use of net operating losses to offset possible future taxable income; (xv) exercise of the warrant by K Equity which could potentially may result in the existence of a significant stockholder who could seek to influence our corporate decisions; and (xvi) recent events in Japan could negatively impact our sales and supply chain.


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                  954-766-2800






KEMET CORPORATION AND SUBSIDIARIES

Consolidated Statements of Operations

(Amounts in thousands except per share data)

(Unaudited)



                                Quarters Ended          Fiscal Years Ended

                                March 2011  March 2010  March 2011   March 2010



Net sales                       $ 261,452   $ 212,980   $ 1,018,488  $ 736,335



Operating costs and expenses:

 Cost of sales                  198,958     169,556     752,846      611,638

 Selling, general and
 administrative expenses        27,940      25,388      104,607      86,085

 Research and development       6,662       6,079       25,864       22,064

 Restructuring charges          1,974       6,609       7,171        9,198

 Net (gain) loss on sales and
 disposals of assets            145         (1,501)     (1,261)      (1,003)

 Write down of long-lived
 assets                         -           -           -            656

  Total operating costs and
  expenses                      235,679     206,131     889,227      728,638

   Operating income             25,773      6,849       129,261      7,697



Other (income) expense:

 Interest income                (85)        (41)        (218)        (188)

 Interest expense and
 amortization of debt discount  7,627       6,264       30,175       26,008

 Other (income) expense, net    (3,045)     (2,078)     (4,692)      4,121

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

 Increase in value of warrant   -           -           -            81,088

  Income (loss) before income
  taxes                         21,276      2,704       65,748       (64,411)

Income tax expense              211         2,387       2,704        5,036

   Net income (loss)            $ 21,065    $ 317       $ 63,044     $ (69,447)



Net income (loss) per share
(basic)                         $ 0.57      $ 0.01      $ 2.11       $ (2.57)

Net income (loss) per share
(diluted)                       $ 0.40      $ 0.01      $ 1.22       $ (2.57)



Weighted-average shares
outstanding:

Basic                           37,127      27,017      29,847       26,971

Diluted                         52,293      47,679      51,477       26,971






KEMET CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

(Amounts in thousands, except per share data)



                                                        March 31,

                                                        2011         2010

                                                        (Unaudited)

ASSETS

Current assets:

 Cash and cash equivalents                              $ 152,051    $ 79,199

 Accounts receivable, net                               160,708      137,385

 Inventories, net                                       206,440      150,508

 Prepaid and other current assets                       18,020       18,790

 Deferred income taxes                                  5,301        2,129

  Total current assets                                  542,520      388,011

Property, plant and equipment, net                      310,412      319,878

Intangible assets, net                                  20,092       21,806

Other assets                                            11,285       11,266

  Total assets                                          $ 884,309    $ 740,961



LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

 Current portion of long-term debt                      $ 42,101     $ 17,880

 Accounts payable                                       90,997       78,829

 Accrued expenses                                       88,291       63,606

 Income taxes payable                                   4,265        1,096

  Total current liabilities                             225,654      161,411

Long-term debt                                          231,215      231,629

Other non-current obligations                           59,727       55,626

Deferred income taxes                                   7,960        8,023

Commitments and contingencies



Stockholders' equity:

 Common stock, par value $0.01, authorized 300,000
 shares, issued

  39,508 and 29,508 shares at March 31, 2011 and 2010,
  respectively                                          395          295

 Additional paid-in capital                             479,322      479,705

 Retained deficit                                       (87,745)     (150,789)

 Accumulated other comprehensive income                 22,555       11,990

 Treasury stock, at cost (2,370 and 2,463 shares at
 March 31, 2011

  and 2010, respectively)                               (54,774)     (56,929)

  Total stockholders' equity                            359,753      284,272

Total liabilities and stockholders' equity              $ 884,309    $ 740,961






KEMET CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Amounts in thousands)

(Unaudited)



                                             Fiscal Years Ended March 31,

                                             2011       2010        2009

Sources (uses) of cash and cash equivalents

 Operating activities:

  Net income (loss)                          $ 63,044   $ (69,447)  $ (285,209)

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

   operating activities:

   Depreciation and amortization             52,932     52,644      58,125

   Amortization of debt discount and debt
   issuance costs                            4,930      13,392      9,918

   Net gain on sales and disposals of
   assets                                    (1,261)    (1,003)     (25,505)

   Stock-based compensation expense          1,783      1,865       1,070

   Pension and other post-retirement
   benefits                                  (2,319)    (2,716)     (3,742)

   Deferred income taxes                     (3,403)    2,051       (8,146)

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

   Write down of long-lived assets           -          656         67,624

   Goodwill impairment                       -          -           174,327

   Increase in value of warrant              -          81,088      -

   Curtailment gains on benefit plans        -          -           (30,835)

   Other, net                                (2,446)    339         -

 Changes in assets and liabilities:

   Accounts receivable                       (14,466)   (18,263)    44,777

   Inventories                               (48,817)   7,168       71,308

   Prepaid expenses and other current
   assets                                    (6,647)    (5,647)     4,055

   Accounts payable                          9,567      26,605      (67,356)

   Accrued income taxes                      4,315      421         (490)

   Other operating liabilities               18,508     4,388       (4,196)

    Net cash provided by operating
    activities                               113,968    54,620      5,725



 Investing activities:

  Capital expenditures                       (34,989)   (12,921)    (30,541)

  Proceeds from sales of assets              5,425      1,500       34,870

  Acquisitions, net of cash received         -          -           (1,000)

  Change in restricted cash                  -          -           3,900

 Net cash provided by (used in) investing
 activities                                  (29,564)   (11,421)    7,229



 Financing activities:

  Proceeds from issuance of debt             227,525    58,949      16,190

  Payment of long-term debt                  (230,413)  (54,525)    (67,949)

  Net (payments) borrowings under other
  credit facilities                          (2,479)    475         (411)

  Debt issuance costs                        (7,853)    (4,206)     (1,574)

  Debt extinguishment costs                  (207)      (3,605)     -

  Proceeds from exercise of stock options    89         -           -

  Other                                      -          -           249

    Net cash used in financing activities    (13,338)   (2,912)     (53,495)

     Net increase (decrease) in cash and
     cash equivalents                        71,066     40,287      (40,541)

 Effect of foreign currency fluctuations on
 cash                                        1,786      (292)       (1,638)

 Cash and cash equivalents at beginning of
 fiscal year                                 79,199     39,204      81,383

 Cash and cash equivalents at end of fiscal
 year                                        $ 152,051  $ 79,199    $ 39,204





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, net foreign exchange 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:


GAAP to Non-GAAP Reconciliation

(Unaudited)           Quarters Ended                   Fiscal Years Ended

                      March      December   March      March        March

                      2011       2010       2010       2011         2010

                      (Amounts in thousands, except per share data)

Including
adjustments (GAAP)

Net sales             $ 261,452  $ 264,654  $ 212,980  $ 1,018,488   $ 736,335



Net income (loss)     $ 21,065   $ 27,167   $ 317      $ 63,044      $ (69,447)

Net income (loss)
per share (basic)     $ 0.57     $ 0.96     $ 0.01     $ 2.11        $ (2.57)

Net income (loss)
per share (diluted)   $ 0.40     $ 0.52     $ 0.01     $ 1.22        $ (2.57)



Excluding the
following items
(Non-GAAP)

Net income (loss)     $ 21,065   $ 27,167   $ 317      $ 63,044      $ (69,447)

Adjustments:



Restructuring
charges               1,974      1,102      6,609      7,171         9,198

Net foreign exchange
(gain) loss           (3,266)    1,785      (2,093)    (2,888)       4,106

Inventory
write-downs           2,991      -          -          2,991         -

Amortization
included in interest
expense               966        1,210      3,806      4,930         13,392

Stock-based
compensation expense  872        429        77         1,783         1,865

ERP integration
costs                 658        602        -          1,915         -

Debt and stock
registration related
fees                  581        950        -          1,531         -

(Gain) loss on sales
and disposals of
assets                145        29         (1,501)    (1,261)       (1,003)

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

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

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

Charge related to
cancellation of an
incentive plan        -          -          -          -             1,161

Write down of long
lived assets          -          -          -          -             656

Write off of
capitalized advisor
fees                  -          -          -          -             413

Income tax effect of
non-GAAP adjustments
(2)                   (428)      (196)      (462)      (1,256)       65



Adjusted net income
(excluding
adjustments)          $ 25,558   $ 33,078   $ 6,753    $ 114,208     $ 2,573

Adjusted net income
per basic

share (excluding
adjustments)          $ 0.69     $ 1.17     $ 0.25     $ 3.83        $ 0.10

Adjusted net income
per diluted

share (excluding
adjustments)          $ 0.49     $ 0.64     $ 0.14     $ 2.22        $ 0.10






(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, net foreign exchange gain/loss, inventory write-downs, 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):


                            Fiscal Year 2011

                            Q1         Q2         Q3        Q4       Total

Net income (loss)           $ (20,099) $ 34,911   $ 27,167  $ 21,065 $ 63,044

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

Stock-based compensation
expense                     149        333        429       872      1,783

Net foreign exchange (gain)
loss                        1,272      (2,679)    1,785     (3,266)  (2,888)

ERP integration costs       280        375        602       658      1,915

(Gain) loss on sales and
disposals of assets         335        (1,770)    29        145      (1,261)

Restructuring charges       1,792      2,303      1,102     1,974    7,171

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

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

Debt and stock 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



                            Fiscal Year 2010

                            Q1         Q2         Q3        Q4       Total

Net income (loss)           $ 25,090   $ (93,075) $ (1,779) $ 317    $ (69,447)

Income tax expense
(benefit)                   1,030      1,712      (93)      2,387    5,036

Interest expense, net       5,788      6,389      7,420     6,223    25,820

Depreciation and
amortization expense        12,264     13,226     13,701    13,453   52,644

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

Stock-based compensation
expense                     241        1,379      168       77       1,865

(Gain) loss on sales and
disposals of assets         206        52         240       (1,501)  (1,003)

Net foreign exchange (gain)
loss                        4,221      1,416      562       (2,093)  4,106

Restructuring charges       -          1,267      1,322     6,609    9,198

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

Write down of long-lived
assets                      -          -          656       -        656

Adjusted EBITDA             $ 9,919    $ 13,454   $ 22,197  $ 25,472 $ 71,042





SOURCE KEMET Corporation