1
Greenville, South Carolina (April 26, 2004) - KEMET Corporation (NYSE:KEM)
today reported financial results for the quarter and fiscal year ended
March 31, 2004. Net sales for the quarter were $117.1 million and net loss
before special charges was $(2.1) million, or $(0.02) per diluted share.
Comparisons to prior periods are as follows:
<Table>
<Caption>
Quarter Ended
Year Ended
- -------------
- ----------
Mar 2004
Dec 2003
Mar 2003
Mar 2004
Mar 2003
- --------
- --------
- --------
- --------
- --------
(In Millions, Except Per Share Data)
Net sales
$ 117.1
$ 111.3
$ 106.5
$ 433.9
$ 447.3
Before special charges (non-GAAP)
Net loss
(2.1)
(7.3)
(3.6)
(26.0)
(3.7)
Net loss per diluted share
(0.02)
(0.08)
(0.04)
(0.30)
(0.04)
Special after tax charges
(50.0)
(5.8)
(12.9)
(86.0)
(52.3)
Special after tax charges per
diluted share
(0.58)
(0.07)
(0.15)
(1.00)
(0.61)
After special charges (GAAP)
Net Loss
(52.1)
(13.1)
(16.5)
(112.0)
(56.0)
Net loss per diluted share
(0.60)
(0.15)
(0.19)
(1.30)
(0.65)
</Table>
"Reflecting the continuing improvement in the electronics industry, March 2004
quarter net sales increased 10% and total unit shipments increased 69% compared
to the March 2003 quarter," stated Dr. Jeffrey Graves, Chief Executive Officer.
"KEMET's capacity utilization is approximately 80%, and we believe industry
wide capacity utilization is higher. Mix adjusted average selling prices rose
1% in the March 2004 quarter, the second quarterly increase, and this firmness
in pricing is continuing in the June 2004 quarter.
"KEMET's net sales and total unit shipments were up 5% sequentially in the
March 2004 quarter. The strongest growth was in North America and Europe
and in Distribution, which are benefiting from a recovery in IT infrastructure
spending, combined with continued strength in the industrial, military and
automotive sectors. Our expectation in the coming quarter is that, based on the
assumption of continued economic recovery, unit shipment growth will continue,
pricing will remain firm, and our product mix will shift toward larger case
sizes and a stronger percentage growth in tantalum products.
2
"Currently, 90% of our production workforce is in low cost locations in the
world. With the surge in demand we are experiencing, we have begun balancing
the remaining manufacturing moves with increasing customer demand. We now
estimate that virtually all of our commodity production should be in low cost
regions by mid 2005.
"KEMET's innovation continues to be strong. Recently we announced 67 new
tantalum parts, including 41 that were first to market. With an experienced
management team and a strong balance sheet, I remain confident in KEMET's
future."
As of March 31, 2004, KEMET had $271 million in cash and short and
long-term investments in marketable securities, $100 million in long-term debt
and $684 million in stockholders' equity.
The company will hold a conference call at 8:30 am ET Tuesday, April 27, 2004,
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 #:
3123653. An archived replay of the conference call will be available through
midnight on May 11, 2004, 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 global
economic conditions make it particularly difficult at present to predict
product demand and other related matters.
* Sales of surface-mount capacitors were 82%, and sales of leaded parts were
18% of total sales for the March 2004 quarter.
* By region, 42% percent of total sales for the March 2004 quarter were to
customers in North America, 35% were to Asia, 22% were to Europe, and 1% to
the rest of the world.
* By channel, 53% percent of total sales for the March 2004 quarter were to
distribution customers, 25% were to Electronic Manufacturing Services
customers, and 22% were to Original Equipment Manufacturing customers.
* Average selling prices for the March 2004 quarter, adjusted for changes in
product mix, increased approximately 1% from average selling prices for the
December 2003 quarter.
3
* On July 2, 2003, KEMET announced the reorganization of its operations around
the world resulting in the location of virtually all of commodity production
in low cost regions to be completed by mid 2005. 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 unit volumes at the time of the
announcement, and a $50-60 million savings with volume recovery by fiscal
2006 if unit growth continues as it has in recent quarters.
Various parts of KEMET's announced move of production have occurred in
accordance with the anticipated time line. Charges related to movement of
manufacturing operations in the March 2004, December 2003, and September 2003
quarters were $3 million, $10 million and $12 million, respectively. The
balance of the $35 million is expected to be realized ratably over the next
six quarters. The timing of the special charges is dependent on the timing of
operational decisions, some of which have not been finalized, and on
operational activities yet to occur.
* Prior to the end of fiscal 2004, KEMET terminated and liquidated its defined
benefit pension plan and, as a result, recognized a $47 million after-tax
special charge (pension settlement charges) in the March 2004 quarter. The
termination of the pension plan is anticipated to result in future savings
of $6 million per year. KEMET continues to provide other defined
contribution retirement plans to its employees.
* Summary of special charges in the fiscal March 2004 periods:
Quarter
Fiscal Year
- --------------------------------------------
- -----------
Jun-03
Sep-03
Dec-03
Mar-04
Mar-04
- ------
- ------
- ------
- ------
- ------
(In Millions)
Manufacturing relocation and employee termination costs
$ 0.3
$ 11.9
$ 10.4
$ 2.8
$ 25.4
Termination of defined benefit pension plan
-
-
-
$ 50.4
50.4
Lower of cost or market valuation of tantalum supply agreement
-
12.4
-
-
12.4
Impairment (recovery of solid aluminum business line
-
22.3
(1.6)
-
20.7
Impaired assets associated with closing facilities
-
-
-
4.6
- --------
- --------
- --------
- --------
- --------
Special charges
0.3
46.6
8.8
53.2
108.9
Income tax expense
(0.1)
(16.6)
(3.0)
(3.2)
(22.9)
- --------
- --------
- --------
- --------
- --------
Special charges net of taxes
$ 0.2
$ 30.0
$ 5.8
$ 50.0
$ 86.0
=========
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</Table>
1
4
* For fiscal 2005, 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
- --------------------------------------------------
- ---------------------------------------
2000
2001
2002
2003
2004
Jun 2003
Sep 2003
Dec 2003
Mar 2004
- ----
- ----
- ----
- ----
- ----
- --------
- --------
- --------
- --------
(In Millions)
SG&A
$52.7
$55.2
$62.3
$54.4
$51.2
$13.5
$13.0
$11.0
$12.8
R&D
$22.1
$24.9
$27.2
$25.3
$24.4
$ 5.9
$ 5.9
$ 6.3
$ 6.3
</Table>
* Capital expenditures for the March 2004 quarter were $12 million.
Fiscal Year Ended
Fiscal Quarter Ended
- --------------------------------------
- ----------------------------------------------------------
2002
2003
2004
Jun 2003
Sep 2003
Dec 2003
Mar 2004
- -------
- -------
- -------
- ------------
- ------------
- ------------
- ------------
(In Millions)
Additions to property, plant and equipment
$ 79
$ 22
$ 26
$ 3
$ 6
$ 5
$ 12
* During the March 2004 quarter, inventories decreased $2 million to $129
million from $131 million at December 31, 2003. Raw materials and supplies
decreased $5 million in the March 2004 quarter, and finished goods and work
in process increased $3 million.
Mar 2000
Mar 2001
Mar 2002
Mar 2003
Jun 2003
Sep 2003
Dec 2003
Mar 2004
- --------
- --------
- --------
- --------
- --------
- --------
- --------
- --------
(In Millions)
Raw materials and supplies
$ 53
$ 115
$ 118
$ 91
$ 81
$ 70
$ 65
$ 60
Work in process and finished goods
78
149
141
93
87
69
66
69
- ------
- ------
- ------
- ------
- ------
- ------
- ------
- ------
$ 131
$ 264
$ 259
$ 184
$ 168
$ 139
$ 131
$ 129
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* Cash and long and short-term investments in marketable securities during
the March 2004 quarter decreased $30 million to $271 million from $301
million at December 31, 2003.
QUIET PERIOD
Beginning July 1, 2004, 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
<Caption>
KEMET CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(Dollars in Thousands Except Per Share Data)
Unaudited
Three months ended
Twelve months ended
March 31,
March 31,
- ------------------------------
- ------------------------------
2004
2003
2004
2003
-------------
- -------------
- --------------
- -------------
Income Statement Data:
Net Sales
$ 117,101
$ 103,727
$ 316,781
$ 340,827
Cost of goods sold
101,876
93,956
312,104
294,886
Loss on long-term supply contract
-
40,833
12,355
40,833
Selling, general and administrative expenses
12,752
13,834
38,494
40,984
Research and development
6,282
5,615
18,167
19,330
Pension settlement charges
50,398
-
50,398
-
Restructuring and impairment charges
2,839
18,003
40,468
31,700
-----------
-----------
-----------
-----------
Operating loss
(57,046)
(28,009)
(159,014)
(97,002)
Interest expense
1,732
1,378
6,472
6,097
Interest income
(1,132)
(767)
(3,847)
(3,818)
Other (income) expense
(1,228)
(591)
(3,311)
(11,387)
Income tax benefit
(4,366)
(11,582)
(46,353)
(31,906)
-----------
-----------
-----------
-----------
Net loss
$ (52,052)
$ (16,537)
$ (111,975)
$ (55,988)
===========
===========
===========
===========
Loss Per Share Data:
Net loss per share:
Basic
$ (0.60)
$ (0.19)
$ (1.30)
$ (0.65)
Diluted
$ (0.60)
$ (0.19)
$ (1.30)
$ (0.65)
Weight-average shares outstanding:
Basic
86,462,742
86,230,198
86,412,281
86,167,563
Diluted
86,462,742
86,230,198
86,412,281
86,167,563
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KEMET CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheet
(Dollars in Thousands)
Unaudited
March 31, 2004
December 31, 2003
------------------
----------------
ASSETS
Cash and cash equivalents
$ 183,528
$ 219,154
Short-term investments
3,172
9,207
Accounts receivable, net
57,303
55,521
Inventories
129,016
130,601
Prepaid expenses and other current assets
6,979
6,685
Deferred income taxes
652
29,716
- ------------
- ------------
Total current assets
380,650
450,884
Property, plant and equipment, net
424,161
428,429
Long-term investments in marketable securities
84,584
72,945
Investments in affiliates
3,610
3,808
Intangible assets, net
45,088
45,592
Other assets
3,321
25,366
- ------------
- ------------
Total assets
$ 941,414
$ 1,026,024
============
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Liabilities and Stockholders' Equity
Accounts payable trade
$ 38,268
$ 33,945
Accrued expenses
41,182
44,861
Income taxes payable
15,863
19,591
- ------------
- ------------
Total current liabilities
95,313
98,397
Long-term debt
100,000
100,000
Other non-current obligations
61,623
60,843
Deferred income taxes
-
32,007
- ------------
- ------------
Total liabilities
256,936
291,247
Common stock
879
879
Additional paid-in capital
317,497
317,579
Retained earnings
394,940
446,992
Accumulated other comprehensive loss
(1,457)
(2,948)
Treasury stock, at cost
(27,381)
(27,725)
- ------------
- ------------
Total stockholders' equity
684,478
734,777
Total liabilities and stockholders' equity
$ 941,414
$ 1,026,024
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