1
Greenville, South Carolina (July 19, 2004) - KEMET Corporation
NYSE:KEM) today reported financial results for the quarter ended June
30, 2004. Net sales for the quarter were $122.4 million and net income
before special charges was $0.7 million, or $0.01 per diluted share.
Comparisons to prior periods are as follows:
<Table>
<Caption>
Quarter Ended
- ---------------
Jun 2004
Mar 2004
Jun 2003
- --------
- --------
- --------
(In Millions, Except Per Share Data)
Net Sales
$ 122.4
$ 117.1
$ 105.4
Before special charges (non-GAAP)
Net income (loss)
0.7
(2.1)
(3.6)
Net income (loss) per diluted share
0.01
(0.02)
(0.04)
Special after-tax charges
(2.6)
(50.0)
-
Special after-tax charges per diluted share
(0.03)
(0.58)
-
After special charges (GAAP)
Net income (loss)
(1.9)
(52.1)
(3.6)
Net income (loss) per diluted share
$ (0.02)
$ (0.60)
$ (0.04)
</Table>
"Reflecting the continuing improvement in the electronics industry,
June 2004 quarter net sales increased 16% and total unit shipments
increased 54% compared to the June 2003 quarter," stated Dr. Jeffrey
Graves, Chief Executive Officer. "KEMET's capacity utilization is
approximately 82%, and we believe industry wide capacity utilization
is higher. Mix adjusted average selling prices were basically flat in
the June 2004 quarter.
"KEMET's net sales were up 4.5% and total unit shipments were up 2.5%
sequentially in the June 2004 quarter. The strongest growth was in
Asia and Europe, especially in distribution in those markets. Our
expectation in the coming quarter is that, based on the assumption of
continued economic growth, unit shipment growth will continue in line
with recent quarters and pricing will be consistent with the June
quarter.
2
"Currently, 90% of our production workforce is in low cost locations in
the world. We now estimate that virtually all of our commodity
production should be in low cost regions by mid 2005. With a strong
innovation pipeline, an experienced management team, and a strong
balance sheet, I remain confident in KEMET's future."
As of June 30, 2004, KEMET had $253 million in cash and short and
long-term investments in marketable securities, $100 million in long-
term debt, and $683 million in stockholders' equity.
The company will hold a conference call at 8:30 am ET Tuesday, July
20, 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 #: 8398080. An
archived replay of the conference call will be available through
midnight on August 3, 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 81%, and sales of leaded parts
were 19% of total sales for the June 2004 quarter.
By region, 45% percent of total sales for the June 2004 quarter were
to customers in North America, 31% were to Asia, 23% were to Europe,
and 1% to the rest of the world.
By channel, 56% percent of total sales for the June 2004 quarter were
to distribution customers, 23% were to Electronic Manufacturing
Services customers, and 21% were to Original Equipment Manufacturing
customers.
Average selling prices for the June 2004 quarter, adjusted for changes
in product mix, were basically flat compared to average selling prices
for the March 2004 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 June 2004, March 2004, December
2003, and September 2003 quarters were $3 million, $3 million, $10
million and $12 million, respectively. The balance of the $35 million
is expected to be realized ratably over the next five 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.
Summary of special charges in the June 2004 quarter:
<Table>
(In Millions)
Manufacturing relocation
$ 2.6
Income tax benefit
-
- --------------
Special charges net of taxes
$ 2.6
==============
</Table>
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.
<Table>
<Caption>
Fiscal Year Ended
Fiscal Quarter Ended
- --------------------------------------------------
- ---------------------------------------
2000
2001
2002
2003
2004
Sep 2003
Dec 2003
Mar 2004
Jun 2004
- ----
- ----
- ----
- ----
- ----
- --------
- --------
- --------
- --------
(In Millions)
SG&A
$52.7
$55.2
$62.3
$54.4
$51.2
$13.0
$11.9
$12.8
$12.9
R&D
$22.1
$24.9
$27.2
$25.3
$24.4
$ 5.9
$ 6.3
$ 6.3
$ 6.3
</Table>
Capital expenditures for the June 2004 quarter were $9.4 million.
<Table>
<Caption>
Fiscal Year Ended
Fiscal Quarter Ended
- ----------------------
- --------------------------------
2002
2003
2004
Sep 2003
Dec 2003
Mar 2004
Jun 2004
- ------
- ------
- ------
- ------
- ------
- ------
- ------
(In Millions)
Additions to property, plant and equipment
$ 79
$ 22
$ 26
$ 6
$ 5
$ 12
$ 9
=====
=====
=====
=====
=====
=====
=====
</Table>
During the June 2004 quarter, inventories increased $11 million to
$140 million from $129 million at March 31, 2004. Raw materials and
supplies increased $6 million in the June 2004 quarter, and finished
goods and work in process increased $5 million.
<Table>
<Caption>
Mar 2001
Mar 2002
Mar 2003
Mar 2004
Sep 2003
Dec 2003
Mar 2004
Jun 2004
- --------
- --------
- --------
- --------
- --------
- --------
- --------
- --------
(In Millions)
Raw materials and supplies
$ 115
$ 118
$ 91
$ 60
$ 70
$ 65
$ 60
$ 66
Work in process and finished goods
149
141
93
69
69
66
69
74
- ------
- ------
- ------
- ------
- ------
- ------
- ------
- ------
$ 264
$ 259
$ 184
$ 129
$ 139
$ 131
$ 129
$ 140
======
======
======
======
======
======
======
======
</Table>
5
Cash and long and short-term investments in marketable securities
during the June 2004 quarter decreased $18 million to $253 million
from $271 million at March 31, 2004. Approximately $11 of this is
related to increases in inventory, and most of the rest is related to
capital expenditures during the quarter.
There was a $2.3 million charge, reported in other (income) expense
related to marking an interest rate swap contract to market,
reflecting recent increases in interest rates.
QUIET PERIOD
Beginning October 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
<Table>
<Caption>
KEMET CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in Thousands Except Per Share Data)
Unaudited
Three months ended
June 30,
-------------------------------
2004
2003
-------------
- -------------
Income Statement Data:
Net Sales
$ 122,383
$ 105,362
Cost of goods sold
100,124
96,289
Selling, general and administrative expenses
12,878
13,546
Research and development
6,297
5,963
Restructuring and impairment charges
2,550
-
-----------
-----------
Operating loss
534
(10,436)
Interest expense
1,623
1,572
Interest income
(1,910)
(760)
Other (income) expense
2,285
(1,384)
Income tax expense (benefit)
387
(6,293)
-----------
-----------
Net loss
$ (1,851)
$ (3,571)
===========
===========
Loss Per Share Data:
Net loss per share:
Basic
$ (0.02)
$ (0.04)
Diluted
$ (0.02)
$ (0.04)
Weight-average shares outstanding:
Basic
86,494,650
86,349,086
Diluted
86,494,650
86,349,086
</Table>
7
<Table>
<Caption>
KEMET CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheet
(Dollars in Thousands)
Unaudited
June 30, 2004
March 31, 2004
-------------
------------------
ASSETS
Cash and cash equivalents
$ 41,327
$ 183,528
Short-term investments
23,122
3,172
Accounts receivable, net
58,278
57,303
Inventories
139,509
129,016
Prepaid expenses and other current assets
5,025
6,979
Deferred income taxes
25,010
29,046
- ------------
- ------------
Total current assets
292,271
409,044
Property, plant and equipment, net
416,330
424,161
Long-term investments in marketable securities
188,746
84,584
Investments in affiliates
3,420
3,610
Intangible assets, net
44,737
45,088
Other assets
3,923
3,321
- ------------
- ------------
Total assets
$ 949,427
$ 969,808
============
============
Liabilities and Stockholders' Equity
Accounts payable trade
$ 33,982
$ 38,268
Accrued expenses
37,804
41,182
Income taxes payable
14,666
15,863
- ------------
- ------------
Total current liabilities
86,452
95,313
Long-term debt
100,000
100,000
Other non-current obligations
55,858
61,623
Deferred income taxes
24,154
28,394
- ------------
- ------------
Total liabilities
266,464
285,330
Common stock
879
879
Additional paid-in capital
317,891
317,497
Retained earnings
393,089
394,940
Accumulated other comprehensive loss
(1,586)
(1,457)
Treasury stock, at cost
(27,310)
(27,381)
- ------------
- ------------
Total stockholders' equity
682,963
684,478
Total liabilities and stockholders' equity
$ 949,427
$ 969,808
============
============
</Table>