8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC  20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15 (d) of

The Securities Exchange Act of 1934

Date of Report (date of earliest event reported):  May 14, 2007

KEMET Corporation

(Exact name of registrant as specified in its charter)

Delaware	0-20289	57-0923789
(State or other	(Commission File Number)	(IRS Employer
jurisdiction)	Identification No.)

2835 KEMET Way, Simpsonville, SC	29681
(Address of principal executive offices)	(Zip Code)

Registrants telephone number, including area code:  (864) 963-6300

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o            Written communications pursuant to Rule 425 under the Securities Act (17 CRS    230.425)

o            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o            Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13a-4c))

Item 2.02 Results of Operations and Financial Condition

On May 9, 2007, KEMET Corporation issued a News Release announcing consolidated financial results for the quarter and fiscal year ending March 31, 2007.

A copy of this News Release is furnished as Exhibit 99.1 to this Form 8-K.

Item 5.02 Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers.

(a)Not applicable.

(b)Not applicable.

(c)Effective May 8, 2007, the Board of Directors of KEMET Corporation (the “Company”) approved certain additions and modifications to the compensation plan of its Chief Executive Officer, Per-Olof Loof. These additions and modifications are as follows:

a.The annual base salary for the fiscal year ending March 31, 2008 (“FY2008”) is established at     $585,000.

b.An annual bonus plan based upon the achievement of certain target financial metrics for FY 2008 has been established. Mr. Loof has the potential to receive a bonus of up to 100% of his annual base salary (the “Target Bonus”), which is subject to a multiplier equal to 2.0 times the Target Bonus, in each case if the target financial metrics are met or are exceeded by defined parameters. (The maximum bonus payable for FY2008 is, therefore, 2.0 times Mr. Loof’s annual base salary.)

Effective May 8, 2007, the Board of Directors of the Company approved the annual bonus payment in the amount of $1,104,000 applicable to FY2007 and the issuance of 50,000 shares of restricted stock of the Company based on the achievement of previously established financial metrics.

Effective May 8, 2007, the Board of Directors of the Company approved certain additions and modifications to the compensations plans for its other executive officers. These additions and modifications are as follows:

a.The annual base salary for FY2008 is established as follows:

i.David E. Gable, Senior Vice President and Chief Financial Officer:  $286,500

ii.Dennis R. Constantine, Senior Vice President and Chief of Staff:  $324,000 (no change)

iii.J. Kelly Vogt, Senior Vice President, Marketing and Sales:  $273,800

iv.Larry C. McAdams, Vice President, Human Resources:  $225,000

b.An annual bonus plan based upon the achievement of certain target financial metrics for FY2008 has been established. Each executive officer has the potential to receive a bonus of between 40% and 60% of his annual base salary (the “Executive Officer Target Bonus”), which is subject to a multiplier equal to 2.0 times the Executive Officer Target Bonus, in each case if the target financial metrics are met or exceeded by defined parameters. (The maximum bonus payable for FY2008 will vary by position, and will range from 0.8 times annual base salary to 1.2 times annual base salary.)

Effective May 8, 2007, the Board of Directors of the Company approved annual bonus payments in the amount of $388,800, $270,300, $247,760 and $168,714 for Messrs. Constantine, Gable, Vogt and McAdams, respectively, which were applicable to FY2007 based on the achievement of previously established financial metrics.

Item 9.01 Financial Statements and Exhibits

(a)   Not applicable

(b)   Not applicable

(d)   Exhibits

99.1   News Release, dated May 9, 2007 issued by the Company

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Signature

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: May 14, 2007	KEMET Corporation
	/s/ David E. Gable
	David E. Gable
	Senior Vice President and
	Chief Financial Officer

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EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE

Contact:             David E. Gable

            Senior Vice President and Chief Financial Officer

            davidgable@KEMET.com

            864-963-6484

KEMET Reports Results of 4th Quarter and Fiscal Year 2007

·Net Sales were $658.7 million for fiscal year 2007, up 34% over last year

·Gross Margin for the year was 21.4%, up from 18.5% last year

·Net Income on a pro-forma basis was $42.7 million or $0.50 per share, up 140% from FY 2006

Greenville, South Carolina (May 9, 2007) - - KEMET Corporation (NYSE:KEM) today reported that net sales for the quarter ended March 31, 2007, were $157.1 million which is an 18% increase over the same quarter last year and 5% lower than the prior quarter.  Net income before special charges was $8.3 million, or $0.10 per share, compared to $10.7 million, or $0.12 per share, for the same quarter last year and $12.3 million, or $0.15 per share, for the prior quarter.  On a GAAP basis, net income was $0.1 million, or $0.00 per share, for the current quarter compared to a net loss of $2.3 million for the same quarter last year and net income of $5.3 million for the prior quarter.  KEMET 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 2007		Dec 2006		Mar 2006			Mar 2007		Mar 2006
	(In Millions, Except Per Share Data)
Net sales	$	157.1	$	165.5	$	133.4		$	658.7	$	490.1
Before special charges and SFAS No. 123R (non-GAAP)
Net income	$	8.3	$	12.3	$	10.7		$	42.7	$	17.8
Net income per diluted share	$	0.10	$	0.15	$	0.12		$	0.50	$	0.21
After special charges and SFAS No. 123R (GAAP)
Net income/(loss)	$	0.1	$	5.3	$	(2.3	)	$	6.9	$	0.4
Net income/(loss) per diluted share	$	0.00	$	0.06	$	(0.03	)	$	0.08	$	0.00

“We are extremely pleased with the Company’s results for the fiscal year ended March 31, 2007,” stated Per Loof, Chief Executive Officer.  “With revenues up 34% and net income before special charges up 140% over the prior year, we exceeded all our expectations.  We are tracking a full year ahead of the improvement plan I established when I joined KEMET two years ago and I am confident that we will continue to make progress in the years to come.”

“The results in the fiscal fourth quarter, though generally in line with our expectations given normal seasonality and the impact of the Chinese New Year, need to improve and will improve.  Our acquisition strategy is intended to mitigate future volatility.  Our relentless efforts to reduce our costs will continue as we work every day to provide better solutions for our customers and increased profitability for our shareholders.”

“We are pleased to note that we closed the purchase of Evox Rifa Group Oyj on April 24, 2007.  This complementary business brings us one step closer to becoming The Capacitance Company.  We would like to welcome every Evox Rifa customer and employee into the KEMET family, and look forward to new opportunities to provide capacitance solutions around the world.  Our success in integrating the tantalum business unit acquired from EPCOS during the past fiscal year gives us confidence that we will see accretive results from the new Evox Rifa businesses as well in fiscal year 2008.”

The Company will hold a conference call at 9:00 am ET Wednesday, May 9, 2007, to discuss this 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 #: 5684155. 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 23, 2007, 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.

·      Net sales of the Tantalum Business Group were $99.8 million, and net sales of the Ceramics Business Group were $57.3 million for the March 2007 quarter.

·      By region, 34% of net sales for the March 2007 quarter were to customers in the Americas, 40% were to customers in Asia Pacific, and 26% were to customers in Europe.

·      By channel, 54% of net sales for the March 2007 quarter were to distribution customers, 22% were to Electronics Manufacturing Services customers, and 24% were to Original Equipment Manufacturing customers. Average selling prices for the March 2007 quarter, adjusted for changes in product mix, were basically flat.

·      Cash and long-term investments in marketable securities increased $3.9 million to $258.0 million during the March 2007 quarter, from $254.2 million at December 31, 2006.

·      During the March 2007 quarter, inventories increased $8.0 million to $153.9 million from $145.9 million at December 31, 2006.  Raw materials and supplies decreased $0.4 million in the March 2007 quarter, and work in process and finished goods increased $8.4 million.

	Fiscal Year Ended						Fiscal Quarter Ended
	Mar 2004		Mar 2005		Mar 2006		Jun 2006		Sept 2006		Dec 2006		Mar 2007
	(In Millions)
Raw materials and supplies	$	59.8	$	47.5	$	45.7	$	46.7	$	48.8	$	55.0	$	54.6
Work in process and finished goods	69.2		86.4		79.4		85.4		88.6		90.9		99.3
Total inventory	$	129.0	$	133.9	$	125.1	$	132.1	$	137.4	$	145.9	$	153.9

     Capital expenditures for the March 2007 quarter were $10.7 million.  Depreciation and amortization expense in the quarter was $9.9 million.  Net capital expenditures for fiscal year 2007 were $35.3 million.  The Company anticipates capital expenditures for fiscal year 2008 of $45 to $50 million, including approximately $7 million of capital expenditures at our new Evox Rifa facilities.

	Fiscal Year Ended								Fiscal Quarter Ended
	Mar 2004		Mar 2005		Mar 2006		Mar 2007		Jun 2006		Sept 2006		Dec 2006		Mar 2007
	(In Millions)
Additions to property, plant and equipment	$	25.8	$	39.6	$	22.8	$	35.3	$	3.7	$	8.9	$	12.0	$	10.7

·      For fiscal year 2008, KEMET anticipates continuing our investments in key customer relationships through our direct sales and customer service professionals. We will make investments in research and development to improve our competitive position in the capacitor industry, working to become a technology leader. We continue to invest in research and development activities with a primary focus on organic polymer tantalum and high-capacitance ceramic capacitor technologies.  We will also invest additional resources in research and development activities for our Evox Rifa businesses.

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	Fiscal Year Ended								Fiscal Quarter Ended
	Mar 2004		Mar 2005		Mar 2006		Mar 2007		Jun 2006		Sept 2006		Dec 2006		Mar 2007
	(In Millions)
Selling, General & Admin.	$	51.2	$	51.7	$	49.7	$	89.4	$	23.9	$	21.2	$	21.2	$	23.1
Research & Development	$	24.4	$	26.6	$	26.0	$	33.4	$	7.8	$	7.4	$	8.8	$	9.4

·              The increase in SG&A expenses for the March 2007 quarter as compared to the prior quarter was due primarily to year end accounting adjustments for incentive based compensation and higher European tantalum integration costs.

·              The increase in R&D costs reflects the Company’s continuing efforts to be The Capacitance Company.  KEMET introduced over 3,000 new Ceramics part numbers during the March 2007 quarter. KEMET also introduced 125 new Tantalum products during the quarter of which 41 were first to market.

·      The manufacturing moves to low-cost regions are substantially complete.  Two manufacturing operation moves still remain to be made.  One is the anode manufacturing move to Mexico, which is currently in process, and the other is the tantalum polymer manufacturing move to China, which was started in the fiscal first quarter 2007.  It is expected that both moves will be completed by the end of calendar 2007.

Summary of special charges in the March 2007 quarter:

	Fiscal Quarter
	Ended
	March 2007
	(In Millions)
Manufacturing relocation		$	2.5
Property writedown		0.1
Reduction in workforce		0.1
Restructuring charges		$	2.7	Shown separately on income statement
EPCOS tantalum business unit integration		4.2		Included in SG&A expenses
Impact of SFAS No. 123R “Share-Based Payment”		1.3		Included in SG&A expenses
Special charges		$	8.2

As of the end of the March 2007 quarter, all European tantalum integration activities are complete, and the Company does not anticipate any future costs associated with those activities.

QUIET PERIOD

Beginning July 1, 2007, 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.

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.

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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
	2007			2006			2007			2006
Income Statement Data:
Net sales	$	157,077		$	133,406		$	658,714		$	490,106
Cost of goods sold	124,744			105,551			517,443			399,264
Selling, general and administrative expenses	23,077			13,114			89,450			49,660
Research and development	9,418			7,370			33,385			25,976
Gain on sale of intellectual property	—			(2,917		)	—			(2,917		)
Restructuring charges	2,658			12,457			12,572			28,319
Operating income/(loss)	(2,820		)	(2,169		)	5,864			(10,196		)
Interest expense	2,110			1,667			7,174			6,628
Interest income	(2,361		)	(1,452		)	(6,283		)	(5,640		)
Other (income)/expense	(1,666		)	(331		)	(2,486		)	916
Income tax (benefit)/expense	(1,031		)	218			563			(12,475		)
Net income/(loss)	$	128		$	(2,271	)	$	6,896		$	375
Income/(Loss) Per Share Data:
Net income/(loss) per share:
Basic	$	0.00		$	(0.03	)	$	0.08		$	0.00
Diluted	$	0.00		$	(0.03	)	$	0.08		$	0.00
Weighted-average shares outstanding:
Basic	83,746,252			86,866,937			85,647,914			86,721,589
Diluted	83,875,700			86,866,937			85,795,486			86,779,653

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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, 2007
	Before
	Special			Special			See	GAAP
	Charges			Charges			Note	Results
Net sales	$	157,077						$	157,077
Cost of goods sold	124,744							124,744
Selling, general and administrative expenses	17,577			$	5,500		(1)(2)	23,077
Research and development	9,418							9,418
Restructuring charges	—			2,658			(3)	2,658
Operating income/(loss)	5,338			(8,158		)		(2,820		)
Interest expense	2,110							2,110
Interest income	(2,361		)					(2,361		)
Other (income)/expense	(1,666		)					(1,666		)
Income tax (benefit)/expense	(1,031		)					(1,031		)
Net income/(loss)	$	8,286		$	(8,158	)		$	128
Income/(Loss) Per Share Data:
Net income/(loss) per share:
Basic	$	0.10		$	(0.10	)		$	0.00
Diluted	$	0.10		$	(0.10	)		$	0.00
Weighted-average shares outstanding:
Basic	83,746,252			83,746,252				83,746,252
Diluted	83,875,700			83,746,252				83,875,700

Notes:

(1) - EPCOS tantalum business unit integration costs were $4.2 million for the quarter ended March 31, 2007.

(2) - Includes the impact of $1.3 million related to the implementation SFAS No. 123R “Share-Based Payment.” 

(3) - Restructuring costs were $2.7 million as follows:

Manufacturing relocation	$          2.5
Property writedown	0.1
Reduction in workforce	0.1
Total restructuring charges	$          2.7

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KEMET CORPORATION AND SUBSIDIARIES

PRO FORMA RECONCILIATION OF RESULTS BEFORE SPECIAL CHARGES TO GAAP RESULTS

(Dollars in Thousands, Except Per Share Data)

Unaudited

	Twelve months ended March 31, 2007
	Before
	Special			Special			See	GAAP
	Charges			Charges			Note	Results
Net sales	$	658,714						$	658,714
Cost of goods sold	517,443							517,443
Selling, general and administrative expenses	66,396			$	23,054		(1)(2)	89,450
Research and development	33,385							33,385
Restructuring charges	—			12,572			(3)	12,572
Operating income/(loss)	41,490			(35,626		)		5,864
Interest expense	7,174							7,174
Interest income	(6,283		)					(6,283		)
Other (income)/expense	(2,646		)	160			(4)	(2,486		)
Income tax (benefit)/expense	563							563
Net income/(loss)	$	42,682		$	(35,786	)		$	6,896
Income/(Loss) Per Share Data:
Net income/(loss) per share:
Basic	$	0.50		$	(0.42	)		$	0.08
Diluted	$	0.50		$	(0.42	)		$	0.08
Weighted-average shares outstanding:
Basic	85,647,914			85,647,914				85,647,914
Diluted	85,795,486			85,647,914				85,795,486

Notes:

(1) - - EPCOS tantalum business unit integration costs were $16.2 million for the twelve months ended March 31, 2007.

(2) - - Includes the impact of $6.8 million related to the implementation SFAS No. 123R “Share-Based Payment.”

(3) - Restructuring costs were $12.6 million as follows:

Manufacturing relocation	$	9.6
Property writedown	0.2
Reduction in workforce	2.8
Total restructuring charges	$	12.6

(4) - Write-off related to acquisition of EPCOS tantalum business unit of $160 thousand.

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KEMET CORPORATION AND SUBSIDIARIES

CONSOLIDATED GAAP BALANCE SHEETS

(Dollars in Thousands)

Unaudited

	March 31, 2007			March 31, 2006
ASSETS
Cash and cash equivalents	$	212,202		$	163,778
Short-term investments	—			4,889
Accounts receivable, net	108,830			68,457
Inventories	153,868			125,070
Prepaid expenses and other current assets	6,816			7,822
Deferred income taxes	5,071			4,647
Total current assets	486,787			374,663
Property, plant and equipment, net	349,174			253,303
Property held for sale	3,647			4,502
Long-term investments in marketable securities	45,767			67,195
Investments in affiliates	119			972
Goodwill	36,552			30,471
Intangible assets, net	14,260			12,506
Other assets	7,110			4,706
Total assets	$	943,416		$	748,318
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current portion of long-term debt	$	20,000		$	20,000
Accounts payable, trade	70,799			47,251
Accrued expenses	49,777			32,303
Income taxes payable	7,225			5,770
Total current liabilities	147,801			105,324
Long-term debt	238,744			80,000
Other non-current obligations	19,587			44,139
Deferred income taxes	1,526			6,152
Total liabilities	407,658			235,615
Common stock	881			881
Additional paid-in capital	321,329			315,500
Retained earnings	228,117			221,221
Accumulated other comprehensive income	30,419			(2,343		)
Treasury stock, at cost	(44,988		)	(22,556		)
Total stockholders’ equity	535,758			512,703
Total liabilities and stockholders’ equity	$	943,416		$	748,318

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