EX-99.1 CHARTER 3 exhibits2005991a.txt EXHIBIT 1 Exhibit 99.1 KEMET Reports Financial Results for Quarter and Fiscal Year Ending March 31, 2005 Greenville, South Carolina (May 5, 2005) - KEMET Corporation (NYSE:KEM) today reported financial results for the quarter and fiscal year ended March 31, 2005. Net sales for the quarter were $101.4 million and net loss before special charges was $16.7 million, or $(0.19) per diluted share. KEMET reports net loss before special charges because the results better depict normal operations (see chart below for a reconciliation between net loss before special charges and GAAP net loss). Comparisons to prior periods are as follows:
Quarter Ended Year Ended ------------- ---------- Mar 2005 Dec 2004 Mar 2004 Mar 2005 Mar 2004 -------- -------- -------- -------- -------- (In Millions, Except Per Share Data) Net sales $ 101.4 $ 95.5 $ 117.1 $ 425.3 $ 433.9 Before special charges (non-GAAP) (1) Net loss (16.7) (18.6) (2.1) (51.2) (26.0) Net loss per diluted share (0.19) (0.21) (0.02) (0.59) (0.30) Special after tax charges (see page 3) (9.0) (20.3) (50.0) (22.7) (86.0) Special after tax charges per diluted share (0.11) (0.24) (0.58) (0.26) (1.00) After special charges (GAAP) Net Loss (25.7) (38.9) (52.1) (73.9) (112.0) Net loss per diluted share ( 0.30) (0.45) (0.60) (0.85) (1.30)
(1) Does not include potential charge relating to asset impairment discussed below. "Net sales for the March 2005 quarter increased 6.2% compared to the December 2004 quarter," stated Mr. Per Loof, Chief Executive Officer. "I am encouraged that we finished the March quarter strongly. We saw this trend in new orders continue in April. It is important to note that sales rose while our distributors' inventories declined during the quarter. 2 I am also pleased to report that KEMET reduced inventories by 9.7% in the March 2005 quarter as compared to the December 2004 quarter, though this did have a negative impact on cost of sales as the parts we did produce had to absorb more of our fixed manufacturing overhead. We are in the process of completing a previously announced reduction in force that, when finalized, will reduce our workforce by approximately 500 employees globally and cut about $18 million in total cost on an annualized basis. We also currently expect to record an asset impairment charge in the range of $80-$100 million in the March 2005 quarter which will decrease depreciation expense by $13 to $17 million per annum over the next several years. We do not believe the future cash flows support the carrying value of the assets and therefore an impairment charge seems warranted. Our previously announced production moves should be completed by the end of this calendar year. We will continue to focus on cost reduction both in terms of manufacturing costs and operating expenses. It is our goal to return the Company to profitability as soon as possible. Pricing continues to be an issue. Mix adjusted average selling pricess decreased 3.5% in the March 2005 quarter as compared to the December 2004 quarter. KEMET's capacity utilization remains at approximately 85%, and capacity utilization in the industry at large remains low enough to continue to put pressure on pricing. On a personal note, I have been with KEMET just one month. I have found an impressive customer franchise with strong relationships around the world. KEMET has a dedicated workforce with an experienced management team and a strong balance sheet. KEMET is a fine company with an impressive history and a leading position in the marketplace. I am looking forward to working with my team, as we undertake the challenge to take our Company to the next level." The Company will hold a conference call at 9:00 am ET Thursday, May 5, 2005, 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 #: 5518549. In conjunction with the conference call, there will be a simultaneous live broadcast over the Internet, which can be accessed at http://www.kemet.com/page/webcast. A replay of the conference call will be available, at the same link, until midnight May 19. 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. 3 OUR BUSINESS * As of March 31, 2005, KEMET had $219.5 million in cash and short and long-term investments in marketable securities, $100.0 million in long-term debt, and $615.4 million in stockholders' equity. * Sales of surface-mount capacitors were 82.5%, and sales of leaded parts were 17.5% of total sales for the March 2005 quarter. * By region, 46.9% percent of total sales for the March 2005 quarter were to customers in North America, 33.1% were to Asia, and 20.0% were to Europe. * By channel, 51.6% percent of total sales for the March 2005 quarter were to distribution customers, 25.7% were to Electronic Manufacturing Services customers, and 22.7% were to Original Equipment Manufacturing customers. Average selling prices for the March 2005 quarter, adjusted for changes in product mix, decreased approximately 3.5% from average selling prices for the December 2004 quarter. * During the March 2005 quarter, the Company has been examining whether certain assets were impaired as defined by the Statement of Financial Accounting Standards No. 144. As a result, the Company currently expects to recognize an impairment charge in the March 2005 quarter to write down certain assets to their fair value. The Company is currently in the process of determining the amount of the impairment charge, but estimates it to be in the $80-$100 million range. * On July 2, 2003, KEMET announced the reorganization of its operations around the world, resulting in the location of virtually all of its commodity production in low cost regions to be completed in mid 2005. KEMET estimates it will incur special charges of approximately $39 million over the period of the reorganization related to movement of manufacturing operations. Completed portions 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 2005 quarter were $1.9 million bringing the total manufacturing relocation charges to approximately $33.9 million to date. The balance of the $39 million is expected to be realized ratably over the next two quarters. The timing and amount of the special charges are dependent on the timing of operational decisions, some of which have not been finalized, and on operational activities yet to occur. In addition, KEMET recognized accelerated facility depreciation of $2 million related to the anticipated shut-down of a manufacturing facility by mid 2005. We anticipate recording an additional $5 million of charges comprised of accelerated depreciation related to the shut down of this facility plus other charges associated with the relocation of certain other assets over the next several quarters. During the March 2005 quarter, KEMET reduced its workforce by approximately 300 employees worldwide, or approximately 3.6%, which resulted in one-time charges of $5.1 million in the March 2005 quarter and expected annualized savings of approximately $10.6 million. 4 Summary of special charges (other than potential asset impairment charge discussed above) in the March 2005 quarter, net of tax:
(In Millions) Manufacturing relocation $1.9 Reduction in workforce 5.1 Other, net 0.2 -------- 4Q 2005 Restructuring and impairment charges 7.2 Pension plan curtailment final settlement 0.4 Shown separately on financial statements Gain on long-term supply contract (0.6) Shown separately on financial statements Accelerated depreciation on Manufacturing facility 2.0 Included in cost of goods sold -------- Special charges net of taxes $9.0 --------
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. We are continuing to enhance research and development, focused on organic polymer tantalum and high-capacitance ceramic capacitor technologies.
Fiscal Year Ended Fiscal Quarter Ended -------------------------------------------------- --------------------------------------- 2001 2002 2003 2004 Jun 2004 Sep 2004 Dec 2004 Mar 2005 ---- ---- ---- ---- -------- -------- -------- -------- (In Millions) SG&A $62.3 $54.4 $54.4 $51.2 $12.9 $13.0 $12.0 $13.8 R&D $27.1 $26.3 $25.3 $24.4 $ 6.3 $ 6.6 $ 7.5 $ 6.2
5 * Capital expenditures for the March 2005 quarter were $12.0 million.
Fiscal Year Ended Fiscal Quarter Ended -------------------------------------- ---------------------------------------------------------- 2002 2003 2004 Jun 2004 Sep 2004 Dec 2004 Mar 2005 ------- ------- ------- ------------ ------------ ------------ ------------ (In Millions) Additions to property, plant and equipment $ 79 $ 22 $ 26 $ 9.0 $ 7.0 $ 11.0 $ 12.0
* During the March 2005 quarter, inventories decreased $14.4 million to $133.9 million from $148.3 million at December 31, 2004. Raw materials and supplies decreased $9.2 million in the March 2005 quarter, and finished goods and work in process decreased $5.2 million.
Fiscal Year Ended Fiscal Quarter Ended -------------------------------------- ---------------------------------------------------------- Mar 2002 Mar 2003 Mar 2004 Jun 2004 Sep 2004 Dec 2004 Mar 2005 -------- -------- -------- -------- -------- -------- -------- (In Millions) Raw materials and supplies $118.0 $ 91.3 $ 59.3 $ 60.7 $ 65.5 $ 56.7 $ 47.5 Work in process and finished goods 141.0 92.7 69.2 78.8 88.5 91.6 86.4 ------ ------ ------ ------ ------ ------ ------ $259.0 $184.0 $129.0 $139.5 $154.0 $148.3 $133.9 ====== ====== ====== ====== ====== ====== ======
* Cash and short and long-term investments in marketable securities during the March 2005 quarter decreased $7.1 million to $219.5 million from $226.6 million at December 31, 2004. This is related to capital expenditures during the quarter. * During the fourth quarter of fiscal 2005, the Company recognized a benefit of $5.0 million relating to life insurance proceeds upon the death of one of its former executives. This has been recorded as a component of Other (income) expense on the Consolidated Statements of Operations. * KEMET also decided to dismiss the lawsuit filed against AVX Corporation in January 2005. While the Company still believes in the merits of the case, the lawsuit was dismissed in order to allow management to be able to focus on the important business challenges it currently faces. 6 QUIET PERIOD Beginning June 15, 2005, 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 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 are based on current expectations and 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 China, and the possible loss of key employees. Current global economic conditions make it particularly difficult at present to predict product demand and other related matters. 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. 7
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, ------------------------------ ------------------------------ 2005 (1) 2004 2005 (1) 2004 ------------- ------------- -------------- ------------- Income Statement Data: Net Sales $ 101,431 $ 117,101 $ 425,338 $ 433,882 Cost of goods sold 104,264 101,876 402,974 413,980 Loss on long-term supply contract (628) - (11,767) 12,355 Selling, general and administrative expenses 13,790 12,752 51,734 51,246 Research and development 6,217 6,282 26,639 24,449 Pension settlement charges 400 50,398 618 50,398 Restructuring and impairment charges 7,232 2,839 29,783 40,468 ----------- ----------- ----------- ----------- Operating loss (29,844) (57,046) (74,643) (159.014) Interest expense 1,677 1,732 6,511 6,472 Interest income (1,419) (1,132) (6,295) (3,847) Other (income) expense (4,956) (1,228) (2,849) (3,311) Income tax benefit 573 (4,366) 1,885 (46,353) ----------- ----------- ----------- ----------- Net loss $ (25,719) $ (52,052) $ (73,895) $ (111,975) =========== =========== =========== =========== Loss Per Share Data: Net loss per share: Basic $ (0.30) $ (0.60) $ (0.85) $ (1.30) Diluted $ (0.30) $ (0.60) $ (0.85) $ (1.30) Weight-average shares outstanding: Basic 86,548,572 86,462,742 86,518,923 86,412,281 Diluted 86,548,572 86,462,742 86,518,923 86,412,281
(1) Does not include impact of potential asset impairment as discussed in the Company's press release. 8
KEMET CORPORATION AND SUBSIDIARIES Consolidated Balance Sheet (Dollars in Thousands) Unaudited March 31, 2005 (2) March 31, 2004 ------------------ ---------------- ASSETS Cash and cash equivalents $ 26,898 $ 183,528 Short-term investments 34,992 3,172 Accounts receivable, net 59,228 57,303 Inventories 133,935 129,016 Prepaid expenses and other current assets 9,571 6,979 Deferred income taxes 7,862 29,046 ------------ ------------ Total current assets 272,486 409,044 Property, plant and equipment, net 382,152 424,161 Long-term investments in marketable securities 157,576 84,584 Investments in affiliates 682 3,610 Intangible assets, net 43,983 45,088 Other assets 3,335 3,312 ------------ ------------ Total assets $ 860,214 $ 969,808 ============ ============ Liabilities and Stockholders' Equity Accounts payable trade $ 38,943 $ 38,268 Accrued expenses 36,617 41,182 Income taxes payable 12,430 15,863 ------------ ------------ Total current liabilities 85,990 95,313 Long-term debt 100,000 100,000 Other non-current obligations 48,951 61,623 Deferred income taxes 9,870 28,394 ------------ ------------ Total liabilities 244,811 285,330 Common stock 880 879 Additional paid-in capital 317,729 317,497 Retained earnings 321,045 394,940 Accumulated other comprehensive loss 2,669 (1,457) Treasury stock, at cost (26,920) (27,381) ------------ ------------ Total stockholders' equity 615,403 684,478 Total liabilities and stockholders' equity $ 860,214 $ 969,808 ============ ============
(2) Does not include impact of potential asset impairment as discussed in the Company's press release.