Exhibit 99.1
FOR IMMEDIATE RELEASE
Contact: | William M. Lowe, Jr. | Dean W. Dimke |
| Executive Vice President and
Chief Financial Officer | Director of Corporate and
Investor Communications |
| billlowe@KEMET.com | deandimke@KEMET.com |
| 864-963-6484 | 954-766-2800 |
KEMET Reports Second Quarter Results of Fiscal Year 2009
Quarter Highlights:
· Sales $235M compared to $243M for the previous quarter
· Non-GAAP Net Loss $(0.04) compared to $(0.22) for the previous quarter
· GAAP net loss per share was $(1.03) compared to $(2.33) for the previous quarter
· SG&A costs decline $4.4M versus previous quarter
· Retired $40M Senior Note and closed new mid-term loan of Euro 60M
Greenville, South Carolina (October 29, 2008) - KEMET Corporation (NYSE:KEM) today reported preliminary results for the second quarter ended September 30, 2008. The non-GAAP net loss, excluding special charges, was $3.6 million or $(0.04) per share for the current quarter compared to net loss of $17.5 million or $(0.22) for the previous quarter ended June 30, 2008, and a net income of $10.4 million, or $0.12 per share for the comparable quarter last fiscal year. On a U.S. GAAP basis the net loss was $83.0 million, or $(1.03) per share for the current quarter compared to a net loss of $187.3 million or $2.33 per share for the previous quarter ended June 30, 2008, and a net income of $4.0 million for the same quarter last year or $0.05 per share. Net sales for the quarter ended September 30, 2008, were $234.8 million, which is a 3.3% decrease from the previous quarter ended June 30, 2008, and a 19.1% increase over the same quarter last year, inclusive of recent acquisitions. Net sales for the six month period ended September 30, 2008 were $477.7 million which is a 25.6% increase compared to the same period last year.
The current quarter includes a $85.7 million pre-tax goodwill impairment charge, a $18.2 million restructuring charge related to a global headcount reduction plan, $1.8 million in integration expenses related to recent acquisitions, $2.2 million of losses related to the early retirement of debt, a $1.2 million write down of a long-lived asset and a $28.6 million gain on the sale of assets.
“Our second quarter saw many positive actions taken that demonstrate our resolve in strengthening our balance sheet and eliminating the financial issues that were a concern to our shareholders, and our continued effort to improve the operational performance of the company,” stated Per Loof, KEMET’s Chief Executive Officer. “We have prepaid the $40 million remaining on our Senior Notes in September, and in October we closed on a mid-term facility that eliminated our short-term debt that was coming due this December. Additionally, savings in our cost structure as a result of the rationalization plan we announced in July are clearly having an impact on our financial results. These savings will increase in our third and fourth quarters as the savings will be generated in all three months of the quarters going forward. It is clear to us all that the global economic environment is volatile and many lack confidence in the short term. However we look at our business with a long term, strategic perspective, and we do have a great deal of confidence in the strategic direction we have established and are currently implementing for KEMET,” 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 the gain on sales of certain assets. 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.
The following table provides reconciliation from GAAP net income (loss) to Non-GAAP net income (loss):
GAAP to Non-GAAP Reconciliation | | | | | |
(unaudited) | | Quarters Ended | | Six Months Ended | |
(in millions, except per share data) | | Sept. 2008 | | June 2008 | | Sept. 2007 | | Sept. 2008 | | Sept. 2007 | |
| | (In Millions, Except Per Share Data) | |
Including special items (GAAP) | | | | | | | | | | | |
Net sales | | $ | 234.8 | | $ | 242.8 | | $ | 197.1 | | $ | 477.7 | | $ | 380.2 | |
| | | | | | | | | | | |
Net income (loss) | | $ | (83.0 | ) | $ | (187.3 | ) | $ | 4.0 | | $ | (270.3 | ) | $ | 11.0 | |
Net income (loss) per basic and diluted share | | (1.03 | ) | (2.33 | ) | 0.05 | | (3.36 | ) | 0.13 | |
| | | | | | | | | | | |
Excluding special items (Non-GAAP) | | | | | | | | | | | |
| | | | | | | | | | | |
Net income (loss) | | $ | (83.0 | ) | $ | (187.3 | ) | $ | 4.0 | | $ | (270.3 | ) | $ | 11.0 | |
Special items (after tax): | | | | | | | | | | | |
Goodwill impairment charges | | 85.7 | | 88.6 | | — | | 174.3 | | — | |
Write down of long-lived assets | | 1.0 | | 63.9 | | — | | 64.9 | | — | |
Gain on sale of assets | | (28.6 | ) | — | | — | | (28.6 | ) | — | |
Restructuring | | 17.4 | | 6.5 | | 6.0 | | 23.9 | | 8.3 | |
Inventory adjustments | | — | | 8.6 | | — | | 8.6 | | — | |
Integration | | 1.7 | | 2.2 | | 0.4 | | 3.9 | | 0.6 | |
Loss on early retirement of debt | | 2.2 | | — | | — | | 2.2 | | — | |
Adjusted net income (loss) (excluding special items) | | $ | (3.6 | ) | $ | (17.5 | ) | $ | 10.4 | | $ | (21.1 | ) | $ | 19.9 | |
Adjusted net income (loss) per basic and diluted share (excluding special items) | | $ | (0.04 | ) | $ | (0.22 | ) | $ | 0.12 | | $ | (0.26 | ) | $ | 0.24 | |
Due to the decline in the Company’s stock price during the third quarter of calendar 2008, a goodwill impairment test was performed as of September 30, 2008. The Company took into consideration both the market approach and the income approach to determine the fair value of the Company and its reporting units. As a result of this review, the Company recorded an $85.7 million pre-tax impairment charge which eliminated all goodwill. The goodwill impairment charge to earnings reduces the financial results; however, it is non-cash in nature and does not affect the Company’s cash flows.
The impairment was charged to the Tantalum Business Group, and the Film and Electrolytic Business Group in the amount of $24.4 million and $61.3 million, respectively. The amount of the impairment should be considered an estimate until the Company has completed its required filing of Form 10-Q for the quarter.
KEMET’s common stock is listed on the New York Stock Exchange under the symbol 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.
QUIET PERIOD
Beginning January 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.
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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, availability, sourcing and pricing of raw materials, pressures on sales prices and volumes due to competition and economic conditions, reliance on and financial viability of significant customers, operating performance of joint ventures, alliances and other equity investments, technological advancements, employee relations, changes in construction spending, capital expenditures and long-term investments (including those related to unforeseen acquisition opportunities), continued availability of financial resources through financing arrangements and operations, outcomes of pending or threatened legal proceedings, negotiation of new or modifications of existing contracts for asset management and for property and equipment construction and acquisition, regulations governing tax laws, other governmental and authoritative bodies’ policies and legislation, and proceeds received from the sale of assets held for disposal. In addition to these representative factors, forward-looking statements could be impacted by general domestic and international economic and industry conditions in the markets where the Company competes, such as changes in currency exchange rates, interest and inflation rates, recession and other economic and political factors over which the Company has no control. 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.
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KEMET CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands Except Per Share Data)
Unaudited
| | Fiscal Quarters Ended | | Six Months Ended | |
| | September 30, | | September 30, | |
| | 2008 | | 2007 | | 2008 | | 2007 | |
| | | | | | | | | |
Summary of Operations: | | | | | | | | | |
Net sales | | $ | 234,819 | | $ | 197,129 | | $ | 477,663 | | $ | 380,248 | |
Cost of sales | | 206,822 | | 159,397 | | 432,411 | | 302,939 | |
Selling, general and administrative expenses | | 23,799 | | 20,212 | | 52,018 | | 42,019 | |
Research and development | | 7,048 | | 8,173 | | 17,144 | | 17,240 | |
Restructuring charges | | 18,210 | | 5,985 | | 25,007 | | 8,534 | |
Goodwill impairment | | 85,680 | | — | | 174,327 | | — | |
Writedown of long-lived assets | | 1,227 | | — | | 65,155 | | — | |
Gain on sale of assets | | (28,654 | ) | — | | (28,654 | ) | — | |
| | | | | | | | | |
Operating income (loss) | | (79,313 | ) | 3,362 | | (259,745 | ) | 9,516 | |
| | | | | | | | | |
Interest income | | (178 | ) | (1,356 | ) | (416 | ) | (3,217 | ) |
Interest expense | | 5,501 | | 2,085 | | 11,147 | | 4,685 | |
Other (income) expense, net | | (5,067 | ) | (1,110 | ) | (3,535 | ) | (1,417 | ) |
Loss on early retirement of debt | | 2,212 | | — | | 2,212 | | — | |
Income (loss) before income taxes | | (81,781 | ) | 3,743 | | (269,153 | ) | 9,465 | |
Income tax expense (benefit) | | 1,205 | | (267 | ) | 1,125 | | (1,577 | ) |
Net income (loss) | | $ | (82,986 | ) | $ | 4,010 | | $ | (270,278 | ) | $ | 11,042 | |
| | | | | | | | | |
Net Income (Loss) Per Share Data: | | | | | | | | | |
Net income (loss) per share: | | | | | | | | | |
Basic and diluted | | $ | (1.03 | ) | $ | 0.05 | | $ | (3.36 | ) | $ | 0.13 | |
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KEMET CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
Unaudited
| | September 30, 2008 | | March 31, 2008 | |
ASSETS | | | | | |
| | | | | |
Cash and cash equivalents | | $ | 36,095 | | $ | 81,383 | |
Accounts receivable, net | | 181,052 | | 197,258 | |
Inventories | | 210,965 | | 243,714 | |
Prepaid expenses and other current assets | | 15,938 | | 15,692 | |
Deferred income taxes | | 4,926 | | 4,017 | |
Total current assets | | 448,976 | | 542,064 | |
Property, plant and equipment, net | | 391,832 | | 475,912 | |
Assets held for sale | | 3,484 | | 4,638 | |
Goodwill | | — | | 182,273 | |
Intangible assets, net | | 27,818 | | 35,786 | |
Other assets | | 10,508 | | 11,227 | |
| | | | | |
Total assets | | $ | 882,618 | | $ | 1,251,900 | |
| | | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | |
| | | | | |
Current portion of long-term debt | | $ | 151,883 | | $ | 108,387 | |
Accounts payable | | 111,861 | | 131,468 | |
Accrued expenses | | 71,936 | | 59,626 | |
Income taxes payable | | 68 | | 3,524 | |
Total current liabilities | | 335,748 | | 303,005 | |
Long-term debt | | 199,381 | | 304,294 | |
Other non-current obligations | | 69,607 | | 80,130 | |
Deferred income taxes | | 18,690 | | 21,679 | |
| | | | | |
Common stock | | 883 | | 882 | |
Additional paid-in capital | | 323,522 | | 323,359 | |
Retained earnings (deficit) | | (56,099 | ) | 214,180 | |
Accumulated other comprehensive income | | 51,198 | | 65,565 | |
Treasury stock, at cost | | (60,312 | ) | (61,194 | ) |
Total stockholders’ equity | | 259,192 | | 542,792 | |
| | | | | |
Total liabilities and stockholders’ equity | | $ | 882,618 | | $ | 1,251,900 | |
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