KEMET Reports Financial Results for Quarter Ending September 30, 2005
GREENVILLE, S.C., Oct. 26, 2005 -- KEMET Corporation today reported financial results for the quarter ended September 30, 2005. Net sales for the quarter were $116.6 million and net loss was $1.9 million or $0.02 per share. Before special charges, the net income was $1.3 million, or $0.02 per share. 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
Sep 2005 Jun 2005 Sep 2004
(In Millions, Except Per Share Data)
Net sales $116.6 $114.1 $106.0
Before special charges (non-GAAP)
Net income/(loss) $1.3 $(0.3) $(16.7)
Net income/(loss) per diluted share $0.02 $(0.00) $(0.19)
After special charges (GAAP)
Net income/(loss) $(1.9) $3.0 $(7.5)
Net income/(loss) per diluted share $(0.02) $0.03 $(0.09)
"I am pleased with the results for the quarter as net income before special charges was $1.3 million or $0.02 per share," stated Mr. Per Loof, Chief Executive Officer. "The improvement in our results was a combination of higher sales volumes and our recent cost reduction actions. This quarter, while profitable, still does not get us to the level of profitability that we desire. We will continue to drive down our costs and continue to find opportunities to improve our profitability.
"We did experience some improvements in pricing in some product lines during the quarter, however, mix adjusted average selling prices decreased 3% to 4% in the aggregate from the previous quarter. Capacity utilization, however, remains at approximately 85%, with the ceramics utilization rate running slightly higher than tantalum. I am also pleased to report that we have begun shipping commercial volumes of our tantalum polymer capacitors from our second facility in Suzhou, China in September. The new facility was necessary due to increasing demand for this product particularly in Asia.
"As you can see from our recent news releases, exciting things are happening at KEMET. Our recently announced strategic alliance with Taiyo Yuden has been well received by our customers, and I am pleased with our continued progress. We are in advanced discussions with EPCOS to purchase their Tantalum Capacitor Business, as we announced last week. If completed, this would significantly enhance our global tantalum position in the market.
"I have now been with KEMET for six months. I have been impressed with the team and their commitment to succeed. The positive results are a testimony to this fact. However, this turnaround journey has just begun. We will continue to strive for excellence and to provide to our customers the best products in the industry. I am confident that the KEMET team will be able to capitalize on opportunities presented in the quarters to come."
As of September 30, 2005, KEMET had $213.0 million in cash and short and long-term investments in marketable securities, $100.0 million in debt, and $518.9 million in stockholders' equity.
The Company will hold a conference call at 9:00 am ET Wednesday, October 26, 2005, to discuss the earnings release. The call will last approximately one hour, and after an initial presentation, questions will be taken as time permits. 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 #: 1416997. 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 November 9, 2005, 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 consequentially 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 83.6% of net sales, and sales of leaded parts were 16.4% of net sales for the September 2005 quarter. - By region, 42.7% of net sales for the September 2005 quarter were to customers in North America, 40.8% were to Asia, and 16.5% were to Europe. - By channel, 55.8% of net sales for the September 2005 quarter were to distribution customers, 23.4% were to Electronic Manufacturing Services customers, and 20.8% were to Original Equipment Manufacturing customers. Average selling prices for the September 2005 quarter, adjusted for changes in product mix, decreased approximately 3% to 4% from average selling prices for the June 2005 quarter. - In July 2003, KEMET announced the reorganization of its operations around the world, resulting in the location of virtually all of its production in low cost regions and to be completed in 2005. KEMET estimates it will incur special charges of approximately $42 million ($39 million disclosed previously) over the period of the reorganization related to movement of manufacturing operations. The increase is due to additional reorganization activities that were not part of the original plan as the Company initiated more aggressive reductions to improve profitability.
Completed portions of KEMET's announced move of production have occurred in accordance with the anticipated time line. Charges related to movement of manufacturing operations in the September 2005 quarter were $3.2 million bringing the total manufacturing relocation charges to approximately $39.6 million to date. The Company has substantially completed its relocation of production to low cost regions of the world.
Summary of special charges in the September 2005 quarter, net of tax:
(In Millions)
Manufacturing relocation (Restructuring charges) $3.2
Special after tax charges $3.2
- For fiscal 2006, KEMET anticipates maintaining 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 are
continuing to enhance research and development, focused on organic
polymer tantalum and high-capacitance ceramic capacitor technologies.
Fiscal Year Fiscal Quarter Ended
Dec Mar Jun Sep
2003 2004 2005 2004 2005 2005 2005
(In Millions)
SG&A $54.4 $51.2 $51.7 $12.0 $13.8 $12.2 $12.1
R&D $25.3 $24.4 $26.6 $7.5 $6.2 $6.2 $6.0
- Capital expenditures for the September 2005 quarter were $7.3 million.
Fiscal Year Ended Fiscal Quarter Ended
Dec Mar Jun Sep
2003 2004 2005 2004 2005 2005 2005
(In Millions)
Additions to property,
plant and equipment $22.2 $25.8 $39.6 $10.8 $12.0 $6.4 $7.3
- Depreciation and amortization expense in the quarter were $8.1 million.
- During the September 2005 quarter, inventories decreased $1.7 million
to $124.0 million from $125.7 million at June 30, 2005. Raw materials
and supplies increased $1.0 million in the September 2005 quarter, and
work in process and finished goods decreased $2.7 million.
Fiscal Year Ended Fiscal Quarter Ended
Mar Mar Mar Dec Mar Jun Sep
2003 2004 2005 2004 2005 2005 2005
(In Millions)
Raw materials
and supplies $91.3 $59.8 $47.5 $56.7 $47.5 $46.4 $47.4
Work in process
and finished goods 92.7 69.2 86.4 91.6 86.4 79.3 76.6
$184.0 $129.0 $133.9 $148.3 $133.9 $125.7 $124.0
- Cash and short and long-term investments in marketable securities
during the September 2005 quarter decreased $5.6 million to
$213.0 million from $218.6 million at June 30, 2005. This decrease is
due to capital expenditures, reduction in force payouts, and
manufacturing relocation expenditures, partially offset by cash from
operations.
QUIET PERIOD
Beginning January 1, 2006, KEMET will observe a Quiet Period during which the information provided in this news release and the Company's quarterly report on Form 10-Q 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 and China, 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.
KEMET CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands Except Per Share Data)
Unaudited
Three months ended Six months ending
September 30, September 30,
2005 2004 2005 2004
Income Statement Data:
Net sales $116,608 $106,022 $230,712 $228,405
Cost of goods sold 97,463 102,773 192,453 202,896
Gain on long-term supply
contract - (11,139) - (11,139)
Selling, general and
administrative expenses 12,067 13,062 24,293 25,500
Research and development 6,008 6,637 12,225 13,375
Pension settlement charges - 218 - 218
Restructuring charges 3,154 1,649 11,327 4,199
Operating loss (2,084) (7,178) (9,586) (6,644)
Interest expense 1,639 1,579 3,307 3,202
Interest income (1,402) (1,455) (2,727) (3,365)
Other (income)/expense (57) 11 1,007 2,296
Income tax (benefit)/expense (354) 152 (12,298) 539
Net (loss)/income $(1,910) $(7,465) $1,125 $(9,316)
(Loss)/Income Per Share Data:
Net (loss)/income per share:
Basic $(0.02) $(0.09) 0.01 $(0.11)
Diluted $(0.02) $(0.09) 0.01 $(0.11)
Weighted-average shares
outstanding:
Basic 86,653,831 86,506,738 86,633,143 86,500,694
Diluted 86,653,831 86,506,738 86,696,023 86,500,694
KEMET CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
Unaudited
September 30, 2005 March 31, 2005
ASSETS
Cash and cash equivalents $36,135 $26,898
Short-term investments in marketable
securities 55,077 34,992
Accounts receivable, net 67,351 59,228
Inventories 123,988 133,935
Prepaid expenses and other current assets 12,286 9,571
Deferred income taxes 5,107 5,945
Total current assets 299,944 270,569
Property, plant and equipment, net 275,245 279,626
Property held for sale 4,683 2,326
Long-term investments in marketable
securities 121,750 157,576
Investments in affiliates 590 682
Goodwill 30,471 30,471
Intangible assets, net 13,010 13,512
Other assets 3,383 3,335
Total assets $749,076 $758,097
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt $20,000 $-
Accounts payable, trade 36,128 38,943
Accrued expenses 29,151 34,617
Income taxes payable 10,424 12,430
Total current liabilities 95,703 85,990
Long-term debt 80,000 100,000
Other non-current obligations 47,252 48,951
Deferred income taxes 7,174 7,953
Total liabilities 230,129 242,894
Common stock 881 880
Additional paid-in capital 317,246 317,728
Retained earnings 221,971 220,846
Accumulated other comprehensive income 4,428 2,669
Treasury stock, at cost (25,579) (26,920)
Total stockholders' equity 518,947 515,203
Total liabilities and
stockholders' equity $749,076 $758,097