-----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, SnKe+G36/gk2omkKbOyEDUamzvFyPHLIRQ6iq3Fujs8cqheJm8BB3/Jf88GyuBo0 TXvYOwXFjX2Y2XXdtuqIiQ== 0000887730-99-000008.txt : 19990813 0000887730-99-000008.hdr.sgml : 19990813 ACCESSION NUMBER: 0000887730-99-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990812 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: 99686203 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 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 June 30, 1999. [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. ` Commission File Number: 0-20289 KEMET CORPORATION Exact name of registrant as specified in its charter DELAWARE 57-0923789 (State or other (IRS Employer jurisdiction of Identification No.) incorporation or organization) 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: August 10, 1999 Title of Each Class Number of Shares Outstanding - -------------------------------------------------------------------------------- Common Stock, $.01 Par Value 38,252,448 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)
June 30, March 31, 1999 1999 ------- -------- (unaudited) ASSETS Current assets: Cash $ 12,974 $ 3,914 Accounts receivable (less allowances of $7,533 and $6,225 June 30, 1999 and March 31, 1999, respectively) 64,064 57,784 Inventories: Raw materials and supplies 52,447 45,288 Work in process 53,819 52,225 Finished goods 22,261 28,306 -------- -------- Total inventories 128,527 125,819 Prepaid expenses 2,909 2,951 Income taxes receivable 1,856 1,855 Deferred income taxes 11,094 10,899 -------- -------- Total current assets 221,424 203,222 Property and equipment (less accumulated depreciation of $242,204 and $229,055 at June 30, 1999 and March 31, 1999, respectively) 410,258 406,735 Intangible assets (less accumulated amortization of $15,983 and $15,584 at June 30, 1999 and March 31, 1999, respectively) 44,799 46,268 Other assets 8,549 7,465 -------- -------- Total assets $685,030 $663,690 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current installments of long-term debt $ 20,000 $20,000 Accounts payable, trade 76,541 64,750 Accrued expenses 27,894 28,101 Income taxes 1,580 - -------- -------- Total current liabilities 126,015 112,851 Long-term debt, excluding current installments 146,000 144,000 Other non-current obligations 69,393 69,394 Deferred income taxes 24,738 23,771 -------- -------- Total liabilities 366,146 350,016 Stockholders' equity: Common stock, par value $.01, authorized 100,000,000 shares, issued and outstanding 38,213,630 and 38,158,290 shares at June 30, 1999 and March 31, 1999, respectively 382 382 Non-voting common stock, par value $.01, authorized 12,000,000 shares, issued and outstanding 1,096,610 at June 30, 1999 and March 31, 1999 11 11 Additional paid-in capital 146,018 145,482 Retained earnings 172,421 167,727 Accumulated other comprehensive income 52 72 -------- -------- Total stockholders' equity 318,884 313,674 -------- -------- Total liabilities and stockholders' equity $685,030 $663,690 ======== ========
See accompanying notes to consolidated financial statements. 3 ITEM 1 - Financial Statements KEMET CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (Dollars in Thousands Except Per Share Data)
Three months ended June 30, ---------------------------- 1999 1998 -------- -------- (unaudited) (unaudited) Net Sales $162,649 $142,471 Operating costs and expenses: Cost of goods sold, exclusive of depreciation 122,984 107,266 Selling, general and administrative expenses 10,944 12,179 Research, development and engineering 4,388 6,153 Depreciation and amortization 13,040 10,878 -------- -------- Total operating costs and expenses 151,356 136,476 Operating income 11,293 5,995 Other expense: Interest expense 2,734 2,494 Other 1,656 1,299 -------- -------- Total other expense 4,390 3,793 Earnings before income taxes 6,903 2,202 Income tax expense 2,209 705 -------- -------- Net earnings $ 4,694 $ 1,497 ======== ======== Per Common Share Information: Net earnings per share: Basic $ 0.12 $ 0.04 Diluted $ 0.12 $ 0.04 Weighted average shares outstanding: Basic 39,285,558 39,185,382 Diluted 39,889,061 39,390,046
See accompanying notes to consolidated financial statements. 4 ITEM 1 - Financial Statements KEMET CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands)
Three months ended June 30, -------------------------- 1999 1998 -------- -------- (unaudited) (unaudited) Sources (uses) of cash: Net cash from operating activities $23,676 (1,893) Investing activities: Additions to property and equipment (17,132) (27,874) Proceeds from disposals of property - - (4) Other (20) (51) -------- -------- Net cash used by investing activities (17,152) (27,929) Financing activities: Proceeds from employees savings plan 328 405 Proceeds from exercise of stock options including related tax benefit 208 126 Net proceeds/(repayments) from revolving/swingline loan 2,000 (69,850) Proceeds from Senior Notes - - 100,000 -------- -------- Net cash provided by financing activities 2,536 30,681 -------- -------- Net increase in cash 9,060 859 Cash at beginning of period 3,914 1,801 -------- -------- Cash at end of period $12,974 $2,660 ======== ========
See accompanying notes to consolidated financial statements. 5 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 ending March 31, 1999 Form 10-K. Net sales and operating results for the three months ended June 30, 1999 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. Note 2. Reconciliation of basic earnings per common share to diluted earnings per common share. In accordance with FASB Statement No. 128, the Company has included the following table presenting a reconciliation of basic EPS to diluted EPS fully displaying the effect of dilutive securities. Computation Of Basic And Diluted Earnings Per Share (Dollars in Thousands Except Per Share Data)
For the three months ended June 30, 1999 1998 ---------------------------------------- - ----------------------------------- Per Per Income Shares Share Income Shares Share (numerator) (denominator) Amount (numerator) (denominator) Amount ---------- ------------ ------- - ---------- ------------ ------- Basic EPS Income available to common stockholders $ 4,694 39,285,558 $ 0.12 $ 1,497 39,185,382 $ 0.04 Effect of diluted securities Stock Options - 603,503 - - - 204,664 - ---------- ------------ ------- - --------- ------------ ------- Diluted EPS Income available to common stockholders plus assumed conversions $ 4,694 39,889,061 $ 0.12 $ 1,497 39,390,046 $ 0.04
6 Note 3. Stock Options In fiscal 1999, the Company's Board of Directors approved an option re-price program for the Executive Stock Option Plan effective April 1, 1999. Under this program, options to purchase 396,000 shares of the Company's Common Stock at prices ranging from $19.25 to $32.13 per share were canceled and reissued at $12.00 per share with vesting dates ranging from October 1999 to April 2000. Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition RESULTS OF OPERATIONS Three Month Period Ended June 30, 1999 and Three Month Period Ended June 30, 1998 Net sales for the three months ended June 30, 1999 increased 14% to $162.6 million from $142.5 million for the three months ended June 30, 1998. The increase in net sales resulted from higher demand for surface-mount tantalum and multilayer ceramic capacitors. Sales of surface-mount capacitors were $134.2 million for the first quarter of fiscal 1999, an increase of 18% from $113.5 million in the prior year's first quarter. Globally, domestic sales increased 14% to $87.4 million during the quarter. Export sales, led by an increase in sales in Asia of 48%, increased 15% to $75.2 million as compared to the prior year's first quarter. Cost of sales, exclusive of depreciation, for the three months ended June 30, 1999 was $123.0 million compared to $107.3 million for the three months ended June 30, 1998. As a percentage of net sales, cost of sales, exclusive of depreciation, increased slightly to 76% compared to 75% for the prior year quarter. Selling, general and administrative expenses for the three months ended June 30, 1999 were $10.9 million, or 7% of net sales, as compared to $12.2 million, or 9% of net sales, for the three months ended June 30, 1998. Selling, general and administrative expenses as a percent of sales decreased primarily as a result of increased sales volume and the Company's continued cost reduction activities. Depreciation and amortization expense was $13.0 million for the three months ended June 30, 1999, as compared to $10.9 million from the prior year's first quarter and resulted primarily from increased capital expenditures over the past fiscal years. Operating income for the three months ended June 30, 1999 was $11.3 million compared to $6.0 million for the three months ended June 30, 1998. The increase resulted primarily from the increase in net sales as discussed above. Income tax expense was 32.0% of earnings for the three month periods ended June 30, 1999 and 1998. The difference from the statutory income tax rate was primarily the result of increased foreign sales corporation benefits and the implementation of various state tax savings strategies. 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, borrowings under its revolving credit facility and amounts advanced under its foreign accounts receivable discounting arrangements. 7 Cash flows from operating activities for the three months ended June 30, 1999 amounted to a surplus of $23.7 million compared to a deficit of $1.9 million for the three months ended June 30, 1998. The increase in cash flow 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 were $17.1 million for the three months ended June 30, 1999 compared to $27.9 million for the three months ended June 30, 1998. The first quarter's expenditures reflect the completion of projects initiated during fiscal year 1999. The Company estimates its capital expenditures for fiscal year 2000 to be approximately $60.0 million. During the three months ended June 30, 1999 the Company increased its indebtedness (long-term debt and current portion of long-term debt) by $2.0 million which consisted primarily of the financing of capital expenditures. As of June 30, 1999, the Company had unused availability under its revolving credit facility and swingline loan of approximately $104.0 million and $10.0 million, respectively. In May 1998, the Company sold $100.0 million of its Senior Notes pursuant to the terms of the Note Purchase Agreement dated as of May 1, 1998, between the Company and the eleven purchasers of the Senior Notes named therein. These Senior Notes have a final maturity date of May 4, 2010, with required principal repayments beginning on May 4, 2006. The Senior Notes bear interest at a fixed rate of 6.66%, with interest payable semiannually beginning November 4, 1998. The terms of the Note Purchase Agreement include various restrictive covenants typical of transactions of this type, and require the Company to meet certain financial tests including a minimum net worth test and a maximum ratio of debt to total capitalization. KEMET 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 utilization of its borrowings under its bank credit facilities. Impact of Year 2000 The Company has a Year 2000 Readiness Program that began in December 1996. The scope of the program includes all business-critical operations in all locations worldwide. Areas assessed include business applications, technical infrastructure, facilities, end-user computing, manufacturing, and suppliers. Overall, the Readiness Program was completed by July 15, 1999. The Company's plan to resolve the Year 2000 issue includes the process of inventory, assessment, remediation, testing, and implementation. As of July 15, 1999, the Company had completed 100% of the inventory, assessment, remediation, testing, and implementation work. The Company's Readiness Program is a combination of both internal and external resources to reprogram, implement, test, or replace existing hardware and software. The total cost of the program was approximately $6.5 million and will be funded through operating cash flows. As of June 30, 1999, the Company had expended $6.3 million related to the Year 2000 Readiness Program. 8 Suppliers that are not prepared for the Year 2000 issues could have an impact on the Company's ability to meet customer requirements. To reduce this risk, the Company has conducted a survey of key suppliers to determine potential exposure to Year 2000 issues. Suppliers not in compliance will be expected to be in compliance before the issue could affect delivery. Date-sensitive equipment and software are required to be Year 2000 ready before being approved for purchase. The Company has developed for our internal systems and suppliers a comprehensive contingency plan with respect to year 2000. To ensure worldwide consistency, standard formats were designed for risk assessment and contingency plans. A database was created to develop, approve and maintain these documents and monitor the project. The Company's comprehensive contingency plan was completed July 1999. From time to time, information provided by the Company, including but not limited to statements in this report, or other statements made by or on behalf of the Company, may contain "forward-looking" information within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934. Such statements involve a number of risks and uncertainties. The Company's actual results could differ materially from those discussed in the forward-looking statements. The cautionary statements set forth in the Company's 1999 Annual Report under the heading Safe Harbor Statement identify important factors that could cause actual results to differ materially from those in any forward-looking statements made by or on behalf of the Company. Part II - OTHER INFORMATION Item 1. Legal Proceedings. Other than as reported above and in the Company's fiscal year ending March 31, 1999 Form 10-K under the caption "Item 3. Legal Proceedings", the Company is not currently a party to any material pending legal proceedings, other than routine litigation incidental to the business of the Company. Item 2. Change in Securities. None. Item 3. Defaults Upon Senior Securities. None. Item 4. Submission of Matters to a Vote of Security Holders. None. Item 5. Other Information. On July 21, 1999, at the Company's annual meeting, shareholders re-elected E. Erwin Maddrey, II as Director of the Company to serve a three-year term. The Company's shareholders also approved the appointment of KPMG LLP as independent public accountants for the fiscal year ending March 31, 2000. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. 10.1 Fifth Amendment to Credit Agreement between KEMET Corporation, Wachovia Bank, N.A. as Agent, and the Banks named in the Credit Agreement dated as of June 30, 1999. (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: August 13, 1999 KEMET Corporation /S/ D.R. Cash -------------------------- D.R. Cash Senior Vice President of Administration, Treasurer and Assistant Secretary (Principal Accounting and Financial Officer) EX-27 2
5 1000 3-MOS MAR-31-1999 JUN-30-1999 12974 0 71597 7533 128527 221424 652462 242204 685030 126015 0 0 0 382 318884 685030 162649 162649 122984 151356 1656 0 2734 6903 2209 4694 0 0 0 4694 .12 .12
EX-10 3 FIFTH AMENDMENT TO CREDIT AGREEMENT THIS FIFTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is made as of the 30th day of June, 1999, 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, as amended by a First Amendment to Credit Agreement dated as of August 30, 1997, as further amended by a Second Amendment to Credit Agreement dated as of March 31, 1998, as further amended by a Third Amendment to Credit Agreement dated as of September 9, 1998 and as further amended by a Fourth Amendment to Credit Agreement dated as of December 31, 1998 (as amended, the "Credit Agreement"). The Borrower, the Agent and the Banks wish to further 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 and restated in its entirety to read as follows: SECTION 5.07. Investments. Neither the Borrower nor any of its Subsidiaries shall make Investments in any Person except (a) as permitted by Section 5.06, (b) for Permitted Investments and Hedging Transactions, (c) that the Borrower and any Subsidiary shall be permitted to acquire (whether through the organization of a Subsidiary or otherwise) all or any portion of the capital stock or securities of any Person engaged in the business or businesses substantially similar to any business currently conducted by the Borrower or any Subsidiary or make capital contributions to any Wholly-Owned Subsidiary which is not a Guarantor, but only to the extent that (i) the cost of any such acquisition or the amount of any such capital contribution, when aggregated with the total cost of all such acquisitions occurring after the Closing Date and the total amount of all such capital contributions made after the Closing Date, does not exceed the Test Amount on the day such acquisition occurs or such capital contribution is made, and (ii) after giving effect to such acquisition or capital contribution no Default shall exist, (d) Investments in Guarantors, (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 Dollars ($1,000,000) at any time, (f) Investments by Subsidiaries in the Borrower, and (g) an Investment by Borrower in an insurance company providing insurance to the Borrower, provided the amount of such Investment shall not exceed $50,000 in the aggregate and the percentage ownership of the Borrower in such insurance company shall not exceed 10%. 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. Representations 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 are 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' 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 the 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 the date first set forth above, upon receipt by the Agent from each of the parties hereto of either a duly executed signature page from a counterpart of this Amendment or a facsimile transmission of a duly executed signature page from a counterpart of this Amendment, signed by such party. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be 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 and Treasurer Date executed: June 30, 1999 [Remainder of this page intentionally left blank] 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/ Marshall Meier [SEAL] Title: Vice President [Remainder of this page intentionally left blank] ABN AMRO BANK N.V. ATLANTA AGENCY, as Co-Agent and Bank By: /S/ Bruce W. Swords [SEAL] Title: Vice President [Remainder of this page intentionally left blank] SUNTRUST BANK, ATLANTA By: /S/ R. Michael Dunlap [SEAL] Title: Director By: /S/ Brian K. Peters [SEAL] Title: Director [Remainder of this page intentionally left blank] FIRST UNION NATIONAL BANK (formally known as First Union National Bank of South Carolina) By: /S/ Frank Wrenn III [SEAL] Title: Senior Vice President [Remainder of this page intentionally left blank] BANK OF AMERICA NT & SA By: /S/ Michael J. Dasher [SEAL] Title: Managing Director [Remainder of this page intentionally left blank] -----END PRIVACY-ENHANCED MESSAGE-----