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.
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.
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 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
Released May 12, 2011