1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of
The Securities Exchange Act of 1934
Date of Report (date of earliest event reported): April 24, 2003
KEMET Corporation
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(Exact name of registrant as specified in its charter)
Delaware 0-20289 57-0923789
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(State or other (Commission File Number) (IRS Employer
jurisdiction) Identification No.)
2835 KEMET Way, Simpsonville, SC 29681
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(Address of principal executive offices) (Zip Code)
Registrants telephone number, including area code: (864) 963-6300
<PAGE 2
KEMET Reports Financial Results for March 2003 Quarter
Greenville, South Carolina (April 21, 2003) - KEMET Corporation (NYSE:KEM)
today reported financial results for the fiscal quarter and year ended
March 31, 2003. Net loss in the quarter, prior to special pre-tax charges
of $19.6 million, was $(3.6) million, or $(0.04) per diluted share, and
after the special pre-tax charges, was $(16.5) million, or $(0.19) per
diluted share. Net loss in the fiscal year, prior to special pre-tax charges
of $79.2 million, was $(3.7) million, or $(0.04) per diluted share, and after
the special pre-tax charges, was $(56.0) million, or $(0.65) per diluted share.
Comparisons to prior periods are as follows:
<Table>
<Caption>
Quarter Ended
Year Ended
Mar 2003
Dec 2002
Mar 2002
Mar 2003
Mar 2002
(In Millions, Except Per Share Data)
Net Sales
$ 106.5
$ 103.7
$ 117.9
$ 447.3
$ 508.6
Before special charges (Non-GAAP)
Net earnings (loss)
(3.6)
(3.6)
1.6
(3.7)
16.5
Net earnings (loss) per diluted
share
(0.04)
(0.04)
0.02
(0.04)
0.19
Special after-tax charges
12.9
28.1
16.0
52.3
43.8
Special after-tax charges per
diluted share
0.15
0.33
0.19
0.61
0.51
After special charges (GAAP)
Net earnings (loss)
(16.5)
(31.7)
(14.4)
(56.0)
(27.3)
Net earnings (loss) per diluted
share
$ (0.19)
$ (0.37)
$ (0.17)
$ (0.65)
$(0.32)
</Table>
Management believes the non-GAAP measures provide additional information to
investors related to ongoing operations. Special charges reflect employee
termination costs, asset impairment charges, losses on purchase commitments,
inventory charges and other restructuring costs.
"Unit shipments in the March quarter were up 7% over the December quarter,
while average selling prices declined 5%," stated Dr. Jeffrey Graves,
President and CEO. "KEMET continues to be impacted by the sluggishness
in the electronics industry, in general, and in corporate information
technology and telecommunication equipment sectors, in particular. While
the uncertainty of the ongoing war on terrorism is impacting the global
economy, significant advances in information and communications technologies
continue at a rapid pace. "I'm excited about my new role at KEMET and the
depth and expertise of our team. As KEMET always has done in the past, we
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will continue cost reduction efforts at the bottom of this cycle, while also
maintaining our new product development initiatives and global customer service
focus in order to enhance our leadership position when the market does turn
positive again.
?The strategic plan that the KEMET team has developed over
the past several months has three foundations necessary for us to realize
our vision to be the market leader in the global capacitor industry:
* First, we must continue to excel in the execution of our easy-to-buy-from
technology, quality, delivery, and service processes to enhance our position
as the leader in the capacitor industry.
* Second, we must accelerate the pace of innovations, to broaden our product
portfolio and increase the mix of innovative components that meet the needs
of our customers? leading edge products.
* Finally, we must intensify our global mindset, holding firm to core KEMET
values worldwide, while having local KEMET employees meet local customer
preferences, as evidenced by our current expansion in Asia.?
As of March 31, 2003, KEMET had $263.6 million in cash and short-term
investments, $100.0 million in long-term debt, and $793.3 million in
stockholders? equity. KEMET's common stock is listed on The New York Stock
Exchange under the symbol KEM. At the Investor Relations portion of the
company?s web site at http://www.KEMET.com/IR, users can subscribe to KEMET
news releases and can find additional company information, including updated
industry statistics charts, in the company's PowerPoint investor presentation.
KEMET will hold a conference call at 8:30 am ET Tuesday, April 22, 2003, to
discuss the earnings release and to provide guidance for future quarters. To
access the call, participants should dial 1-800-540-0559 and reference "KEMET"
as the conference call ID. An archived replay of the conference call will be
available through midnight on May 20, 2003, by calling 1-800-283-4783.
BUSINESS OUTLOOK
The following statements are based on current expectations. These statements
are forward-looking, and actual results may differ materially. Current negative
trends in global economic conditions make it particularly difficult at present
to predict product demand and other related matters.
* Sales of surface-mount capacitors were 79% and of leaded parts were 21% of
total sales for the March 2003 quarter.
* By region, 49% percent of total sales for the March 2003 quarter were to
customers in North America, 27% were to Asia, 22% were to Europe, and 2%
were to the rest of the world.
* On January 6, 2003, KEMET announced additional workforce reductions through
an early retirement program and reductions in force. During the March 2003
quarter, KEMET recognized special pre-tax charges of approximately $19.6
million related to these cost savings initiatives, with total annual cost
savings anticipated to be approximately $16 million. The details of the
special charges by period are as follows:
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<Table>
<Caption>
Quarter Ended
Year Ended
Mar 2003
Dec 2002
Mar 2002
Mar 2003
Mar 2002
(In Millions)
Employee termination costs
$ 18.0
$ -
$ 2.9
$ 27.1
$ 12.8
Asset impairment charges
-
-
21.5
4.6
32.9
Loss on commitments to
purchase inventory
1.6
42.6
-
44.2
6.3
Inventory charges
-
-
3.7
1.5
10.0
Other restructuring
-
-
-
1.8
4.5
Special pre-tax charges
$ 19.6
$ 42.6
$ 28.1
$ 79.2
$ 66.5
Special after-tax charges
$ 12.9
$ 28.1
$ 16.0
$ 52.3
$ 43.8
</Table>
* Average selling prices for the March 2003 quarter decreased approximately 5%
from average selling prices for the December 2002 quarter. As industry unit
volumes increase as end demand improves, the decline in average selling
prices should moderate to more normal annual declines of 6% to 8% per year.
* For fiscal 2003, KEMET anticipates maintaining our investments in key
customer relationships through our direct sales and customer service
professionals, as well as our investments in research and development, to
maintain our competitive position in the capacitor industry.
<Table>
<Caption>
Fiscal Year Ended *
Fiscal Quarter Ended *
1999
2000
2001
2002
2003
Jun 2002
Sep 2002
Dec 2002
Mar 2003
(In Millions)
SG&A
$52.7
$55.2
$62.3
$54.4
$54.4
$13.9
$13.3
$13.8
$13.4
R&D
$22.1
$24.9
$27.2
$26.3
$25.3
$ 6.8
$ 6.9
$ 5.6
$ 5.9
</Table>
* In the June 2002 quarter, the Income Statement presentation of SG&A and
R&D was changed to include depreciation and amortization expense. Amounts
shown above reflect these changes.
* Capital expenditures for the March 2003 quarter were $5 million. "Production
capacity" is equipment that can be added incrementally during the year as
market demand dictates. "Facilities and cost reduction" are long-term
investments that maintain KEMET's ability to be cost competitive and to add
space for new equipment lines as needed to respond to market demands.
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<Table>
<Caption>
Fiscal Year Ended
Fiscal Quarter Ended
1999
2000
2001
2002
2003
Jun 2002
Sep 2002
Dec 2002
Mar 2003
(In Millions)
Production capacity
$ 35
$ 61
$135
$ 47
$ 18
$ 5
$ 5
$ 4
$ 4
Facilities & cost reduction
24
21
76
31
4
-
1
2
1
$ 59
$ 82
$211
$ 78
$ 22
$ 5
$ 6
$ 6
$ 5
</Table>
* During the March 2003 quarter, inventories decreased $26 million to $184
million from $210 million at December 31, 2002. Raw materials and supplies
decreased $11 million in the March 2003 quarter, and finished goods and
work in process decreased $15 million.
<Table>
<Caption>
Mar 1999
Mar 2000
Mar 2001
Mar 2002
Jun 2002
Sep 2002
Dec 2002
Mar 2003
(In Millions)
Raw materials and supplies
$ 45
$ 53
$ 115
$ 118
$ 108
$ 97
$ 102
$ 91
Work in process and finished goods
81
78
149
141
133
120
108
93
$ 126
$ 131
$ 264
$ 259
$ 241
$ 217
$ 210
$ 184
</Table>
* Cash and short-term investments during the March 2003 quarter decreased $19
million to $264 million from $283 million at December 31, 2002. Cash
primarily decreased due to a pension contribution of approximately $25
million and capital expenditures of $5 million.
* The Board of Directors has authorized the purchase of up to 8.0 million
shares of common stock on the open market. As of March 31, 2003, the net
results of the company?s stock repurchase program were purchases of a total
of 2,100,000 shares at a weighted average cost of $18.34 per share. The
company has remaining outstanding put option obligations for approximately
300,000 shares under the program at a net put price of $8.75 per share. The
amount and timing of purchases will depend on market conditions and other
factors.
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QUIET PERIOD
Beginning June 1, 2003, KEMET will observe a Quiet Period during which the
Business Outlook as provided in this news release and the company?s annual
report on Form 10-K will no longer constitute the company?s current
expectations. During the Quiet Period, the Business Outlook in these documents
should be considered to be historical, applying prior to the Quiet Period only
and not subject to update by the company. During the Quiet Period, KEMET
Electronics Corp representative will not comment concerning the Business
Outlook or KEMET?s financial results or expectations. The Quiet Period will
extend until the day when KEMET?s next quarterly earnings release is published.
This release contains certain forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended. We intend that
these forward-looking statements be subject to the safe harbor created by that
provision. These forward-looking statements involve risks and uncertainties
and include, but are not limited to, statements regarding future events and our
plans, goals, and objectives. Our actual results may differ materially from
these statements. These risks, trends, and uncertainties, which in some
instances are beyond our control, include: risks associated with the cyclical
nature of the electronics industry, the requirement to continue to reduce the
cost of our products, the competitiveness of our industry, an increase in the
cost of our raw materials, the location of several of our plants in Mexico, and
the possible loss of key employees. Although we believe that the assumptions
underlying the forward-looking statements are reasonable, any of the
assumptions could prove to be inaccurate. Therefore, we can give no assurance
that the results contemplated in these forward-looking statements will be
realized. The inclusion of this forward-looking information should not be
regarded as a representation by our company or any person that the future
events, plans, or expectations contemplated by our company will be achieved.
Furthermore, past performance in operations and share price is not necessariy
predictive of future performance.
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<Table>
<Caption>
UNAUDITED FINANCIAL HIGHLIGHTS
(Dollars in Thousands Except Per Share Data)
Three months ended
Twelve months ended
March 31,
March 31,
2003
2002
2003
2002
Income Statement Data:
Net sales
$ 106,504
$ 117,902
$ 447,332
$ 508,555
Cost of goods sold
95,644
100,215
388,778
412,510
Selling, general and administrative expenses
13,406
12,961
54,390
54,420
Research and development
5,938
6,503
25,268
26,334
Restructuring and impairment charges
19,615
24,351
75,898
55,656
Operating income (loss)
(28,099)
(26,128)
(97,002)
(40,365)
Interest expense
1,365
1,360
4,599
6,736
Interest income
(767)
(1,418)
(3,818)
(9,809)
Other expense (income)
(578)
(562)
(9,889)
3,438
Income tax expense (benefit)
(11,582)
(11,097)
(31,906)
(13,441)
Net earnings (loss)
$ (16,537)
$ (14,411)
$ (55,988)
$ (27,289)
Earnings Per Share Data:
Net earnings (loss) per share:
Basic
$ (0.19)
$ (0.17)
$ (0.65)
$ (0.32)
Diluted
$ (0.19)
$ (0.17)
$ (0.65)
$ (0.32)
Weigh-average shares outstanding
Basic
86,230,198
85,873,025
86,167,563
85,773,763
Diluted
86,230,198
85,873,025
86,167,563
85,773,763
</Table>
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<Table>
<Caption>
KEMET CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
ASSETS
March 31, 2003
December 31, 2002
Cash and cash equivalents
$ 263,585
$ 282,865
Short-term investments
-
-
Accounts receivable, net
45,418
41,286
Inventories
184,074
209,890
Income tax refund receivable
24,640
-
Prepaid expenses and other current assets
6,120
4,110
Deferred income taxes
23,947
28,595
Total current assets
547,784
566,746
Property, plant and equipment, net
485,166
497,851
Intangible assets, net
41,560
41,799
Other assets
26,500
23,861
Total assets
$ 1,101,010
$ 1,130,257
LIABILITIES AND STOCKHOLDERS? EQUITY
Accounts payable, trade
$ 49,171
$ 52,192
Accrued expenses
35,078
34,943
Income taxes payable
-
758
Total current liabilities
84,249
87,893
Long-term debt
100,000
100,000
Other non-current obligation
57,617
74,016
Deferred income taxes
65,869
58,811
Total liabilities
307,735
320,720
Common Stock
879
878
Additional paid-in capital
318,546
318,515
Retained earnings
506,913
523,451
Accumulated other comprehensive income
(2,995)
(3,047)
Treasury stock, at cost
(30,068)
(30,260)
Total stockholders? equity
793,275
809,537
Total liabilities and stockholders? equity
$ 1,101,010
$ 1,130,257
</Table>