1
Bank of America
Leveraged Finance Conference
NOVEMBER 2017
1
Cautionary Statement
Certain statements included herein contain forward-looking statements within the meaning of federal securities laws about KEMET Corporation's (the "Company") financial condition and results of
operations that are based on management's current expectations, estimates and projections about the markets in which the Company operates, as well as management's beliefs and assumptions. Words such as
"expects," "anticipates," "believes," "estimates," variations of such words and other similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future
performance and involve certain risks, uncertainties and assumptions, which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in, or implied
by, such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's judgment only as of the date hereof. The Company
undertakes no obligation to update publicly any of these forward-looking statements to reflect new information, future events or otherwise.
Factors that may cause actual outcomes and results to differ materially from those expressed in, or implied by, these forward-looking statements include, but are not necessarily limited to the following:
(i) adverse economic conditions could impact our ability to realize operating plans if the demand for our products declines, and such conditions could adversely affect our liquidity and ability to continue to operate
and cause a write down of long-lived assets or goodwill; (ii) an increase in the cost or a decrease in the availability of our principal or single-sourced purchased raw materials; (iii) changes in the competitive
environment; (iv) uncertainty of the timing of customer product qualifications in heavily regulated industries; (v) economic, political, or regulatory changes in the countries in which we operate; (vi) difficulties, delays
or unexpected costs in completing the restructuring plans; (vii) acquisitions and other strategic transactions expose us to a variety of risks; (viii) acquisition of TOKIN may not achieve all of the anticipated results;
(ix) our business could be negatively impacted by increased regulatory scrutiny and litigation; (x) difficulties associated with retaining, attracting and training effective employees and management; (xi) the need to
develop innovative products to maintain customer relationships and offset potential price erosion in older products; (xii) exposure to claims alleging product defects; (xiii) the impact of laws and regulations that
apply to our business, including those relating to environmental matters; (xiv) the impact of international laws relating to trade, export controls and foreign corrupt practices;
(xv) changes impacting international trade and corporate tax provisions related to the global manufacturing and sales of our products may have an adverse effect on our financial condition and results of
operations; (xvi) volatility of financial and credit markets affecting our access to capital; (xvii) the need to reduce the total costs of our products to remain competitive; (xviii) potential limitation on the use of net
operating losses to offset possible future taxable income; (xix) restrictions in our debt agreements that could limit our flexibility in operating our business; (xx) disruption to our information technology systems to
function properly or control unauthorized access to our systems may cause business disruptions; (xxi) additional exercise of the warrant by K Equity, LLC which could potentially result in the existence of a
significant stockholder who could seek to influence our corporate decisions; (xxii) fluctuation in distributor sales could adversely affect our results of operations, (xxiii) earthquakes and other natural disasters could
disrupt our operations and have a material adverse effect on our financial condition and results of operations.
2
2
14
In products that can be found anywhere
3
4
© KEMET Electronics. All Rights Reserved.
Semiconductor Industry vs. Capacitor Industry
Billion US$
$-
$20
$40
$60
$80
$100
$120
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
$4.0
$4.5
$5.0
CY1
3
Q
1
Q
2
Q
3
Q
4
CY1
4
Q
1
Q
2
Q
3
Q
4
CY1
5
Q
1
Q
2
Q
3
Q
4
CY1
6
Q
1
Q
2
Q
3
Q
4
CY1
7
Q
1
Q
2
C
A
P
A
CITOR
IND
U
S
T
R
Y
Capacitors Semiconductors
5
Sales Summary - Q2 FY18
(Unaudited)
Telecom
14%
Computer
21%
Consumer
15%
Ind/Light
27%
Automotive
14%
Def
4%
Med
5%
INDUSTRY
Distributors
36%
EMS
15%
OEM
49%
CHANNEL
Americas
20%
EMEA
22%
JPKO
15%
APAC
43%
REGION
TA
41%
CE
22%
F&E
16%
MSA
21%
PRODUCT LINE
5
KEMET Market Share
Pro forma
Panasonic
35%
KEMET
42%
Others
23%
Tantalum Capacitors (est. $1.7B)**Polymer Capacitors (est. $0.6B)*
AVX
30%
KEMET
33%
Panasonic
12%
Rohm
4%
Vishay
9%
Samsung
3%
Others
9%
Market Share (FY17E)
* Management Estimates
**Paumanok Publications. Passive Electronics Components: World Market Outlook: 2017-2022
© KEMET Electronics. All Rights Reserved.
6
7
Company Overview
Post TOKIN Acquisition
Simpsonville
Ciudad Victoria,
Monterrey & Matamoros,
Mexico
Evora,
Portugal
Pontecchio, Italy
Kyustendil, Bulgaria
Anting, China
Carson City, NV
Batam,
Indonesia
Suomussalmi, FinlandGranna & Farjestaden,
Sweden
Suzhou, China
Skopje, Macedonia
Xiamen, China
Toyama, Japan
Shiroishi, Japan
Sendai, Japan
Bang Pakong,
Thailand
Biên Hòa, Vietnam
• Global manufacturer of tantalum, multilayer ceramic, solid and electrolytic, aluminum and film and paper
capacitors, electro magnetic capability devices, and sensors and actuators
• 24 manufacturing plants located in North America, Europe and Asia
• employees worldwide (15,800)
– USA 700 Mexico 5,800 Japan 1,100
– Asia 6,600 Europe 1,600
• Recognized as the “Easy to buy from Company” (ETBF) and “Easy to design in” (E2Di)
Location Business Group
Simpsonville, USA Ta, Ce
Carson City, USA Ta
Matamoros, Mexico Ta
Victoria, Mexico Ta
Monterrey, Mexico (2) Ce
Location Business Group
Evora, Portugal F&E, Ta
Skopje, Macedonia F&E
Gränna, Sweden F&E
Suomussalmi, Finland F&E
Kyustendil, Bulgaria F&E
Pontecchio, Italy F&E
Location Business Group
Suzhou,China Ta
Toyama, Japan Ta
Chachoengsao,
Thailand
Ta
Shiroishi, Japan MS&A
Sendai, Japan MS&A
Bien Hoa, Vietnam MS&A
Xiamen, China MS&A
Batam, Indonesia F&E
Anting, China F&E
Americas EMEA Asia
Manufacturing Locations
8
9
Allocation from sale of EMD (relay) BU
Selling price $ 422.0 (US $)
NEC loan $ (222.4)
Fees & Taxes (estimated) $ (10.6)
BALANCE $ 189.0
50% to NEC $ (94.5)
50% to KEMET & TOKIN $ (94.5)
REMAINDER $ -
KEMET purchase of remaining NT shares from NEC
Purchase of shares (KEMET cash) $ 52.5
50% of net proceeds $ 94.5
TOTAL $ 147.0
Excess cash to KEMET & TOKIN
EMD proceeds $ 94.5
Purchase of shares (KEMET cash) $ (52.5)
$ 42.0
“The Deal”
24
Manufacturing
Plants*
15,800
Employees*
48 billion
Components
Shipped per year*
Ship to
97
Countries
Founded
1919
$ $1.1B*
* IncludesTOKIN
10
PRE AND POST TOKIN TRANSACTION
(Non-GAAP)
Pre-TOKIN MARCH 2017 Post-TOKIN SEPT 2017
Revenue $198.0 $301.5
Adjusted gross margin $50.2 $85.0
AGM% 25.4% 28.2%
Adjusted Net Income $7.8 $26.0
Adjusted EBITDA $27.2 $49.5
Cash $110.2 $254.0
Debt $388.3 $332.0
(in millions)
11
Share Price
12
13
14
15
Quote & Price
Management
MobileApps
kemet.com3.0
Next Level
website
ENGINNERING
CENTER
Search Engine &
selection tool
Simulation Tools
Digital Engagement
Platform
Improved
Design Tools
FY18
16
17
© KEMET Electronics. All Rights Reserved.
The world’s largest
taxi company owns
no vehicles
The world’s most
popular media
owner creates no
content
The world’s largest
accommodation
provider owns no
real estate
The world’s most
valuable retailer
has no inventory
F
The Digital Transformation Playbook, 64 & 65, David L. Rogers
Our World, Right Now
DC Link
Wearables
226M units in 2016 to 505M units in 2021
19
© KEMET Electronics. All Rights Reserved.
DC Link
Electric Vehicles
35% of global new car sales by 2040
20
© KEMET Electronics. All Rights Reserved.
DC Link
Computers that See
Image Recognition
30% CAAGR through 2021
21
© KEMET Electronics. All Rights Reserved.
DC Link
Server growth
Telecommunication Driver
Every 600 new phones that go on line will require 1 new server
1
0
0
1
0
01
0
0
1
0
0
1
0
0
1
0
0
22
© KEMET Electronics. All Rights Reserved.
China Insights
Last 10 years GDP was built on B2B, next 10 years is on B2C
EV completely replacing ICE car in China will happen much faster than we
think
Internet of Things, connected and everything smart
“Shared” is the trend
1.4 billion digital savvy citizens
Delivery Robots
InterContinental Hotel
Suzhou, China
23
Financial Information
Financial Trends
Quarterly Sales Summary U.S. GAAP (Unaudited)
1. TOKIN results exclude the EMD business which was sold on April 14, 2017.
1. Net sales include sales between KEMET and TOKIN of $7.0 million, $7.2 million and $6.2 million for the quarters ended September 30, 2016,
December 31, 2016 and March 31, 2017, respectively. Upon acquisition, inter-company sales were eliminated.
1. Proforma sales information assuming TOKIN was owned for the entire quarter.
25
Financial Trends
Cash and Cash Equivalents U.S. GAAP (Unaudited)
1. TOKIN results exclude the EMD business which was sold on April 14, 2017.
26
LTM Operating Income Margins
U.S. GAAP (Unaudited)
27
LTM Adjusted EBITDA Margins
Non-GAAP (Unaudited)
28
FY18 Q2, FY18 Q1 & FY17 Q2 Comparison
U.S. GAAP (Unaudited)
For the Quarters Ended
(Amounts in thousands, except percentages and per share data) Sep 2017 Jun 2017 Sep 2016
Net sales $ 301,471 $ 274,000 $ 187,308
Gross margin (1),(2) $ 85,076 $ 74,437 $ 46,516
Gross margin as a percentage of net sales 28.2% 27.2% 24.8%
Selling, general and administrative (1),(2) $ 42,417 $ 35,631 $ 25,843
SG&A as a percentage of net sales 14.1% 13.0% 13.8%
Operating income (loss) (1) $ 31,643 $ 27,784 $ 3,374
Net income (loss) $ 12,849 $ 220,606 $ (4,998)
Per basic and diluted share data:
Net income (loss) per basic share $ 0.26 $ 4.66 $ (0.11)
Net income (loss) per diluted share 0.22 3.82 (0.11)
Weighted avg. shares - basic 49,819 47,381 46,590
Weighted avg. shares - diluted 58,409 57,731 46,590
(1) September 30, 2016 adjusted due to the adoption of Accounting Standards Update ("ASU") No. 2017-07, Improving the Presentation of Net
Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.
(2) Results for the quarter ended June 30, 2017 have been reclassified to conform to the current period presentation where certain regional SG&A
amounts have been allocated to costs of goods sold.
29
FY18 Q2, FY18 Q1 & FY17 Q2 Comparison
Non-GAAP (Unaudited)
For the Quarters Ended
(Amounts in thousands, except percentages and per share data) Sep 2017 Jun 2017 Sep 2016
Net sales $ 301,471 $ 274,000 $ 187,308
Adjusted gross margin (1)(2) $ 85,418 $ 74,747 $ 46,936
Adjusted gross margin as a percentage of net sales 28.3% 27.3% 25.1%
Adjusted selling, general and administrative (1),(2) $ 38,900 $ 33,745 $ 22,346
Adjusted SG&A as a percentage of net sales 12.9% 12.3% 11.9%
Adjusted operating income (loss) (1) $ 36,902 $ 31,658 $ 17,615
Adjusted net income (loss) $ 26,475 $ 19,242 $ 6,955
Adjusted EBITDA $ 49,918 $ 43,291 $ 26,912
Adjusted EBITDA margin as a percentage of net sales 16.6% 15.8% 14.4%
Per share data:
Adjusted net income (loss) - basic $ 0.53 $ 0.41 $ 0.15
Adjusted net income (loss) - diluted $ 0.45 $ 0.33 $ 0.13
Weighted avg. shares - basic 49,819 47,381 46,590
Weighted avg. shares - diluted 58,409 57,731 53,834
(1) September 30, 2016 adjusted due to the adoption of ASU No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net
Periodic Postretirement Benefit Cost.
(2) Results for the quarter ended June 30, 2017 have been reclassified to conform to the current period presentation where certain regional
SG&A amounts have been allocated to costs of goods sold.
30
Financial Highlights
(Unaudited)
(1)Calculated as accounts receivable, net, plus inventories, net, less accounts payable.
(1)Current quarter's accounts receivable divided by annualized current quarter’s Net sales multiplied by 365.
(1)Current quarter's accounts payable divided by annualized current quarter's cost of goods sold multiplied by 365.
(Amounts in millions, except DSO and DPO) Sep 2017 Jun 2017 FX Impact
Cash, cash equivalents $ 253.7 $ 225.6 $ 0.7
Capital expenditures $ 10.5 $ 7.3
Short-term debt $ 20.4 $ 20.4
Long-term debt 326.4 330.3
Debt (discount)/premium and issuance costs (15.0) (15.5)
Total debt $ 331.8 $ 335.2 $ —
Equity $ 416.1 $ 385.3 $ 8.0
Net working capital (1) $ 200.8 $ 193.7 $ 4.2
Days in receivables (DSO) (2) 42 46
Days in payables (DPO) (3) 58 63
31
The human side of the equation
32
Kisengo Hospital
Before After
33
Kisengo School
Before After
34
35
© KEMET Electronics. All Rights Reserved.
Appendix
Adjusted Gross Margin
Non-GAAP (Unaudited)
For the Quarters Ended
(Amounts in thousands, except percentages) Sep 2017 Jun 2017 Sep 2016
Net Sales $ 301,471 $ 274,000 $ 187,308
Gross Margin (U.S. GAAP) (1)(2) $ 85,076 $ 74,437 $ 46,516
Gross margin as a percentage of net sales 28.2% 27.2% 24.8%
Adjustments:
Stock-based compensation expense 342 310 301
Plant start-up costs — — 119
Adjusted gross margin (non-GAAP) $ 85,418 $ 74,747 $ 46,936
Adjusted gross margin as a percentage of net sales 28.3% 27.3% 25.1%
(1) September 30, 2016 adjusted due to the adoption of ASU No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic
Postretirement Benefit Cost.
(2) Results for the quarter ended June 30, 2017 have been reclassified to conform to the current period presentation where certain regional SG&A amounts
have been allocated to costs of goods sold.
37
Adjusted Selling, General & Administrative Expenses
Non-GAAP (Unaudited)
For the Quarters Ended
(Amounts in thousands, except percentages) Sep 2017 Jun 2017 Sep 2016
Net sales $ 301,471 $ 274,000 $ 187,308
Selling, general and administrative expenses (U.S. GAAP)
(1)(2) $ 42,417 $ 35,631 $ 25,843
Selling, general, and administrative as a percentage of net sales 14.1% 13.0% 13.8%
Less adjustments:
ERP integration/IT transition costs — — 1,783
Stock-based compensation expense 1,142 745 754
Legal expenses/fines related to antitrust class actions 2,375 1,141 766
TOKIN investment-related expenses — — 194
Adjusted selling, general and administrative expenses (non-
GAAP) $ 38,900 $ 33,745 $ 22,346
Adjusted selling, general, and administrative as a percentage of net sales 12.9% 12.3% 11.9%
(1) September 30, 2016 adjusted due to the adoption of ASU No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net
Periodic Postretirement Benefit Cost.
(2) Results for the quarter ended June 30, 2017 have been reclassified to conform to the current period presentation where certain regional
SG&A amounts have been allocated to costs of goods sold.
38
Adjusted Operating Income (Loss)
Non-GAAP (Unaudited)
For the Quarters Ended
(Amounts in thousands) Sep 2017 Jun 2017 Sep 2016
Operating income (loss) (U.S. GAAP) (1) $ 31,643 $ 27,784 $ 3,374
Adjustments:
Restructuring charges 1,393 1,613 3,998
Legal expenses related to antitrust class actions 2,375 1,141 766
Stock-based compensation expense 1,530 1,101 1,104
Write-down and disposal of long-lived assets (39) 19 6,277
ERP integration/IT transition costs — — 1,783
TOKIN investment-related expenses — — 194
Plant start-up costs — — 119
Adjusted operating income (loss) (non-GAAP) $ 36,902 $ 31,658 $ 17,615
(1) Quarter ended September 30, 2016 adjusted due to the adoption of Accounting Standards Update ("ASU") No. 2017-07, Improving the
Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.
39
Adjusted Net Income (Loss)
Non-GAAP (Unaudited)
For the Quarters Ended
(Amounts in thousands, except percentages and per share data) Sep 2017 Jun 2017 Sep 2016
Net income (loss) (U.S. GAAP) $ 12,849 $ 220,606 $ (4,998)
Adjustments:
Equity (income) loss from TOKIN (224) (75,417) (181)
Acquisition Gain (1,285) (135,588) —
Net foreign exchange (gain) loss 1,891 5,043 (724)
Restructuring charges 1,393 1,613 3,998
Legal expenses related to antitrust class actions 10,327 1,141 766
Stock-based compensation expense 1,530 1,101 1,104
(Gain) loss on early extinguishment of debt — 486 —
Amortization included in interest expense 664 460 188
Income tax effect of non-U.S. GAAP adjustments (1) (631) (222) 29
Write-down and disposal of long-lived assets (39) 19 6,277
Change in value of TOKIN option — — (1,600)
ERP integration/IT transition costs — — 1,783
TOKIN investment-related expenses — — 194
Plant start-up costs — — 119
Adjusted net income (loss) (non-GAAP) $ 26,475 $ 19,242 $ 6,955
Adjusted net income (loss) per share - basic $ 0.53 $ 0.41 $ 0.15
Adjusted net income (loss) per share - diluted $ 0.45 $ 0.33 $ 0.13
Adjusted EBITDA (non-GAAP) $ 49,918 $ 43,291 $ 26,912
Weighted avg. shares - basic 49,819 47,381 46,590
Weighted avg. shares - diluted 58,409 57,731 53,834
(1) The income tax effect of the excluded items is calculated by applying the applicable jurisdictional income tax rate, considering the deferred
tax valuation for each applicable jurisdiction.
40
Adjusted EBITDA Reconciliation
Non-GAAP (Unaudited)
Quarters Ended LTM
(Amounts in thousands, except percentages) Dec 2015 Mar 2016 Jun 2016 Sep 2016 Sep 2016
Net Sales $ 177,184 $ 183,926 $ 184,935 $ 187,308 $ 733,353
Net income (loss) (8,600) (15,173) (12,205) (4,998) (40,976)
Income tax expense (benefit) 2,760 2,056 1,800 830 7,446
Interest expense, net 9,848 9,925 9,920 9,904 39,597
Depreciation and amortization 9,674 10,160 9,436 9,440 38,710
EBITDA 13,682 6,968 8,951 15,176 44,777
Excluding the following items (Non-GAAP):
Change in value of TOKIN options (700) — 12,000 (1,600) 9,700
Equity (gain) loss from TOKIN 6,505 11,648 (223) (181) 17,749
Restructuring charges 1,714 617 688 3,998 7,017
ERP integration costs / IT transition costs 167 859 1,768 1,783 4,577
Stock-based compensation expense 1,154 1,013 1,228 1,104 4,499
Legal expenses related to antitrust class actions 1,300 482 1,175 766 3,723
Net foreign exchange (gain) loss (1,036) 122 (1,920) (724) (3,558)
TOKIN investment-related expenses 225 265 206 194 890
Plant start-up costs 160 319 308 119 906
Plant shut-down costs 231 141 — — 372
Write-down and disposal of long-lived assets 129 608 91 6,277 7,105
Adjusted EBITDA (non-GAAP) $ 23,531 $ 23,042 $ 24,272 $ 26,912 $ 97,757
Adjusted EBITDA Margin (non-GAAP) 13.3% 12.5% 13.1% 14.4% 13.3%
41
Adjusted EBITDA Reconciliation
Non-GAAP (Unaudited)
Quarters Ended LTM
(Amounts in thousands, except percentages) Mar 2016 Jun 2016 Sep 2016 Dec 2016 Dec 2016
Net Sales $ 183,926 $ 184,935 $ 187,308 $ 188,029 $ 744,198
Net income (loss) (15,173) (12,205) (4,998) 12,278 (20,098)
Income tax expense (benefit) 2,056 1,800 830 1,810 6,496
Interest expense, net 9,925 9,920 9,904 9,913 39,662
Depreciation and amortization 10,160 9,436 9,440 9,095 38,131
EBITDA 6,968 8,951 15,176 33,096 64,191
Excluding the following items (Non-GAAP):
Change in value of TOKIN options — 12,000 (1,600) (6,900) 3,500
Equity (gain) loss from TOKIN 11,648 (223) (181) 133 11,377
Restructuring charges 617 688 3,998 (369) 4,934
ERP integration costs / IT transition costs 859 1,768 1,783 1,734 6,144
Stock-based compensation expense 1,013 1,228 1,104 1,139 4,484
Legal expenses related to antitrust class actions 482 1,175 766 293 2,716
Net foreign exchange (gain) loss 122 (1,920) (724) (2,621) (5,143)
TOKIN investment-related expenses 265 206 194 204 869
Plant start-up costs 319 308 119 — 746
Plant shut-down costs 141 — — — 141
Write-down and disposal of long-lived assets 608 91 6,277 132 7,108
Adjusted EBITDA (non-GAAP) $ 23,042 $ 24,272 $ 26,912 $ 26,841 $ 101,067
Adjusted EBITDA Margin (non-GAAP) 12.5% 13.1% 14.4% 14.3% 13.6%
42
Adjusted EBITDA Reconciliation
Non-GAAP (Unaudited)
Fiscal Year
(Amounts in thousands, except percentages) 2017
Net Sales $ 757,791
Net income (loss) 47,989
Income tax expense (benefit) 4,290
Interest expense, net 39,731
Depreciation and amortization 37,338
EBITDA 129,348
Excluding the following items (Non-GAAP):
Change in value of TOKIN options (10,700)
Equity (gain) loss from TOKIN (41,643)
Restructuring charges 5,404
ERP integration costs / IT transition costs 7,045
Stock-based compensation expense 4,720
Legal expenses related to antitrust class actions 2,640
Net foreign exchange (gain) loss (3,758)
TOKIN investment-related expenses 1,101
Plant start-up costs 427
Write-down and disposal of long-lived assets 10,671
Adjusted EBITDA (non-GAAP) $ 105,255
Adjusted EBITDA Margin (non-GAAP) 13.9%
43
Adjusted EBITDA Reconciliation
Non-GAAP (Unaudited)
Quarter Ended LTM
(Amounts in thousands, except percentages) Sep 2016 Dec 2016 Mar 2017 Jun 2017 Jun 2017
Net Sales $ 187,308 $ 188,029 $ 197,519 $ 274,000 $ 846,856
Net income (loss) (4,998) 12,278 52,914 220,606 280,800
Income tax expense (benefit) 830 1,810 (150) 1,150 3,640
Interest expense, net 9,904 9,913 9,994 10,894 40,705
Depreciation and amortization 9,440 9,095 9,367 12,243 40,145
EBITDA 15,176 33,096 72,125 244,893 365,290
Excluding the following items (Non-GAAP):
Change in value of NEC TOKIN options (1,600) (6,900) (14,200) — (22,700)
Equity (gain) loss from NEC TOKIN (181) 133 (41,372) (75,417) (116,837)
Acquisition Gain — — — (135,588) (135,588)
Restructuring charges 3,998 (369) 1,087 1,613 6,329
ERP integration costs / IT transition costs 1,783 1,734 1,760 — 5,277
Stock-based compensation expense 1,104 1,139 1,249 1,101 4,593
Legal expenses related to antitrust class actions 766 293 406 1,141 2,606
Net foreign exchange (gain) loss (724) (2,621) 1,507 5,043 3,205
NEC TOKIN investment-related expenses 194 204 497 — 895
Plant start-up costs 119 — — — 119
Write-down and disposal of long-lived assets 6,277 132 4,171 19 10,599
(Gain) loss on early extinguishment of debt — — — 486 486
Adjusted EBITDA (non-GAAP) $ 26,912 $ 26,841 $ 27,230 $ 43,291 $ 124,274
Adjusted EBITDA Margin (non-GAAP) 14.4% 14.3% 13.8% 15.8% 14.7%
44
Adjusted EBITDA Reconciliation
Non-GAAP (Unaudited)
Quarters Ended LTM
(Amounts in thousands, except percentages) Dec 2016 Mar 2017 Jun 2017 Sep 2017 Sep 2017
Net Sales $ 188,029 $ 197,519 $ 274,000 $ 301,471 $ 961,019
Net income (loss) 12,278 52,914 220,606 12,849 298,647
Income tax expense (benefit) 1,810 (150) 1,150 7,270 10,080
Interest expense, net 9,913 9,994 10,894 2,880 33,681
Depreciation and amortization 9,095 9,367 12,243 13,326 44,031
EBITDA 33,096 72,125 244,893 36,325 386,439
Excluding the following items (Non-GAAP):
Change in value of TOKIN options (6,900) (14,200) — — (21,100)
Equity (gain) loss from TOKIN 133 (41,372) (75,417) (224) (116,880)
Acquisition Gain — — (135,588) (1,285) (136,873)
Restructuring charges (369) 1,087 1,613 1,393 3,724
ERP integration costs / IT transition costs 1,734 1,760 — — 3,494
Stock-based compensation expense 1,139 1,249 1,101 1,530 5,019
Legal expenses related to antitrust class actions 293 406 1,141 10,327 12,167
Net foreign exchange (gain) loss (2,621) 1,507 5,043 1,891 5,820
TOKIN investment-related expenses 204 497 — — 701
Write-down and disposal of long-lived assets 132 4,171 19 (39) 4,283
(Gain) loss on early extinguishment of debt — — 486 — 486
Adjusted EBITDA (non-GAAP) $ 26,841 $ 27,230 $ 43,291 $ 49,918 $ 147,280
Adjusted EBITDA Margin (non-GAAP) 14.3% 13.8% 15.8% 16.6% 15.3%
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Non-GAAP Financial Measures
Non-GAAP Financial Measures
Included in this presentation are certain non-GAAP financial measures designed to complement the financial information presented in accordance with generally accepted accounting principles in the United States of America
because management believes such measures are useful to investors for the reasons described below.
Adjusted gross margin
Adjusted gross margin represents net sales less cost of sales excluding adjustments which are outlined in the quantitative reconciliation provided earlier in this presentation. Management uses Adjusted gross margin to
facilitate our analysis and understanding of our business operations by excluding the items outlined in the quantitative reconciliation provided earlier in this presentation which might otherwise make comparisons of our ongoing
business with prior periods more difficult and obscure trends in ongoing operations. The Company believes that Adjusted gross margin is useful to investors because it provides a supplemental way to understand the
underlying operating performance of the Company. Adjusted gross margin should not be considered as an alternative to gross margin or any other performance measure derived in accordance with GAAP.
Adjusted selling, general and administrative expenses
Adjusted selling, general and administrative expenses represents selling, general and administrative expenses excluding adjustments which are outlined in the quantitative reconciliation provided earlier in this presentation.
Management uses Adjusted selling, general and administrative expenses to facilitate our analysis and understanding of our business operations by excluding the items outlined in the quantitative reconciliation provided earlier
in this presentation which might otherwise make comparisons of our ongoing business with prior periods more difficult and obscure trends in ongoing operations. The Company believes that Adjusted selling, general and
administrative expenses is useful to investors because it provides a supplemental way to understand the underlying operating performance of the Company. Adjusted selling, general and administrative expenses should not be
considered as an alternative to selling, general and administrative expenses or any other performance measure derived in accordance with GAAP.
Adjusted operating income (loss)
Adjusted operating income (loss) represents operating income (loss), excluding adjustments which are outlined in the quantitative reconciliation provided earlier in this presentation. Management uses Adjusted operating
income to facilitate our analysis and understanding of our business operations by excluding the items outlined in the quantitative reconciliation provided earlier in this presentation which might otherwise make comparisons of
our ongoing business with prior periods more difficult and obscure trends in ongoing operations. The Company believes that Adjusted operating income is useful to investors to provide a supplemental way to understand the
underlying operating performance of the Company and monitor and understand changes in our ability to generate income from ongoing business operations. Adjusted operating income should not be considered as an
alternative to operating loss or any other performance measure derived in accordance with GAAP.
Adjusted net income (loss) and Adjusted EPS
Adjusted net income (loss) and Adjusted EPS represent net income (loss) and EPS, excluding adjustments which are more specifically outlined in the quantitative reconciliation provided earlier in this presentation.
Management uses Adjusted net income (loss) and Adjusted EPS to evaluate the Company's operating performance by excluding the items outlined in the quantitative reconciliation provided earlier in this presentation which
might otherwise make comparisons of our ongoing business with prior periods more difficult and obscure trends in ongoing operations. The Company believes that Adjusted net income (loss) and Adjusted EPS are useful to
investors because they provide a supplemental way to understand the underlying operating performance of the Company and allows investors to monitor and understand changes in our ability to generate income from ongoing
business operations. Adjusted net income (loss) and Adjusted EPS should not be considered as alternatives to net income, operating income or any other performance measures derived in accordance with GAAP.
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Non-GAAP Financial Measures
Continued
Adjusted EBITDA
Adjusted EBITDA represents net loss before income tax expense (benefit), interest expense, net, and depreciation and amortization expense, excluding adjustments which are more specifically outlined in the quantitative
reconciliation provided earlier in this presentation. We present Adjusted EBITDA as a supplemental measure of our performance and ability to service debt. We also present Adjusted EBITDA because we believe such
measure is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry.
We believe Adjusted EBITDA is an appropriate supplemental measure of debt service capacity, because cash expenditures on interest are, by definition, available to pay interest, and tax expense is inversely correlated to
interest expense because tax expense goes down as deductible interest expense goes up; depreciation and amortization are non-cash charges. The other items excluded from Adjusted EBITDA are excluded in order to
better reflect our continuing operations.
In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses similar to the adjustments in this presentation. Our presentation of Adjusted EBITDA should not be construed as an inference
that our future results will be unaffected by these types of adjustments. Adjusted EBITDA is not a measurement of our financial performance under GAAP and should not be considered as an alternative to net income,
operating income or any other performance measures derived in accordance with GAAP or as an alternative to cash flow from operating activities as a measure of our liquidity.
Our Adjusted EBITDA measure has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations
are:
• it does not reflect our cash expenditures, future requirements for capital expenditures or contractual commitments;
• it does not reflect changes in, or cash requirements for, our working capital needs;
• it does not reflect the significant interest expense or the cash requirements necessary to service interest or principal payment on our debt;
• although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and our Adjusted EBITDA measure does not
reflect any cash requirements for such replacements;
• it is not adjusted for all non-cash income or expense items that are reflected in our statements of cash flows;
• it does not reflect the impact of earnings or charges resulting from matters we consider not to be indicative of our ongoing operations;
• it does not reflect limitations on or costs related to transferring earnings from our subsidiaries to us; and
• other companies in our industry may calculate this measure differently than we do, limiting its usefulness as a comparative measure.
Because of these limitations, Adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business or as a measure of cash that will be
available to us to meet our obligations. You should compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA only supplementally.
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