KEMET Reports Third Quarter Results of Fiscal Year 2009

January 29, 2009

GREENVILLE, SC – January 29, 2009 – Quarter Highlights:

   — Net sales declined 16.6% versus same quarter last fiscal year

   — Gross Margin increased approximately 1% over prior quarter September 2008

   — Non-GAAP net loss per share of $(.06) compared to $(.04) for prior quarter September 2008

   — GAAP net loss  per share of $(0.14) compared to $(1.03) for prior quarter September 2008

   — SG&A expenses declined $3.2 million compared to September 2008 quarter and $7.6 million versus June 2008 quarter


KEMET Corporation (Other OTC: KEME) today reported preliminary results for the third quarter ended December 31, 2008. Net sales for the quarter ended December 31, 2008, were $190.7 million, which is a 16.6% decrease over the same quarter last year. Net sales for the nine month period ended December 31, 2008 were $668.3 million which is a 9.8% increase compared to the same period last year, inclusive of acquisitions. Sales declined approximately 13 percent compared to the prior quarter ended September 2008 excluding the impact of exchange rates and the sale of the Company’s wet tantalum assets.

The Non-GAAP net loss, excluding special charges, was $(4.9) million or $(0.06) per share for the current quarter compared to net loss of $(1.6) million, or $(0.02) per share for the same quarter last year and compares to a net loss of $(3.6) million, or $(0.04) per share for the prior quarter ended September 2008. On a U.S. GAAP basis net loss was $(11.1) million, or $(0.14) per share for the third fiscal quarter compared to a net loss of $(8.2) million or $(0.10) per share for the same quarter last year.

The current quarter includes a $4.6 million restructuring charge primarily related to a global headcount reduction plan, $0.6 million in integration expenses related to recent acquisitions, and a $1.1 million loss on sales and disposals of certain assets.

Although the world-wide recession continues to put pressure on our business the actions that we took last year minimized the impact to our operating income this quarter. Since last August we have taken over fifty million dollars of annual expense out of the business and that is clearly reflected in our financial results this quarter as sales decreased forty-four million, but our operating income was only impacted by nine-hundred thousand dollars versus the September quarter, stated Per Loof, KEMET’s Chief Executive Officer. Our cash balance remains stable and we remain focused on keeping our working capital in line with market demands to maximize cash to position KEMET for a strong rebound when normal economic activities resume, 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 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, losses incurred due to the early retirement of debt and sales or disposals of certain asset groups. Management believes that this Non-GAAP disclosure is useful to investors in that it provides an alternative way to possibly better understand the underlying operating performance. 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 income (loss):

     GAAP to Non-GAAP
       (unaudited)           Quarters Ended              Nine Months Ended
                       Dec.      Sept.       Dec.         Dec.        Dec.
                       2008      2008        2007         2008        2007

                               (In Millions, Except Per Share Data)

  Including special
   items (GAAP)
  Net sales            $190.7     $234.8      $228.7      $668.3      $608.9

  Net income (loss)    $(11.1)    $(83.0)      $(8.2)    $(281.3)       $2.9
  Net income (loss)
   per basic and
   diluted share        (0.14)     (1.03)      (0.10)      (3.50)       0.03

  Excluding special
   items (Non-GAAP)

  Net income (loss)    $(11.1)    $(83.0)      $(8.2)    $(281.3)       $2.9
    Special items
    (after tax):
       charges              –       85.7           –       174.3           –
      Write down
       of long-
       lived assets         –        1.0         2.1        64.9         2.1
     (Gain) loss on
       sale or disposal
       of assets          1.4      (28.6)          –      (26.9)           –
      Restructuring       4.2       17.4         2.9        28.1        11.2
       adjustments          –          –                     8.6           –
      Integration      &nbsp
;  0.6        1.7         1.6         4.5         2.2
      Loss on early
       retirement of
       debt                 –        2.2           –         2.2           –
  Adjusted net income
   (loss) (excluding
   special items)      $(4.9)      $(3.6)      $(1.6)     $(25.6)      $18.4
  Adjusted net income
  (loss) per basic
   and diluted share
  (excluding special
   items)             $(0.06)     $(0.04)     $(0.02)     $(0.32)      $0.22

  Basic Shares    80,605,960  80,463,192  83,984,668  80,489,021  83,942,502
  Fully Diluted
   Shares         80,605,960  80,463,192  83,984,668  80,489,021  84,163,133


KEMET’s common stock is listed on the Financial Industry Regulatory Authority’s over-the-counter bulletin board and on the Pink Sheets Inc.’s Pink Quote System under the symbol KEME. At the Investor Relations section of our web site at, users may subscribe to KEMET news releases and find additional information about our Company.


Beginning April 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.


Certain statements included herein contain forward-looking statements within the meaning of federal security laws about KEMET Corporation (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) adverse economic conditions could cause further reevaluation of the fair value of our reporting segments and the write down of long-lived assets; (iv) the cost and availability of raw materials; (v) changes in the competitive environment of the Company; (vi) economic, political, or regulatory changes in the countries in which the Company operates; (vii) the ability to successfully integrate the operations of acquired businesses; (viii) the ability to attract, train and retain effective employees and management; (ix) the ability to develop innovative products to maintain customer relationships; (x) the impact of environmental issues, laws, and regulations; (xi) the Company’s ability to achieve the expected benefits of its manufacturing relocation plan or other restructuring plan; and (xii) volatility of financial and credit markets which would affect access to capital for the Company. 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.

            Condensed Consolidated Statements of Operations
             (Amounts in thousands, except per share data)

                                Quarters Ended     Nine Months Ended
                                 December 31,        December 31,
                                2008      2007      2008       2007

  Net sales                   $190,679  $228,694   $668,342  $608,942

  Operating costs and
  Cost of sales                166,507   188,616    598,918   491,555
  Selling, general and
   administrative expenses      20,569    28,059     72,587    70,078
  Research and
   development                   6,168     8,646     23,312    25,886
  Restructuring charges          4,572     2,870     29,579    11,404
  Goodwill impairment              –         –      174,327       –
  Write down of long-lived
   assets                          – &nbs
p;     2,098     65,155     2,098
  (Gain) loss on sales and
   disposals of assets           1,054        11    (27,236)      (41)
       Total operating costs
        and expenses           198,870   230,300    936,642   600,980

           Operating (loss)
            income              (8,191)   (1,606)  (268,300)    7,962

  Other (income) expense:
     Interest income              (129)   (1,814)      (545)   (5,031)
     Interest expense            4,617     4,087     15,764     8,772
     Other (income) expense,
      net                       (2,407)   (1,476)    (6,306)   (2,841)
     Loss on early retirement
      of debt                      –         –        2,212       –

        (Loss) income before
         income taxes          (10,272)   (2,403)  (279,425)    7,062

  Income tax expense               793     5,747      1,918     4,170

           Net (loss) income  $(11,065)  $(8,150) $(281,343)   $2,892

  Net (loss) income per share:
     Basic and Diluted          $(0.14)   $(0.10)    $(3.50)    $0.03


                    Condensed Consolidated Balance Sheets
                (Amounts in thousands, except per share data)

                                          December 31, 2008   March 31, 2008
  Current assets:
    Cash and cash equivalents                   $25,387            $81,383
    Accounts receivable, net                    152,804            197,258
    Inventories                                 191,210            243,714
    Prepaid expenses and other current
     assets                                      12,108             15,692
    Deferred income taxes                         4,399              4,017
        Total current assets                    385,908            542,064
    Property and equipment, net of
     accumulated depreciation of $606.3
     million and $673.6 million as of
     December 31, 2008 and March 31, 2008,
     respectively                               377,429            475,912
    Assets held for sale                          3,546              4,638
    Goodwill                                        –              182,273
    Intangible assets, net                       27,572             35,786
    Other assets                                  9,738             11,227
  Total assets                                 $804,193         $1,251,900

  Current liabilities:
    Current portion of long-term debt           $74,722           $108,387
    Accounts payable, trade                      82,253   &nbsp
;        131,468
    Accrued expenses                             56,275             59,626
    Income taxes payable                            197              3,524
        Total current liabilities               213,447            303,005
    Long-term debt                              265,919            304,294
    Post-retirement benefits and other
     non-current obligations                     68,562             80,130
    Deferred income taxes                        17,278             21,679

  Stockholders’ equity:
    Common stock, par value $0.01,
     authorized 300,000 shares, issued
     88,524 and 88,240 shares at December 31,
     2008 and March 31, 2008, respectively          885                882
    Additional paid-in capital                  323,835            323,359
    Retained earnings (deficit)                 (67,147)           214,180
    Accumulated other comprehensive
     income                                      41,726             65,565
    Treasury stock, at cost (7,835 and
     7,950 shares at December 31, 2008
     and March 31, 2008, respectively)          (60,312)           (61,194)
  Total stockholders’ equity                    238,987            542,792

  Total liabilities and stockholders’
   equity                                      $804,193         $1,251,900


        Condensed Consolidated Statements of Cash Flows
                    (Amounts in thousands)

                                      Nine Months Ended December 31,
                                           2008          2007
  Sources (uses) of cash and cash
    Operating activities:
      Net (loss) income                  $(281,343)      $2,892
      Adjustments to reconcile net
       (loss) income to net cash (used
        in) provided by operating
        Depreciation and amortization       43,859       38,749
        Goodwill impairment                174,327          –
        Write down of long-lived assets     65,155        2,098
        (Gain) loss on sales and
         disposals of assets               (27,236)         (41)
        Stock-based compensation expense     1,115        4,508
        Change in deferred income taxes     (1,650)       3,701
        Change in operating assets          61,182        1,022
        Change in operating liabilities    (43,260)     (39,521)
        Other                               (2,905)      (2,547)
          Net cash (used in) provided by
           operating activities            (10,756)      10,861

    Investing activities:
      Proceeds from sale of assets          34,870        8,389
      Proceeds from sale of investments        –         46,076
      Capital exp
enditures                 (27,699)     (36,527)
      Acquisitions, net of cash received    (1,000)     (70,629)
      Other                                    –           (454)
          Net cash provided by (used in)
           investing activities              6,171      (53,145)

    Financing activities:
      Proceeds from sale of common stock
       to employee savings plan                244          484
      Proceeds from issuance of debt        20,944      140,268
      Payments of debt                     (71,300)    (169,517)
      Other                                    –            130
          Net cash used in financing
           activities                      (50,112)     (28,635)
            Net decrease in cash and
             cash equivalents              (54,697)     (70,919)
    Effect of foreign currency
     fluctuations on cash                   (1,299)      (1,660)
    Cash and cash equivalents at
     beginning of fiscal period              81,383      212,202
    Cash and cash equivalents at end of
     fiscal period                          $25,387     $139,623


  Dean W. Dimke
  Director of Corporate and Investor Communications
  [email protected]

  William M. Lowe, Jr.
  Executive Vice President and Chief Financial Officer
  [email protected]

Source: KEMET Corporation

CONTACT: William M. Lowe, Jr., Executive Vice President and Chief Financial Officer, [email protected], +1-864-963-6484, or Dean W. Dimke, Director of Corporate and Investor Communications, [email protected], +1-954-766-2800

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