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
Reconciliation
(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):
Goodwill
impairment
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
Inventory
adjustments – – 8.6 –
Integration  
; 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 http://www.kemet.com/IR, users may subscribe to KEMET news releases and find additional information about our Company.
QUIET PERIOD
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.
CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
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.
KEMET CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Amounts in thousands, except per share data)
(Unaudited)
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
expenses:
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
KEMET CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Amounts in thousands, except per share data)
(Unaudited)
December 31, 2008 March 31, 2008
ASSETS
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
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt $74,722 $108,387
Accounts payable, trade 82,253  
; 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
KEMET CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Amounts in thousands)
(Unaudited)
Nine Months Ended December 31,
2008 2007
Sources (uses) of cash and cash
equivalents
Operating activities:
Net (loss) income $(281,343) $2,892
Adjustments to reconcile net
(loss) income to net cash (used
in) provided by operating
activities:
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
Contact:
Dean W. Dimke
Director of Corporate and Investor Communications
[email protected]
954-766-2800
William M. Lowe, Jr.
Executive Vice President and Chief Financial Officer
[email protected]
864-963-6484
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
Web site: http://www.kemet.com/
http://www.kemet.com/IR
