-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Vtbp6c/1Ncazta1vTaCT1cd9/Ru36fX3eyDc35JRXX0I5YQeEwgquCATGWeYP15h ++aEN91ym7SWDlbbhzzvVA== 0000887730-97-000015.txt : 19971114 0000887730-97-000015.hdr.sgml : 19971114 ACCESSION NUMBER: 0000887730-97-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971112 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: KEMET CORP CENTRAL INDEX KEY: 0000887730 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS & ACCESSORIES [3670] IRS NUMBER: 570923789 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-20289 FILM NUMBER: 97712876 BUSINESS ADDRESS: STREET 1: 2835 KEMET WAY CITY: SIMPSONVILLE STATE: SC ZIP: 29681 BUSINESS PHONE: 8039636300 MAIL ADDRESS: STREET 1: P O BOX 5928 STREET 2: 2835 KEMET WAY CITY: SIMPSONVILLE STATE: SC ZIP: 29681 10-Q 1 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the period ended September 30, 1997. Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the period from to . ------------- ------------- Commission File Number: 0-20289 KEMET CORPORATION Exact name of registrant as specified in its charter DELAWARE 57-0923789 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 2835 KEMET WAY, SIMPSONVILLE, SOUTH CAROLINA 29681 (Address of principal executive offices, zip code) 864-963-6300 (Registrant's telephone number, including area code) Former name, former address and former fiscal year, if changed since last report: N/A Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO Common Stock Outstanding at: November 10, 1997 Title of Each Class Number of Shares Outstanding Common Stock, $.01 Par Value 38,000,226 Non-Voting Common Stock, $.01 Par Value 1,096,610 2 Part I - FINANCIAL INFORMATION ITEM 1 - Financial Statements KEMET CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in Thousands Except Per Share Data)
September 30, March 31, 1997 1997 ---------- ---------- (unaudited) ASSETS Current assets: Cash $ 3,145 $ 2,188 Notes and accounts receivable (less allowances of $9,708 and $6,999 at September 30, 1997 and March 31, 1997, respectively) 56,447 55,189 Inventories: Raw materials and supplies 33,740 35,880 Work in process 48,191 39,373 Finished goods 23,122 22,116 -------- -------- Total inventories 105,053 97,369 Prepaid expenses 2,584 2,402 Deferred income taxes 13,029 12,552 -------- -------- Total current assets 180,258 169,700 Property and equipment (less accumulated depreciation of $167,174 and $145,124 at September 30, 1997 and March 31, 1997, respectively) 359,086 319,509 Intangible assets (less accumulated amortization of $13,085 and $12,278 at September 30, 1997 and March 31, 1997, respectively) 47,624 48,431 Other assets 5,587 5,604 -------- -------- Total assets $592,555 $543,244 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable and current installments of long-term debt $ - $ 72 Accounts payable, trade 66,518 62,159 Accrued expenses 34,934 29,310 Income taxes 3,229 15,091 -------- -------- Total current liabilities 104,681 106,632 Long-term debt, excluding current installments 121,000 102,900 Other non-current obligations 67,249 68,848 Deferred income taxes 15,527 12,741 -------- -------- Total liabilities $308,457 $291,121 Stockholders' equity: Common stock, par value $.01, authorized 100,000,000 shares, issued and outstanding 37,972,281 and 37,717,011 shares at September 30, 1997 and March 31, 1997, respectively 380 377 Non-voting common stock, par value $.01, authorized 12,000,000 shares, issued and outstanding 1,096,610 at September 30, 1997 and March 31, 1997 11 11 Additional paid-in capital 143,074 139,352 Retained earnings 140,639 112,387 -------- -------- 284,104 252,127 Equity adjustments from foreign currency translation (6) (4) -------- -------- Total stockholders' equity 284,098 252,123 -------- -------- Total liabilities and stockholders' equity $592,555 $543,244 ======== ========
See accompanying notes to consolidated financial statements. 3 ITEM 1 - Financial Statements KEMET CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS OF EARNINGS (Dollars in Thousands Except Per Share Data)
Three months ended Six months ended September 30, September 30, ------------------------- ------------------ 1997 1996 1997 1996 ----- ----- ---- ---- (unaudited) (unaudited) (unaudited) (unaudited) Net Sales $165,477 $130,192 $326,681 $255,918 Operating costs and expenses: Cost of goods sold, exclusive of depreciation 115,177 87,155 225,764 171,996 Selling, general and administrative expenses 12,256 11,846 24,392 23,047 Research, development and engineering 5,423 5,677 11,051 10,458 Depreciation and amortization 9,400 8,220 18,744 16,198 Early retirement costs - 15,407 - 15,407 -------- -------- -------- -------- 142,256 128,305 279,951 237,106 Operating income 23,221 1,887 46,730 18,812 Other expense: Interest expense 1,785 1,545 3,296 2,799 Other 1,018 272 2,432 631 -------- -------- -------- -------- Earnings before income taxes 20,418 70 41,002 15,382 Income tax expense (benefit) 6,176 (203) 12,750 5,384 -------- -------- -------- -------- Net earnings available for common shareholders $14,242 $ 273 28,252 $ 9,998 ======== ======== ======== ======== Per Common Share Information: Net earnings per common share $0.36 $0.01 $0.72 $ 0.26 ======== ======== ======== ======== Weighted average shares outstanding 39,486,926 39,169,234 39,425,461 39,190,136 ========== ========== ========== ==========
See accompanying notes to consolidated financial statements. 4 ITEM 1 - Financial Statements KEMET CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands)
Six months ended September 30, --------------------------- 1997 1996 ---- ---- (unaudited) (unaudited) Sources (uses) of cash: Net cash from operating activities $38,307 $ (342) Investing activities: Additions to property and equipment (59,101) (47,397) Proceeds from disposals of property - 67 Other (2) (2) -------- -------- Net cash used by investing activities (59,103) (47,332) Financing activities: Proceeds from employees savings plan 676 757 Proceeds from exercise of stock options including related tax benefit 3,049 844 Repayment of long-term debt (72) (132) Net proceeds from revolving/swingline loan 18,100 44,725 -------- -------- Net cash provided by financing activities 21,753 46,194 -------- -------- Net increase (decrease) in cash 957 (1,480) Cash at beginning of period 2,188 3,408 ------- -------- Cash at end of period $3,145 $1,928 ======== ========
See accompanying notes to consolidated financial statements. 5 Item 1 - Financial Statements Note 1. Basis of Financial Statement Preparation The consolidated financial statements contained herein are unaudited and have been prepared from the books and records of KEMET Corporation and Subsidiaries (KEMET or the Company). In the opinion of management, the consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods. The consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and footnotes necessary for a complete presentation of financial position, results of operations and cash flows in conformity with generally accepted accounting principles. Although the Company believes that the disclosures are adequate to make the information presented not misleading, it is suggested that these consolidated financial statements be read in conjunction with the audited financial statements and notes thereto included in the Company's fiscal year ended March 31, 1997 Form 10-K. Net sales and operating results for the six months ended September 30, 1997 are not necessarily indicative of the results to be expected for the full year. The accompanying Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries. In consolidation all significant intercompany amounts and transactions have been eliminated. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS Net sales for the quarter and six months ended September 30, 1997, were $165.5 million and $326.7 million, an increase of $35.3 million or 27% and $70.8 million or 28%, respectively, from the comparable periods of the prior year. The increase in net sales was primarily attributable to increased demand for surface-mount products and the ability to broaden sales distribution channels throughout the world. This demand was achieved by continued manufacturing capacity expansion efforts. Sales of surface-mount capacitors for the quarter and six months ended September 30,1997, were $128.1 million and $247.5 million, a increase of 40% and 39%, respectively, from comparable prior year periods and sales of leaded capacitors declined 3% to $37.4 million for the three months ended September 30, 1997, and increased 2% to $79.2 million for the six months ended September 30, 1997. Sales also increased in both the domestic and export markets for the quarter and six months ended September 30, 1997, compared to the comparable prior year's periods with domestic sales increasing 24% and 25% to $94.8 million and $186.8 million, respectively, and export sales increasing by 32% in both periods to $70.7 million and $139.9 million. Cost of sales, exclusive of depreciation for the quarter and six months ended September 30, 1997, were $115.2 million and $225.8 million, respectively, as compared to $87.2 million and $172.0 million for the quarter and six months ended September 30, 1996. As a percentage of net sales, cost of sales, exclusive of depreciation was 70% and 69% for the quarter and six months ended September 30, 1997, as compared to 67% for both the comparable periods of the prior year. The increase in cost of sales as a percentage of sales is primarily 6 a result of a decline in selling prices due to aggressive, competitive pricing coupled with an unfavorable currency exchange impact. This was partially offset by improvements in manufacturing efficiencies and continued efforts to reduce manufacturing costs. Selling, general and administrative expenses for the quarter and six months ended September 30, 1997 were $12.3 million and $24.4 million (both 7% of net sales), respectively, as compared to $11.8 million and $23.0 million (both 9% of net sales) for the comparable periods of the prior year. Selling, general and administrative expenses as a percent of sales decreased primarily as a result of efficiencies associated with the increased sales volume. Research, development and engineering expenses for the quarter and six months ended September 30, 1997, were $5.4 million and $11.1 million, respectively, as compared to $5.7 million and $10.5 million for the prior comparable periods. The increase reflects the Company's continued development of new products such as the Tantalum T510 and the Ceramic 1632 array and engineering expenditures focused on manufacturing efficiencies. Depreciation and amortization expense for the quarter and six months ended September 30, 1997, were $9.4 million and $18.7 million, respectively, as compared to $8.2 million and $16.2 million for the prior comparable periods. The increase resulted primarily from increased capital expenditures over the past fiscal years. The Company recorded a pretax charge of $15.4 million ($9.9 million after tax) in its prior fiscal quarter ended September 30, 1996, in connection with an early retirement incentive program. Operating income for the quarter and six months ended September 30, 1997, was $23.2 million and $46.7 million, respectively, compared to $1.9 million and $18.8 million for the comparable periods in the prior year. The increase in operating income for the current year resulted primarily from the increase in net sales. Also, prior year's operating income was effected by the early retirement incentive program as discussed above. Income tax expense totaled $6.2 million for the quarter ended September 30, 1997, compared to an income tax benefit of $0.2 million for the quarter ended September 30, 1996. Income tax expense for the six months ended September 30, 1997, was $12.8 million or 31.0% of earnings as compared to $5.4 million or 35% of earnings for the comparable period of the prior year. The decrease in the effective rate for the six months ended September 30, 1997, was primarily the result of increased foreign sales corporation benefits and various state tax savings strategies, which were put in place late in fiscal year 1997. Liquidity and Capital Resources The Company's liquidity needs arise primarily from working capital requirements, capital expenditures and interest payments on its indebtedness. The Company intends to satisfy its liquidity requirements primarily with funds provided by operations, and borrowings under its credit facilities. 7 Additional liquidity is generated by the Company through its accounts receivable discounting arrangements. On August 26, 1996, KEMET Electronics, S.A., a wholly owned subsidiary of the Company, renewed its discounting agreement with Swiss Bank Corporation through September 30, 1997. The Company is currently in discussions with Swiss Bank to extend this accounts receivable discounting arrangement through March 31, 1998. The Company is also in discussions with other banks to replace this financing arrangement. In the event that the arrangement with Swiss Bank is not continued and a new bank or banks do not replace this financing arrangement, the Company intends to use a portion of its unused revolving credit facility to finance its liquidity needs abroad. Cash flows from operating activities for the six months ended September 30, 1997, amounted to a surplus of $38.3 million compared with a $0.3 million deficit for the six months ended September 30, 1996. The increase in cash flows was primarily a result of the increase in net income and the timing of cash flows from current assets and liabilities such as accounts receivables, inventories, accounts payables, accrued liabilities and income taxes payable. Capital expenditures invested to support current and long-term growth were $59.1 million for the six months ended September 30, 1997 compared to $47.4 million for the six months ended September 30, 1996. The Company continues to invest in capital that will support KEMET's long-term growth objectives. The Company plans to invest approximately $80 million in fiscal year 1998 in tantalum and ceramic surface-mount manufacturing capacity. During the six months ended September 30, 1997, the Company increased its indebtedness (long-term debt and current portion of long-term debt) by $18.1 million which resulted primarily from the financing of capital expenditures. The Company had unused availability under its revolving credit facilities as of September 30, 1997 of approximately $54.0 million. The Company believes its strong financial position will permit the financing of its business needs and opportunities in an orderly manner. It is anticipated that ongoing operations will be financed primarily by internally generated funds. In addition, the Company has the flexibility to meet short-term working capital and other temporary requirements through the utilization of borrowings under its credit facilities. PART II - OTHER INFORMATION Item 1. Legal Proceedings. Other than as reported in the Company's Form 10-K for the fiscal year ended March 31, 1997 under the caption "Item 3. Legal Proceedings", the Company is not currently a party to any material pending legal proceeding, other than routine litigation incidental to the business of the Company. Item 2. Change in Securities. None. 8 Item 3. Defaults Upon Senior Securities. None. Item 4. Submission of Matters to a Vote of Security Holders. (a) The Company held its Annual Meeting of Stockholders on July 23, 1997. (b) Proxies for the meeting were solicited pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended. There was no solicitation in opposition to management's nominees for directors as listed in the definitive proxy statement of the Company dated as of June 24, 1997, and such nominees were elected. (c) Briefly described below is each matter voted upon at the Annual Meeting of Stockholders. (i) Election of Directors of the Company. All of proxy nominees for directors as listed in the proxy statement were elected for a three year term with the following vote: Broker Nominee In Favor Against Abstained Non-Votes -------- ----------- ---------- --------- ----------- Charles E. Volpe 33,814,865 0 205,730 200 Charles E. Corpening 33,758,262 0 149,127 200 (ii) The ratification of the appointment of KPMG Peat Marwick LLP, independent certified public accountants, to examine the financial statements of the Company for the fiscal year ending March 31, 1998: Broker In Favor Against Abstained Non-Votes ---------- -------- --------- ---------- 33,847,946 22,367 93,679 200 Item 5. Other Information. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits: 10.1 First Amendment to Credit Agreement among KEMET Corporation, Wachovia Bank, N.A. as agent, and the Banks named in the Credit Agreement dated as of the 30th day of August 1997. 11.1 Computation of Per Share Earnings. (b) Reports on Form 8-K. None. 9 Signatures Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: November 10, 1997 KEMET Corporation /S/ D.R. Cash D.R. Cash Senior Vice President of Administration and Treasurer (Principal Accounting and Financial Officer) EX-10.1 2 1 FIRST AMENDMENT TO CREDIT AGREEMENT THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is made as of the 30th day of August, 1997, among KEMET CORPORATION, a Delaware corporation (the "Borrower"); WACHOVIA BANK, N.A. as Agent (successor by merger to Wachovia Bank of Georgia, N.A. and hereinafter referred to as the "Agent") under the Credit Agreement (as herein defined) and the BANKS named in the Credit Agreement. Background: The Borrower, the Agent and the Banks have entered into a certain Credit Agreement dated as of October 18, 1996 (the "Credit Agreement"). The Borrower, the Agent and the Banks wish to amend the Credit Agreement in certain respects, as hereinafter provided. NOW, THEREFORE, the parties hereto agree as follows: SECTION 1. Definitions. Capitalized terms used herein which are not otherwise defined herein shall have the respective meanings assigned to them in the Credit Agreement. SECTION 2. Amendment. Section 5.07 of the Credit Agreement is hereby amended by deleting the "and" appearing at the end of clause (c)(ii) of such Section and by adding at the end of such Section the following: ", and (e) Guarantees of loans or advances to employees made in the ordinary course of business and consistent with practices existing on the Closing Date, provided, that the aggregate outstanding principal amount of loans or advances so Guaranteed plus the aggregate principal amount of loans or advances outstanding under Section 5.06(i) does not exceed One Million ($1,000,000) at any time". SECTION 3. No Other Amendment. Except for the amendment set forth above, the text of the Credit Agreement shall remain unchanged and in full force and effect. This Amendment is not intended to effect, nor shall it be construed as, a novation. The Credit Agreement and this Amendment shall be construed together as a single instrument and any reference to the "Agreement" or any other defined term for the Credit Agreement in the Credit Agreement, the Notes or any certificate, instrument or other document delivered pursuant thereto shall mean the Credit Agreement as amended hereby and as it may be amended, supplemented or otherwise modified hereafter. SECTION 4. Representation and Warranties. The Borrower hereby represents and warrants in favor of the Agent and the Banks as follows: (a) No Default or Event of Default under the Credit Agreement has occurred and is continuing on the date hereof; (b) The Borrower has the corporate power and authority to enter into this Amendment and to do all acts and things as required or contemplated hereunder to be done, observed and performed by it; (c) This Amendment has been duly authorized, validly executed and delivered by one or more authorized officers of the Borrower and each of this Amendment and the Credit Agreement, as amended hereby constitutes the legal, valid and binding obligation of the Borrower enforceable against it in accordance with its terms; provided, that the enforceability of each of this Amendment and the Credit Agreement as amended hereby is subject to general principles of equity and to bankruptcy, insolvency and similar laws affecting the enforcement of creditors' 2 rights generally; and (d) The execution and delivery of this Amendment and the Borrower's performance hereunder and under the Credit Agreement as amended hereby do not and will not require the consent or approval of any regulatory authority or governmental authority or agency having jurisdiction over the Borrower other than those which have already been obtained or given, nor be in contravention of or in conflict with the Articles of Incorporation or Bylaws of the Borrower, or the provision of any statute, or any judgment, order or indenture, instrument, agreement or undertaking, to which to Borrower is a party or by which its assets or properties are or may become bound. SECTION 5. Counterparts. This Amendment may be executed in multiple counterparts, each of which shall be deemed to be an original and all of which, taken together, shall constitute one and the same agreement. SECTION 6. Governing Law. This Amendment shall be deemed to be made pursuant to the laws of the State of Georgia with respect to agreements made and to be performed wholly in the State of Georgia and shall be construed, interpreted, performed and enforced in accordance therewith. SECTION 7. Effective Date. This Amendment shall become effective as of August 30, 1997, upon receipt by the Agent from each of the parties hereto of either a duly executed signature page from a counterpart of the Amendment or a facsimile transmission of a duly executed Default or Event of Default occurred or would have occurred under the Credit Agreement because the amendment contained herein were not yet incorporated in the Credit Agreement, such Defaults or Events of Default are hereby waived as of August 30, 1997. 3 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to by duly executed under seal by their respective authorized officers as of the day and year first above written. BORROWER: KEMET CORPORATION By: /S/ D.R. Cash [SEAL] Title: Senior Vice President - Administration & Treasurer [Remainder of this page intentionally left blank] 4 WACHOVIA BANK, N.A. (successor by merger to Wachovia Bank of Georgia, N.A. and Wachovia Bank of South Carolina, N.A. and formerly known as Wachovia Bank of North Carolina, N.A.), as Agent and as a Bank By: /S/ Suzanne Morrison [SEAL] Title: Assistant Vice President [Remainder of this page intentionally left blank] 5 ABN AMRO BANK N.V. ATLANTA AGENCY, as Co-Agent and Bank By: /S/ Linda K. Davis [SEAL] Title: Vice President By: /S/ Steven L. Hipsman Title: Vice President [Remainder of this page intentionally left blank] 6 SUNTRUST BANK, ATLANTA By: /S/ J.P. Owen [Seal] Title: Banking Officer By: /S/ Brian K. Peters [Seal] Title: Vice President [Remainder of this page intentionally left blank] 7 FIRST UNION NATIONAL BANK OF SOUTH CAROLINA By: /S/ Frank R. Wrenn III [SEAL] Title: Senior Vice President [Remainder of this page intentionally left blank] 8 PNC BANK, NATIONAL ASSOCIATION By: /S/ Rose M. Crump [SEAL] Title: Vice President [Remainder of this page intentionally left blank] 9 BANK OF AMERICAN NT & SA By: /S/ Laurens F. Schaad, Jr. [SEAL] Title: Vice President [Remainder of this page intentionally left blank] 10 THE SAKURA BANK, LIMITED By: /S/ Hiroyasu Imanishi [SEAL] Title: Vice President & Senior Manager [Remainder of this page intentionally left blank] EX-11.1 3 1 EXHIBIT 11.1 COMPUTATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA
Six months ended September 30, ------------------ 1997 1996 --------- --------- Primary: Net earnings available for common and common equivalent shares $28,252 $9,998 ----------- ---------- Weighted average common and common equivalent shares outstanding 39,425,461 39,190,136 ----------- ---------- Primary earnings per common share $0.72 $0.26 =========== ========== Fully Diluted: Net earnings available for common and common equivalent shares $28,252 $9,998 ----------- ---------- Weighted average common and common equivalent shares outstanding assuming ending market price 39,483,988 39,190,252 ----------- ---------- Fully diluted earnings per common share $0.72 $0.26 =========== ==========
EX-27 4
5 1000 6-MOS MAR-31-1998 SEP-30-1997 3145 0 66155 9708 105053 180258 526260 167174 592555 104681 0 0 0 380 283718 592555 326681 326681 225764 279951 2432 0 3296 41002 12750 28252 0 0 0 28252 .72 .72
-----END PRIVACY-ENHANCED MESSAGE-----