1
Greenville, South Carolina (July 21, 2003) - KEMET Corporation (NYSE:KEM) today
reported financial results for the fiscal quarter ended June 30, 2003. Net
sales for the quarter were $105.4 million and net loss in the quarter was
$(3.6) million, or $(0.04) per diluted share. Comparisons to prior periods are
as follows:
<Table>
<Caption>
Quarter Ended
- ---------------
Jun 2003
Mar 2003
Jun 2002
- --------
- --------
- --------
(In Millions, Except Per Share Data)
Net Sales
$ 105.4
$ 106.5
$ 124.0
Net earnings(loss)
(3.6)
(16.5)
3.4
Net earnings(loss) per diluted share
$ (0.04)
$ (0.19)
$ 0.04
</Table>
"A key component of our strategy in recent quarters has been enhancing our
presence in Asia," stated Dr. Jeffrey Graves, President and CEO. "KEMET's Asian
sales in the June quarter grew by over 40% in units and over 15% in revenue
relative to the March 2003 quarter. We are pleased with the response of our
customers to our increased emphasis on globalization activities, including
our recent announcement to move manufacturing facilities and local support
nearer our customers in low-cost regions in the world.
"Overall, KEMET continues to be impacted by the sluggishness in the electronics
industry, particularly in the corporate information technology and
telecommunication equipment sectors. Compared to the March quarter, net revenue
in the June quarter was down slightly, while total unit shipments were up
approximately 13% and average selling prices declined approximately 4%. The
June quarter sales growth from unit shipment increases, which were primarily
smaller, high-volume products, essentially offset the reduction in revenue
resulting from the decline in average selling prices.
"Another key component of our strategy is accelerating the pace of
innovations. Recently we announced KEMET's first acquisition of non-medical
high-voltage and high-temperature ceramic capacitor and EMI filter product
lines from Wilson Greatbatch Technologies. At our annual meeting, we will
announce the organization of the KEMET Innovation Center. I believe these are
important steps that will expand KEMET's relationships with the world's most
successful electronics companies."
As of June 30, 2003, KEMET had $296.7 million in cash and short-term
investments, $100.0 million in long-term debt, and $792.1 million in
stockholders' equity.
2
The company will hold a conference call at 8:30 am ET Tuesday,
July 22, 2003, to discuss the earnings release. The call will last
approximately one hour, and after an initial presentation, questions will be
taken as time permits. To access the call, participants in the United States
should dial 1-800-416-8033, and participants outside the United States should
dial 1-706-643-0979. Participants should reference "KEMET Corporation" and the
Conference ID #: 1565749. An archived replay of the conference call will be
available through midnight on August 21, 2003, by calling 1-800-642-1687
inside the United States and 1-706-645-9291 internationally, and referencing
the Conference ID #.
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.
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 76%, and sales of leaded parts were
24% of total sales for the June 2003 quarter.
* By region, 47% percent of total sales for the June 2003 quarter were to
customers in North America, 30% were to Asia, 21% were to Europe, and 2%
were to the rest of the world.
* On July 2, 2003, KEMET announced the reorganization of its operations around
the world over the next two years. KEMET estimates it will incur special
charges of approximately $35 million over the period of the reorganization
related to movement of manufacturing operations. When the reorganization is
complete, the company estimates this will yield an approximate one-year
payback based on fiscal 2004 unit volumes, and a $50-60 million savings
with volume recovery by fiscal 2006 if unit growth continues as it has in
recent quarters. In addition, there will be a special charge of
approximately $15 million reflecting the write-down of US manufacturing
facilities to their residual value over the next seven quarters. The timing
of the special charges is dependent on the timing of operational decisions,
some of which have not been finalized yet, and on operational activities
yet to occur. Below is the company's best estimate of the timing of the
special charges, the actual timing of which may vary.
3
Quarter Ended
- --------------
Sep-03
Dec-03
Mar-04
Jun-04
Sep-04
Dec-04
Mar-05
Total
- ------
- ------
- ------
- ------
- ------
- ------
- ------
- -----
(In Millions)
Manufacturing relocation and employee
Termination costs
$ 3
$ 5
$ 7
$ 6
$ 6
$ 4
$ 4
$ 35
Facilities write-down to residual value
2
2
2
2
2
2
3
15
Special pre-tax charges
$ 5
$ 7
$ 9
$ 8
$ 8
$ 6
$ 7
$ 50
Special after-tax changes
$ 3
$ 5
$ 6
$ 5
$ 5
$ 4
$ 5
$ 33
</Table>
* Average selling prices for the June 2003 quarter decreased approximately 4%
from average selling prices for the March 2003 quarter. As industry unit
volumes increase due to improving end demand, the decline in average selling
prices should moderate to more normal annual declines of 6% to 8% per year.
* For fiscal 2004, 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.
Fiscal Year Ended
Fiscal Quarter Ended
- -------------------
- ---------------------
1999
2000
2001
2002
2003
Sep 2002
Dec 2002
Mar 2003
Jun 2003
- ----
- ----
- ----
- ----
- ----
- --------
- --------
- --------
- --------
(In Millions)
SG&A
$52.7
$55.2
$62.3
$54.4
$54.4
$13.3
$13.8
$13.4
$13.5
R&D
$22.1
$24.9
$27.2
$26.3
$25.3
$ 6.9
$ 5.6
$ 5.9
$ 6.0
</Table>
4
* Capital expenditures for the June 2003 quarter were $3 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.
Fiscal Year Ended March
Fiscal Quarter Ended
- -------------------------
- ---------------------
1999
2000
2001
2002
2003
Sep 2002
Dec 2002
Mar 2003
Jun 2003
- ----
- ----
- ----
- ----
- ----
- --------
- --------
- --------
- --------
(In Millions)
Production capacity
$ 35
$ 61
$ 135
$ 47
$ 18
$ 5
$ 4
$ 4
$ 3
Facilities & Cost reduction
24
21
76
31
4
1
2
1
-
$ 59
$ 82
$ 211
$ 78
$ 22
$ 6
$ 6
$ 5
$ 3
=====
=====
=====
=====
=====
=====
=====
=====
=====
</Table>
* During the June 2003 quarter, inventories decreased $16 million to $168
million from $184 million at March 31, 2003. Raw materials and supplies
decreased $10 million in the June 2003 quarter, and finished goods and
work in process decreased $6 million.
Mar 1999
Mar 2000
Mar 2001
Mar 2002
Sep 2002
Dec 2002
Mar 2003
Jun 2003
- ----
- ----
- ----
- ----
- ----
- --------
- --------
- --------
(In Millions)
Raw materials and supplies
$ 45
$ 53
$ 115
$ 118
$ 97
$ 102
$ 91
$ 81
Work in process and finished goods
81
78
149
141
120
108
93
87
- ------
- ------
- ------
- ------
- ------
- ------
- ------
- ------
$ 126
$ 131
$ 264
$ 259
$ 217
$ 210
$ 184
$ 168
- ------
- ------
- ------
- ------
- ------
- ------
- ------
- ------
* Cash and short-term investments during the June 2003 quarter increased
$33 million to $297 million from $264 million at March 31, 2003. Cash
primarily increased due to a reduction in income tax receivable.
* The Board of Directors has authorized the purchase of up to 8.0 million
shares of common stock on the open market. As of July 21, 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 $18.24 per share. The
company does not anticipate any further stock purchases under this
authorization.
5
QUIET PERIOD
Beginning October 1, 2003, KEMET will observe a Quiet Period during which
the Business Outlook as provided in this news release and the company's
quarterly report on Form 10-Q 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
representatives 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 necessarily predictive of future performance.
6
<Table>
<Caption>
KEMET CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(Dollars in Thousands Except Per Share Data)
Unaudited
Three months ended
June 30,
- -------------------
2003
2002
-------------
----------
Income Statement Data:
Net Sales
$ 105,362
$ 124,045
Cost of goods sold
96,289
100,953
Selling, general and administrative expenses
13,546
13,856
Research and development
5,963
6,780
----------
----------
Operating income (loss)
(10,436)
2,456
Interest expense
1,572
1,547
Interest income
(760)
(938)
Other income
(1,384)
(3,338)
Income tax expense (benefit)
(6,293)
1,763
-----------
-----------
Net earnings (loss)
$ (3,571)
$ 3,422
===========
===========
Earnings Per Share Data:
Net earnings (loss) per share:
Basic
$ (0.04)
$ 0.04
Diluted
$ (0.04)
$ 0.04
Weight-average shares outstanding:
Basic
86,349,086
86,078,012
Diluted
86,349,086
86,956,317
7
KEMET CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheet
(Dollars in Thousands)
Unaudited
June 30, 2003
March 31, 2003
- -------------
- ---------------
ASSETS
Cash and cash equivalents
$ 291,498
$ 263,585
Short-term investments
5,198
-
Accounts receivable, net
50,013
45,418
Inventories
167,988
184,074
Income tax refund receivable
-
24,640
Prepaid expenses and other current assets
8,299
6,120
Deferred income taxes
22,103
23,947
- ------------
- ------------
Total current assets
545,099
547,784
Property, plant and equipment, net
469,996
485,166
Intangible assets, net
43,460
41,560
Other assets
26,789
26,500
- ------------
- ------------
Total assets
$ 1,085,344
$ 1,101.010
============
============
Liabilities and Stockholders' Equity
Accounts payable trade
$ 23,407
$ 49,171
Accrued expenses
30,303
35,078
Income taxes payable
23,739
-
- ------------
- ------------
Total current liabilities
77,449
88,249
Long-term debt
100,000
100,000
Other non-current obligations
57,617
57,617
Deferred income taxes
58,158
65,869
- ------------
- ------------
Total liabilities
293,224
307,735
Common stock
879
879
Additional paid-in capital
317,981
318,545
Retained earnings
503,344
506,915
Accumulated other comprehensive loss
(1,574)
(2,996)
Treasury stock, at cost
(28,510)
(30,068)
- ------------
- -----------=
Total stockholders' equity
$ 792,120
$ 793,275
============
============