EX-99.1 2 a06-11590_1ex99d1.htm EX-99

Exhibit 99.1

 

News Release

 

FOR IMMEDIATE RELEASE

 

Contact:

David E. Gable

 

Senior Vice President and Chief Financial Officer

 

davidgable@KEMET.com

 

864-963-6484

 

KEMET Corporation Reports 4th Quarter and Fiscal Year 2006 Results

 

For the 4th Quarter:

 

·                  Net Sales were $133.4 million, up 32% over same quarter last year and 6% sequentially

 

·                  Gross Margin increased to 21%

 

·                  Net Income before special charges improved to $10.7 million, or $0.12 per share

 

For the Fiscal Year:

 

·                  Net Sales were $490.1 million, up 15% over fiscal 2005

 

•                  Net Income before special charges improved to $17.7 million, or $0.20 per share, compared to a net loss of $51.2 million, or ($0.59) per share, in fiscal 2005

 

Greenville, South Carolina (May 4, 2006) - KEMET Corporation (NYSE:KEM) today reported that net sales for the quarter ended March 31, 2006, were $133.4 million, which represents a 6% increase over the previous quarter and a 32% increase over the same quarter last year. Net income before special charges improved to $10.7 million, or $0.12 per share, compared to $6.1 million, or $0.07 per share, last quarter and a net loss of $16.7 million, or ($0.19) per share, for the same quarter last year. On a GAAP basis, there was a net loss of $2.3 million, or ($0.03) per share, for the quarter compared to the previous quarter’s net income of $1.5 million and a net loss of $125.9 million for the same quarter last year. KEMET also reports results before special charges because the results offer an alternative depiction of normal operations. Comparisons to prior periods are as follows:

 

 

 

Quarter Ended

 

Year Ended

 

 

 

Mar 2006

 

Dec 2005

 

Mar 2005

 

Mar 2006

 

Mar 2005

 

 

 

(In Millions, Except Per Share Data)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

133.4

 

$

126.0

 

$

101.4

 

$

490.1

 

$

425.3

 

 

 

 

 

 

 

 

 

 

 

 

 

Before special charges (non-GAAP)

 

 

 

 

 

 

 

 

 

 

 

Net income/(loss)

 

$

10.7

 

$

6.1

 

$

(16.7

)

$

17.7

 

$

(51.2

)

Net income/(loss) per diluted share

 

$

0.12

 

$

0.07

 

$

(0.19

)

$

0.20

 

$

(0.59

)

 

 

 

 

 

 

 

 

 

 

 

 

After special charges (GAAP)

 

 

 

 

 

 

 

 

 

 

 

Net income/(loss)

 

$

(2.3

)

$

1.5

 

$

(125.9

)

$

0.4

 

$

(174.1

)

Net income/(loss) per diluted share

 

$

(0.03

)

$

0.02

 

$

(1.45

)

$

0.00

 

$

(2.01

)

 

“I have now completed my first year with KEMET, and I’m very proud of our fiscal 2006 results,” stated Mr. Per Loof, Chief Executive Officer. “It was a year of change, transition, and new opportunities, and I am extremely pleased with the way the organization responded to these challenges. Our financial performance improved steadily throughout the year as we focused

 


 

our energies on initiatives to grow revenue and increase our profitability. This focus, combined with a stronger market and an improving pricing environment, resulted in significant financial improvement for our shareholders.

 

“In addition to the efforts undertaken to optimize our business operations, we also signed a major strategic alliance during the year and, on April 13, 2006, we closed on a significant acquisition in Europe, both of which we believe will produce positive results in the future. As we move into fiscal 2007, we will continue to build on our fiscal 2006 successes, allowing us to provide the highest quality products and services for our customers and even better financial results for our shareholders.”

 

The Company will hold a conference call at 9:00 am ET Thursday, May 4, 2006, to discuss the earnings release. 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 #: 7589096. 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/IR. A replay of the conference call will be available until midnight May 18, 2006, at the same link.

 

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.

 

OUR BUSINESS
 

The following statements are based on current expectations. These statements may contain forward-looking information, and consequently actual results may differ materially. Current global economic conditions make it particularly difficult at present to predict product demand and other related matters.

 

·                  Sales of surface-mount capacitors were 84.2% of net sales, and sales of leaded parts were 15.8% of net sales for the March 2006 quarter.

 

·                  By region, 40.6% of net sales for the March 2006 quarter were to customers in North America, 37.9% were to Asia, and 21.5% were to Europe.

 

·                  By channel, 58.9% of net sales for the March 2006 quarter were to distribution customers, 20.0% were to Electronics Manufacturing Services customers, and 21.1% were to Original Equipment Manufacturing customers. Average selling prices for the March 2006 quarter, adjusted for changes in product mix, were basically flat.

 

·                  Cash and short- and long-term investments in marketable securities increased $27.0 million to $235.9 million during the March 2006 quarter, from $208.9 million at December 31, 2005. The increase was related primarily to improved operating performance and working capital management. During the quarter, the Company changed its accounting treatment of investments from “investments held to maturity” to “investments held for sale.”  As a result of this change, the cash balance was negatively impacted by $3 million.

 

·                  During the March 2006 quarter, inventories increased $3.1 million to $125.1 million from $122.0 million at December 31, 2005. Raw materials and supplies decreased $3.8 million in the March 2006 quarter, and work-in-process and finished goods increased $6.9 million. Since March 2005, inventories have decreased by $8.8 million and inventory turns have improved to over 3.4 times per year.

 

 

 

Fiscal Year Ended

 

Fiscal Quarter Ended

 

 

 

Mar 2003

 

Mar 2004

 

Mar 2005

 

Jun 2005

 

Sep 2005

 

Dec 2005

 

Mar 2006

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Raw materials and supplies

 

$

91.3

 

$

59.8

 

$

47.5

 

$

46.4

 

$

47.4

 

$

49.5

 

$

45.7

 

Work in process and finished goods

 

92.7

 

69.2

 

86.4

 

79.3

 

76.6

 

72.5

 

79.4

 

Total inventory

 

$

184.0

 

$

129.0

 

$

133.9

 

$

125.7

 

$

124.0

 

$

122.0

 

$

125.1

 

 

2


 

·                  Capital expenditures for the March 2006 quarter were $7.8 million. Depreciation and amortization expense in the quarter was $8.9 million.

 

 

 

Fiscal Year Ended

 

Fiscal Quarter Ended

 

 

 

2003

 

2004

 

2005

 

2006

 

Jun 2005

 

Sep 2005

 

Dec 2005

 

Mar 2006

 

 

 

(In Millions)

 

Additions to property, plant and equipment

 

$

22.2

 

$

25.8

 

$

39.6

 

$

22.8

 

$

6.4

 

$

7.3

 

$

1.3

 

$

7.8

 

 

·                  For fiscal 2006, KEMET anticipates continuing 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 continue to enhance research and development focused on organic polymer tantalum and high-capacitance ceramic capacitor technologies. The selling, general and administrative expenses for the March 2006 quarter included $0.5 million of integration costs related to the acquisition of the EPCOS tantalum business unit.

 

 

 

Fiscal Year

 

Fiscal Quarter Ended

 

 

 

2003

 

2004

 

2005

 

2006

 

Jun 2005

 

Sep 2005

 

Dec 2005

 

Mar 2006

 

 

 

(In Millions)

 

SG&A

 

$

54.4

 

$

51.2

 

$

51.7

 

$

49.7

 

$

12.2

 

$

12.1

 

$

12.3

 

$

13.1

 

R&D

 

$

25.3

 

$

24.4

 

$

26.6

 

$

26.0

 

$

6.2

 

$

6.1

 

$

6.3

 

$

7.4

 

 

·                  In connection with the ongoing development of our medical products business, during the quarter the Company recognized $2.9 million of income from the sale of some intellectual property. This is expected to lead to future opportunities and benefits as the Company expands this business.

 

·                  The manufacturing moves to low-cost regions are substantially complete. Two manufacturing operation moves still remain to be made which are the anode manufacturing move to Mexico, which is currently in process, and the tantalum polymer manufacturing move to China, which has not yet started. It is expected that both moves will be completed by the end of fiscal year 2007.

 

Charges related to the movement of manufacturing operations in the March 2006 quarter were $1.0 million bringing the total manufacturing relocation charges to approximately $41.9 million to date.

 

Summary of special charges in the March 2006 quarter, net of tax:

 

 

 

(In Millions)

 

Manufacturing relocations

 

$

1.0

 

Impairment loss on real property

 

12.1

 

Reduction in Previous Restructuring Accruals

 

(0.6

)

Restructuring Charges

 

12.5

 

EPCOS Integration Costs

 

0.5

 

Total Special Charges

 

$

13.0

 

 

QUIET PERIOD

Beginning July 1, 2006, KEMET will observe a Quiet Period during which the information 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, this information should be considered to be historical, applying prior to the Quiet Period only and not subject to update by the Company. The Quiet Period will extend until the day when KEMET’s next quarterly earnings release is published.

 

3


 

This release contains certain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. We intend that these forward-looking statements be subject to the safe harbor created by that provision. These forward-looking statements involve risks and uncertainties and include, but are not limited to, statements regarding future events and our plans, goals, and objectives. Our actual results may differ materially from these statements. These risks, trends, and uncertainties, which in some instances are beyond our control, include: risks associated with the cyclical nature of the electronics industry, the requirement to continue to reduce the cost of our products, the competitiveness of our industry, an increase in the cost of our raw materials, the location of several of our plants in Mexico, China, and Portugal, and the possible loss of key employees. Although we believe that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove to be inaccurate. Therefore, we can give no assurance that the results contemplated in these forward-looking statements will be realized. The inclusion of this forward-looking information should not be regarded as a representation by our Company or any person that the future events, plans, or expectations contemplated by our Company will be achieved. Furthermore, past performance in operations and share price is not necessarily predictive of future performance.

 

4


 

KEMET CORPORATION AND SUBSIDIARIES

CONSOLIDATED GAAP STATEMENTS OF OPERATIONS

(Dollars in Thousands Except Per Share Data)

Unaudited

 

 

 

Three months ended

 

Twelve months ended

 

 

 

March 31,

 

March 31,

 

 

 

2006

 

2005

 

2006

 

2005

 

 

 

 

 

 

 

 

 

 

 

Income Statement Data:

 

 

 

 

 

 

 

 

 

Net sales

 

$

133,406

 

$

101,431

 

$

490,106

 

$

425,338

 

Cost of goods sold

 

105,551

 

104,264

 

399,264

 

402,974

 

Gain on long-term supply contract

 

—

 

(628

)

—

 

(11,767

)

Selling, general and administrative expenses

 

13,114

 

13,790

 

49,660

 

51,734

 

Research and development

 

7,370

 

6,217

 

25,976

 

26,639

 

Pension settlement charges

 

—

 

400

 

—

 

618

 

Gain on sale of intellectual property

 

(2,917

)

—

 

(2,917

)

—

 

Restructuring charges

 

12,457

 

107,431

 

28,319

 

129,982

 

 

 

 

 

 

 

 

 

 

 

Operating loss

 

(2,169

)

(130,043

)

(10,196

)

(174,842

)

 

 

 

 

 

 

 

 

 

 

Interest expense

 

1,667

 

1,677

 

6,628

 

6,511

 

Interest income

 

(1,452

)

(1,419

)

(5,640

)

(6,295

)

Other (income)/expense

 

(331

)

(4,956

)

916

 

(2,849

)

Income tax (benefit)/expense

 

218

 

573

 

(12,475

)

1,885

 

 

 

 

 

 

 

 

 

 

 

Net (loss)/income

 

$

(2,271

)

$

(125,918

)

$

375

 

$

(174,094

)

 

 

 

 

 

 

 

 

 

 

(Loss)/Income Per Share Data:

 

 

 

 

 

 

 

 

 

Net (loss)/income per share:

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.03

)

$

(1.45

)

$

0.00

 

$

(2.01

)

Diluted

 

$

(0.03

)

$

(1.45

)

$

0.00

 

$

(2.01

)

 

 

 

 

 

 

 

 

 

 

Weighted-average shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

86,866,937

 

86,548,572

 

86,721,589

 

86,518,923

 

Diluted

 

86,866,937

 

86,548,572

 

86,779,653

 

86,518,923

 

 

5


 

KEMET CORPORATION AND SUBSIDIARIES

PRO FORMA RECONCILIATION OF RESULTS BEFORE SPECIAL CHARGES TO GAAP RESULTS

(Dollars in Thousands, Except Per Share Data)

Unaudited

 

 

 

Three months ended March 31, 2006

 

 

 

Before

 

 

 

 

 

 

 

 

 

Special

 

Special

 

See

 

GAAP

 

 

 

Charges

 

Charges

 

Note

 

Results

 

Income Statement Data:

 

 

 

 

 

 

 

 

 

Net sales

 

$

133,406

 

$

—

 

 

 

$

133,406

 

Cost of goods sold

 

105,551

 

 

 

 

 

105,551

 

Selling, general and administrative expenses

 

12,606

 

508

 

(1)

 

13,114

 

Research and development

 

7,370

 

 

 

 

 

7,370

 

Gain on sale of intellectual property

 

(2,917

)

 

 

 

 

(2,917

)

Restructuring charges

 

—

 

12,457

 

(2)

 

12,457

 

 

 

 

 

 

 

 

 

 

 

Operating income/(loss)

 

10,796

 

(12,965

)

 

 

(2,169

)

 

 

 

 

 

 

 

 

 

 

Interest expense

 

1,667

 

 

 

 

 

1,667

 

Interest income

 

(1,452

)

 

 

 

 

(1,452

)

Other (income)/expense

 

(331

)

 

 

 

 

(331

)

Income tax (benefit)/expense

 

218

 

 

 

 

 

218

 

 

 

 

 

 

 

 

 

 

 

Net income/(loss)

 

$

10,694

 

$

(12,965

)

 

 

$

(2,271

)

 

 

 

 

 

 

 

 

 

 

Income/(Loss) Per Share Data:

 

 

 

 

 

 

 

 

 

Net income/(loss) per share:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.12

 

$

(0.15

)

 

 

$

(0.03

)

Diluted

 

$

0.12

 

$

(0.15

)

 

 

$

(0.03

)

 

 

 

 

 

 

 

 

 

 

EBITDA

 

$

19,709

 

 

 

 

 

$

6,744

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

86,866,937

 

86,866,937

 

 

 

86,866,937

 

Diluted

 

86,982,546

 

86,866,937

 

 

 

86,866,937

 

 

Notes:

(1) - EPCOS integration costs were $0.5 million for the quarter ended March 31, 2006.

 

(2) - Restructuring costs were a net $12.5 million dollars as follows:

 

Impairment loss on real property

 

$

12,092

 

Manufacturing relocations

 

956

 

Reversal of previously recorded restructuring accruals

 

(591

)

Total restructuring charges

 

$

12,457

 

 

6


 

 

 

Twelve months ended March 31, 2006

 

 

 

Before

 

 

 

 

 

 

 

 

 

Special

 

Special

 

See

 

GAAP

 

 

 

Charges

 

Charges

 

Note

 

Results

 

Income Statement Data:

 

 

 

 

 

 

 

 

 

Net sales

 

$

490,106

 

$

—

 

 

 

$

490,106

 

Cost of goods sold

 

399,264

 

 

 

 

 

399,264

 

Selling, general and administrative expenses

 

49,152

 

508

 

(1)

 

49,660

 

Research and development

 

25,976

 

 

 

 

 

25,976

 

Gain on sale of intellectual property

 

(2,917

)

 

 

 

 

(2,917

)

Restructuring charges .

 

—

 

28,319

 

(2)

 

28,319

 

 

 

 

 

 

 

 

 

 

 

Operating income/(loss)

 

18,631

 

(28,827

)

 

 

(10,196

)

 

 

 

 

 

 

 

 

 

 

Interest expense

 

6,628

 

 

 

 

 

6,628

 

Interest income

 

(5,640

)

 

 

 

 

(5,640

)

Other (income)/expense

 

324

 

592

 

(3)

 

916

 

Income tax (benefit)/expense

 

(355

)

(12,120

)

(4)

 

(12,475

)

 

 

 

 

 

 

 

 

 

 

Net income/(loss)

 

$

17,674

 

$

(17,299

)

 

 

$

375

 

 

 

 

 

 

 

 

 

 

 

Income/(Loss) Per Share Data:

 

 

 

 

 

 

 

 

 

Net income/(loss) per share:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.20

 

$

(0.20

)

 

 

$

0.00

 

Diluted

 

$

0.20

 

$

(0.20

)

 

 

$

0.00

 

 

 

 

 

 

 

 

 

 

 

EBITDA

 

$

54,880

 

 

 

 

 

$

26,053

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

86,721,589

 

86,721,589

 

 

 

86,721,589

 

Diluted

 

86,779,653

 

86,721,589

 

 

 

86,779,653

 

 

 

 

 

 

 

 

 

 

 

 

Notes:

(1) - EPCOS integration costs were $0.5 million for the quarter ended March 31, 2006.

 

(2) - Restructuring costs were a net $28.3 million dollars as follows:

 

Impairment loss on real property

 

$

12,092

 

Manufacturing relocations

 

8,813

 

Reversal of previously recorded restructuring accruals

 

(591

)

Loss on sale of property

 

1,356

 

Reduction in force

 

6,649

 

Total restructuring charges

 

$

28,319

 

 

(3) - Writedown on an investment in a unconsolidated subsidiary of $0.6 million.

 

(4) - Tax benefit not previously recognized of $12.1 million.

 

7


 

KEMET CORPORATION AND SUBSIDIARIES

CONSOLIDATED GAAP BALANCE SHEETS

(Dollars in Thousands)

Unaudited

 

 

 

March 31, 2006

 

March 31, 2005

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

163,778

 

$

26,898

 

Short-term investments in marketable securities

 

4,889

 

34,992

 

Accounts receivable, net

 

68,457

 

59,228

 

Inventories

 

125,070

 

133,935

 

Prepaid expenses and other current assets

 

9,244

 

9,571

 

Deferred income taxes

 

4,725

 

5,945

 

Total current assets

 

376,163

 

270,569

 

Property, plant and equipment, net

 

253,030

 

279,626

 

Property held for sale

 

4,776

 

2,326

 

Long-term investments in marketable securities

 

67,195

 

157,576

 

Investments in affiliates

 

972

 

682

 

Goodwill

 

30,471

 

30,471

 

Intangible assets, net

 

12,506

 

13,512

 

Other assets

 

4,705

 

3,335

 

 

 

 

 

 

 

Total assets

 

$

749,818

 

$

758,097

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

$

20,000

 

$

—

 

Accounts payable, trade

 

47,250

 

38,943

 

Accrued expenses

 

30,899

 

34,617

 

Income taxes payable

 

8,597

 

12,430

 

Total current liabilities

 

106,746

 

85,990

 

Long-term debt

 

80,000

 

100,000

 

Other non-current obligations

 

44,139

 

48,951

 

Deferred income taxes

 

6,230

 

7,953

 

Total liabilities

 

237,115

 

242,894

 

 

 

 

 

 

 

Common stock

 

881

 

880

 

Additional paid-in capital

 

315,501

 

317,728

 

Retained earnings

 

221,221

 

220,846

 

Accumulated other comprehensive income 

 

(2,343

)

2,669

 

Treasury stock, at cost

 

(22,557

)

(26,920

)

Total stockholders’ equity

 

512,703

 

515,203

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

749,818

 

$

758,097

 

 

8