Exhibit 99.2
Kemet Corporation
Second Quarter Conference Call
October 29, 2008
KEMET Corporation
Second Quarter Ended
September 30, 2008
Conference Call
Kemet Corporation
Second Quarter Conference Call
October 29, 2008
Cautionary Statement
Certain statements included herein contain forward-looking statements within the meaning of federal security 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, availability, sourcing and pricing of raw materials, pressures on sales prices and Income tax expense 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 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.
Kemet Corporation
Second Quarter Conference Call
October 29, 2008
Income Statement Highlights
(Amounts in millions)
| | Non-GAAP | | GAAP | |
| | For the Quarters Ended | | For the Quarters Ended | |
| | September 2008 | | June 2008 | | September 2007 | | September 2008 | | June 2008 | | September 2007 | |
Net sales | | $ | 234.8 | | $ | 242.8 | | $ | 197.1 | | $ | 234.8 | | $ | 242.8 | | $ | 197.1 | |
Gross margin | | 28.0 | | 27.6 | | 37.7 | | 28.0 | | 17.3 | | 37.7 | |
R&D expense | | 7.0 | | 10.1 | | 8.2 | | 7.0 | | 10.1 | | 8.2 | |
Selling, general and administrative expense | | 22.0 | | 25.9 | | 19.6 | | 23.8 | | 28.2 | | 20.2 | |
Interest expense | | 5.5 | | 5.4 | | 2.1 | | 5.5 | | 5.4 | | 2.1 | |
Depreciation and amortization expense | | 15.4 | | 16.0 | | 13.9 | | 15.4 | | 16.0 | | 13.9 | |
Net income (loss) | | (3.6 | ) | (17.5 | ) | 10.4 | | (83.0 | ) | (187.3 | ) | 4.0 | |
| | | | | | | | | | | | | | | | | | | |
Kemet Corporation
Second Quarter Conference Call
October 29, 2008
Second Quarter FY2009 GAAP to Non-GAAP Reconciliation
(Amounts in millions)
| | GAAP | | Special Items | | Non-GAAP | |
| | | | | | | |
Sales | | $ | 234.8 | | $ | — | | $ | 234.8 | |
Cost of sales | | 206.8 | | — | | 206.8 | |
Gross margin | | 28.0 | | — | | 28.0 | |
S G & A expense | | 23.8 | | (1.8 | )(A) | 22.0 | |
R & D expense | | 7.0 | | — | | 7.0 | |
Restructuring charges | | 18.2 | | (18.2 | ) | — | |
Impairment charges | | 86.9 | | (86.9 | ) | — | |
Gain on sale of asset | | (28.6 | ) | 28.6 | | — | |
Operating income (loss) | | (79.3 | ) | 78.3 | | (1.0 | ) |
Net interest expense | | 5.3 | | — | | 5.3 | |
Other (income) expense, net | | (5.0 | ) | — | | (5.0 | ) |
Loss on early retirement of debt | | 2.2 | | (2.2 | ) | — | |
Income (loss) before tax | | (81.8 | ) | 80.5 | | (1.3 | ) |
Income tax expense | | 1.2 | | 1.1 | | 2.3 | |
Net income | | (83.0 | ) | 79.4 | | (3.6 | ) |
| | | | | | | | | | |
Notes:
(A) - $1.8 million related to F&E Business Group integration costs
Kemet Corporation
Second Quarter Conference Call
October 29, 2008
Kemet Corporation
Second Quarter Conference Call
October 29, 2008
Adjusted EBITDA Reconciliation to Pre-Tax Income
(Amounts in millions)
| | June 2007 | | Sept. 2007 | | Dec. 2007 | | March 2008 | | June 2008 | | Sept. 2008 | |
Pre-tax loss (loss) from continuing operations | | $ | 5.7 | | $ | 4.1 | | $ | (8.2 | ) | $ | (14.1 | ) | $ | (187.3 | ) | $ | (81.8 | ) |
Interest expense net | | 0.7 | | 0.7 | | 2.3 | | 4.3 | | 5.4 | | 5.3 | |
Depreciation and amortization expense | | 12.1 | | 13.9 | | 12.1 | | 16.5 | | 16.0 | | 15.1 | |
Gain on sale of assets | | — | | — | | — | | — | | — | | (28.7 | ) |
Goodwill impairment Charge | | — | | — | | — | | — | | 88.6 | | 85.7 | |
Write down of long-lived assets | | — | | — | | 2.2 | | 2.0 | | 63.9 | | 1.2 | |
Integration expenses | | 0.1 | | 0.6 | | 1.8 | | 1.8 | | 2.3 | | 1.8 | |
Inventory adjustments | | — | | — | | — | | — | | 10.3 | | — | |
Acquisition related write off | | — | | — | | — | | 0.9 | | — | | — | |
Loss on early retirement of debt | | — | | — | | — | | — | | — | | 2.2 | |
Restructuring charges | | 2.5 | | 6.0 | | 2.9 | | 14.0 | | 6.8 | | 18.2 | |
Adjusted EBITDA | | $ | 21.1 | | $ | 25.3 | | $ | 13.1 | | $ | 25.4 | | $ | 6.0 | | $ | 19.0 | |
Kemet Corporation
Second Quarter Conference Call
October 29, 2008
Balance Sheet Highlights
(Amounts in millions, except percentages and days in receivables/payables)
| | | | September | | | |
| | September | | Exchange Rate | | June | |
| | 2008 | | Impact | | 2008 | |
Cash | | $ | 36.1 | | | | $ | 35.5 | |
| | | | | | | |
Restricted cash | | $ | 6.3 | | | | $ | 6.9 | |
| | | | | | | |
Capital expeditures | | $ | 11.8 | | | | $ | 11.2 | |
| | | | | | | |
Short-Term Debt | | $ | 151.9 | | 15.3 | | $ | 208.7 | |
Long-Term Debt | | 199.4 | | 0.9 | | 185.5 | |
Total Debt | | $ | 351.3 | | | | $ | 394.2 | |
| | | | | | | |
Equity | | $ | 259.2 | | | | $ | 355.9 | |
| | | | | | | |
Net Working Capital (1) | | $ | 280.2 | | | | $ | 305.3 | |
| | | | | | | |
Days in receivable | | 73.0 | | | | 73.0 | |
Days in Payables | | 48.0 | | | | 56.0 | |
(1) Includes only Accounts Receivable, Inventories and Accounts Payable
Kemet Corporation
Second Quarter Conference Call
October 29, 2008
First Quarter FY2009 GAAP to Non-GAAP Reconciliation
(Amounts in millions)
| | GAAP | | Special Items | | Non-GAAP | |
| | | | | | | |
Sales | | $ | 242.8 | | $ | — | | $ | 242.8 | |
Cost of sales | | 225.5 | | (10.3 | )(A) | 215.2 | |
Gross margin | | 17.3 | | 10.3 | | 27.6 | |
S G & A expense | | 28.2 | | (2.3 | )(B) | 25.9 | |
R & D expense | | 10.1 | | — | | 10.1 | |
Impairment charges | | 152.6 | | (152.6 | ) | — | |
Restructuring charges | | 6.8 | | (6.8 | ) | — | |
Operating income (loss) | | (180.4 | ) | 172.0 | | (8.4 | ) |
Net interest expense | | 5.4 | | — | | 5.4 | |
Other (income) expense, net | | 1.6 | | — | | 1.6 | |
Income (loss) before tax | | (187.4 | ) | 172.0 | | (15.4 | ) |
Income tax expense | | (0.1 | ) | 2.2 | | 2.1 | |
Net income | | $ | (187.3 | ) | $ | 169.8 | | $ | (17.5 | ) |
Notes:
(A) - $10.3 million relates to a $7.0 million LCM reserve and certain other inventory related adjustments
(B) - $2.3 million relates to F&E business segment integration costs.
Kemet Corporation
Second Quarter Conference Call
October 29, 2008
Second Quarter FY2008 GAAP to Non-GAAP Reconciliation
(Amounts in millions)
| | GAAP | | Special Items | | Non-GAAP | |
| | | | | | | |
Sales | | $ | 197.1 | | $ | — | | $ | 197.1 | |
Cost of sales | | 159.4 | | — | | 159.4 | |
Gross margin | | 37.7 | | — | | 37.7 | |
S G & A expense | | 20.2 | | (0.6 | )(A) | 19.6 | |
R & D expense | | 8.2 | | — | | 8.2 | |
Restructuring charges | | 6.0 | | (6.0 | ) | — | |
Operating income (loss) | | 3.3 | | 6.6 | | 9.9 | |
Net interest expense | | 0.7 | | — | | 0.7 | |
Other (income) expense, net | | (1.1 | ) | — | | (1.1 | ) |
Income (loss) before tax | | 3.7 | | 6.6 | | 10.3 | |
Income tax expense | | (0.3 | ) | 0.2 | | (0.1 | ) |
Net income | | $ | 4.0 | | $ | 6.4 | | $ | 10.4 | |
Notes:
(A) - $0.6 million relates to Evox Rifa business unit integration costs
Kemet Corporation
Second Quarter Conference Call
October 29, 2008
Non-GAAP
Financial Measures
Non-GAAP Financial Measures
Included in this presentation are certain non-GAAP financial measures designed to complement the financial information presented in accordance with generally accepted accounting principles in the United States of American because management believes such measures are useful to investors.
Adjusted EBITDA
Adjusted EBITDA represents pre-tax income before interest expense, and depreciation and amortization expense, adjusted to exclude restructuring charges, impairment write-downs, acquisition related write offs, inventory adjustments, gain on the sale of certain assets, loss on the early retirement of debt and integration expenses. 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 in this presentation. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Adjusted EBITDA is not a measurement of our financial performance under GAAP and should not be considered as an alternative to net income, operating income or any other performance measures derived in accordance with GAAP or as an alternative to cash flow from operating activities as a measure of our liquidity.
Kemet Corporation
Second Quarter Conference Call
October 29, 2008
Non-GAAP
Financial Measures - Continued
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 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 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, including those under the notes. You should compensate for these limitations by replying primarily on our GAAP results and using Adjusted EBITDA only supplementally.
