KEMET Corporation (“KEMET” or the “Company”) (NYSE: KEM), a leading
global supplier of passive electronic components, today reported
results for its third fiscal quarter ended December 31, 2019.
"Our overall non-GAAP adjusted gross margin and adjusted EBITDA
margin remained strong at 31.9% and 19.3%, respectively, during the
third fiscal quarter, despite a decrease in sales due to the
general slow-down in the electronics industry and distribution
inventory corrections. These strong margins are further proof that
the structural changes we have made in our operations are firmly
ingrained in our margin structure. We are collaborating with
our distribution partners to further decrease inventory in the
channel during our fourth fiscal quarter. Closer alignment of
end-customer demand with our shipments should enable us to create
opportunities for revenue growth as we enter our next fiscal year
in April,” stated William M. Lowe Jr., KEMET’s Chief Executive
Officer. “We are closely monitoring the Coronavirus situation as it
impacts our China facilities and we are conforming to the
regulations imposed by the governmental authorities for the timing
of employees returning back to work with the extension of the New
Year's holiday. It is too early to know whether it will have a
measurable impact to our fourth fiscal quarter revenue,” continued
Lowe.
For the three-month and nine-month periods ended
December 31, 2019, net sales were $294.7 million and $967.4
million, respectively, compared to $350.2 million and $1.0 billion,
respectively, for the same period last year.
GAAP operating margin for the quarter ended December 31,
2019 decreased to 9.7% compared to 17.6% for the quarter ended
December 31, 2018. Non-GAAP adjusted operating margin for the
quarter ended December 31, 2019 decreased to 13.7% compared to
19.9% for the quarter ended December 31, 2018. Cash on the
balance sheet was $208.4 million at December 31, 2019.
GAAP net income was $16.6 million or $0.28 per diluted share for
the quarter ended December 31, 2019, compared to GAAP net
income of $40.8 million or $0.69 per diluted share for the quarter
ended December 31, 2018.
Non-GAAP adjusted net income was $27.6 million or $0.46 per
diluted share for the quarter ended December 31, 2019,
compared to non-GAAP adjusted net income of $62.7 million or $1.06
per diluted share for the quarter ended December 31, 2018.
Net income for the quarters ended December 31, 2019,
September 30, 2019, and December 31, 2018 include various
items affecting comparability as denoted in the GAAP to non-GAAP
reconciliation table included hereafter.
Yageo Merger Update
In a separate release dated February 4, 2020, KEMET also
announced the merger transaction with Yageo is proceeding per plan
with several key milestones already completed. The transaction is
on track to close in the second half of 2020.
Presentation of Non-GAAP Financial Measures
The Company has presented certain historical financial measures
that have not been prepared in accordance with GAAP, including
adjusted gross margin, adjusted operating margin, adjusted earnings
per share, and adjusted EBITDA margin. Definitions of our non-GAAP
financial measures and a reconciliation to the most directly
comparable GAAP financial measures are included in the financial
schedules accompanying this news release.
About KEMET
The Company’s common stock is listed on the NYSE under the
ticker symbol “KEM” (NYSE: KEM). At the Investor Relations
section of our web site at http://www.KEMET.com/IR, users may
subscribe to KEMET news releases and find additional information
about our Company. KEMET offers our customers the broadest
selection of capacitor technologies in the industry, along with an
expanding range of sensors, actuators, and electromagnetic
compatibility solutions. KEMET operates manufacturing facilities
and sales and distribution centers around the world. Additional
information about KEMET can be found at http://www.KEMET.com.
Cautionary Statement on Forward-Looking
Statements
Certain statements included herein contain
forward-looking statements within the meaning of federal securities
laws about the Company's financial condition and results of
operations that are based on management's current expectations,
estimates and projections about the markets, in which the Company
operates, as well as management's beliefs and assumptions. Words
such as "expects," "anticipates," "believes," "estimates" or other
similar expressions and future or conditional verbs such as “will,”
“should,” “would,” and “could” are intended to identify such
forward-looking statements. These statements are not guarantees of
future performance and involve certain risks, uncertainties and
assumptions, which are difficult to predict. Therefore, actual
outcomes and results may differ materially from what is expressed
or forecasted in, or implied by, such forward-looking statements.
Readers are cautioned not to place undue reliance on these
forward-looking statements, which reflect management's judgment
only as of the date hereof. The Company undertakes no obligation to
update publicly any of these forward-looking statements to reflect
new information, future events or otherwise.
Factors that may cause actual outcomes and results to differ
materially from those expressed in, or implied by, these
forward-looking statements include, but are not necessarily limited
to the following: (i) the failure to complete our merger with Yageo
Corporation (the “Merger”), (ii) certain business uncertainties and
contractual restrictions related to the pendency of the Merger,
(iii) our inability to pursue alternatives to the Merger during the
pendency of the Merger, (iv) lawsuits filed against us relating to
the Merger, (v) adverse economic conditions could impact our
ability to realize operating plans if the demand for our products
declines, and such conditions could adversely affect our liquidity
and ability to continue to operate and could cause a write down of
long-lived assets or goodwill; (vi) an increase in the cost or a
decrease in the availability of our principal or single-sourced
purchased raw materials; (vii) changes in the competitive
environment; (viii) uncertainty of the timing of customer product
qualifications in heavily regulated industries; (ix) economic,
political, or regulatory changes in the countries in which we
operate; (x) difficulties, delays, or unexpected costs in
completing the Company’s restructuring plans; (xi) acquisitions and
other strategic transactions expose us to a variety of risks,
including the ability to successfully integrate and maintain
adequate internal controls over financial reporting in compliance
with applicable regulations; (xii) our acquisition of TOKIN
Corporation may not achieve all of the anticipated results; (xiii)
our business could be negatively impacted by increased regulatory
scrutiny and litigation; (xiv) difficulties associated with
retaining, attracting, and training effective employees and
management; (xv) the need to develop innovative products to
maintain customer relationships and offset potential price erosion
in older products; (xvi) exposure to claims alleging product
defects; (xvii) the impact of laws and regulations that apply to
our business, including those relating to environmental matters,
data protection, cyber security and privacy; (xviii) the impact of
international laws relating to trade, export controls and foreign
corrupt practices; (xix) changes impacting international trade and
corporate tax provisions related to the global manufacturing and
sales of our products may have an adverse effect on our financial
condition and results of operations; (xx) volatility of financial
and credit markets affecting our access to capital; (xxi) default
or failure of one or more of our counterparty financial
institutions could cause us to incur significant losses; (xxii) the
need to reduce the total costs of our products to remain
competitive; (xxiii) potential limitation on the use of net
operating losses to offset possible future taxable income; (xxiv)
restrictions in our debt agreements that could limit our
flexibility in operating our business; (xxv) failure to maintain
effective internal controls over financial reporting; (xxvi)
service interruption, misappropriation of data, or breaches of
security as it relates to our information systems could cause a
disruption in our operations, financial losses, and damage to our
reputation; (xxvii) economic and demographic experience for pension
and other post-retirement benefit plans could be less favorable
than our assumptions; (xxviii) fluctuation in distributor sales
could adversely affect our results of operations; (xxix)
earthquakes and other natural disasters could disrupt our
operations and have a material adverse effect on our financial
condition and results of operations; and (xxx) volatility in our
stock price.
|
KEMET CORPORATION AND SUBSIDIARIES |
Condensed Consolidated Statements of
Operations |
(Amounts in thousands, except per share data) |
(Unaudited) |
|
|
Three Months Ended |
|
Nine Months Ended |
|
December 31, |
|
December 31, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Net sales |
$ |
294,741 |
|
|
$ |
350,175 |
|
|
$ |
967,380 |
|
|
$ |
1,027,024 |
|
Operating costs
and expenses: |
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
201,560 |
|
|
226,425 |
|
|
638,901 |
|
|
694,888 |
|
Selling, general and administrative expenses |
50,031 |
|
|
48,271 |
|
|
147,243 |
|
|
149,071 |
|
Research and development |
12,624 |
|
|
11,357 |
|
|
37,073 |
|
|
33,040 |
|
Restructuring charges |
802 |
|
|
1,718 |
|
|
5,930 |
|
|
1,622 |
|
(Gain) loss on write down and disposal of long-lived assets |
1,076 |
|
|
788 |
|
|
2,095 |
|
|
1,611 |
|
Total operating costs and expenses |
266,093 |
|
|
288,559 |
|
|
831,242 |
|
|
880,232 |
|
Operating income |
28,648 |
|
|
61,616 |
|
|
136,138 |
|
|
146,792 |
|
Non-operating
(income) expense |
|
|
|
|
|
|
|
Interest income |
(904 |
) |
|
(572 |
) |
|
(2,525 |
) |
|
(1,325 |
) |
Interest expense |
2,803 |
|
|
4,480 |
|
|
8,099 |
|
|
18,803 |
|
Antitrust class action settlements and regulatory costs |
1,597 |
|
|
281 |
|
|
64,695 |
|
|
4,563 |
|
Other (income) expense, net |
3,091 |
|
|
13,725 |
|
|
450 |
|
|
2,083 |
|
Income before income taxes and equity income (loss) from equity
method investments |
22,061 |
|
|
43,702 |
|
|
65,419 |
|
|
122,668 |
|
Income tax expense |
5,400 |
|
|
2,600 |
|
|
23,900 |
|
|
9,200 |
|
Income before equity income (loss) from equity method
investments |
16,661 |
|
|
41,102 |
|
|
41,519 |
|
|
113,468 |
|
Equity income
(loss) from equity method investments |
(59 |
) |
|
(296 |
) |
|
163 |
|
|
(301 |
) |
Net income |
$ |
16,602 |
|
|
$ |
40,806 |
|
|
$ |
41,682 |
|
|
$ |
113,167 |
|
|
|
|
|
|
|
|
|
Net income per
basic share |
$ |
0.28 |
|
|
$ |
0.70 |
|
|
$ |
0.71 |
|
|
$ |
1.96 |
|
Net income per
diluted share |
$ |
0.28 |
|
|
$ |
0.69 |
|
|
$ |
0.70 |
|
|
$ |
1.91 |
|
|
|
|
|
|
|
|
|
Weighted-average
shares outstanding: |
|
|
|
|
|
|
|
Basic |
58,646 |
|
|
58,010 |
|
|
58,509 |
|
|
57,717 |
|
Diluted |
59,529 |
|
|
59,111 |
|
|
59,328 |
|
|
59,116 |
|
KEMET CORPORATION AND SUBSIDIARIES |
Condensed Consolidated Balance Sheets |
(Amounts in thousands, except per share data) |
(Unaudited) |
|
|
December 31,2019 |
|
March 31,2019 |
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
208,448 |
|
|
$ |
207,918 |
|
Accounts receivable, net |
142,007 |
|
|
154,059 |
|
Inventories, net |
263,123 |
|
|
241,129 |
|
Prepaid expenses and other current assets |
42,044 |
|
|
38,947 |
|
Total current assets |
655,622 |
|
|
642,053 |
|
Property, plant and equipment, net of accumulated depreciation of
$911,634 and $880,451 as of December 31, 2019 and March 31, 2019,
respectively |
548,594 |
|
|
495,280 |
|
Goodwill |
40,294 |
|
|
40,294 |
|
Intangible assets, net |
55,117 |
|
|
53,749 |
|
Equity method investments |
16,641 |
|
|
12,925 |
|
Deferred income taxes |
47,871 |
|
|
57,024 |
|
Other assets |
48,193 |
|
|
16,770 |
|
Total assets |
$ |
1,412,332 |
|
|
$ |
1,318,095 |
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’
EQUITY |
|
|
|
Current liabilities: |
|
|
|
Current portion of long-term debt |
$ |
29,032 |
|
|
$ |
28,430 |
|
Accounts payable |
111,465 |
|
|
153,287 |
|
Accrued expenses |
130,991 |
|
|
93,761 |
|
Income taxes payable |
3,981 |
|
|
2,995 |
|
Total current liabilities |
275,469 |
|
|
278,473 |
|
Long-term debt |
282,746 |
|
|
266,041 |
|
Other non-current obligations |
153,025 |
|
|
125,360 |
|
Deferred income taxes |
13,779 |
|
|
8,806 |
|
Total liabilities |
725,019 |
|
|
678,680 |
|
Stockholders’ equity: |
|
|
|
Preferred stock, par value $0.01, authorized 10,000 shares, none
issued |
— |
|
|
— |
|
Common stock, par value $0.01, authorized 175,000 shares, issued
58,267 and 57,822 shares at December 31, 2019 and March 31,
2019, respectively |
583 |
|
|
578 |
|
Additional paid-in capital |
471,641 |
|
|
465,366 |
|
Retained earnings |
240,074 |
|
|
204,195 |
|
Accumulated other comprehensive income (loss) |
(24,985 |
) |
|
(30,724 |
) |
Total stockholders’ equity |
687,313 |
|
|
639,415 |
|
Total liabilities and
stockholders’ equity |
$ |
1,412,332 |
|
|
$ |
1,318,095 |
|
KEMET CORPORATION AND SUBSIDIARIES |
Condensed Consolidated Statements of Cash
Flows |
(Amounts in thousands) |
(Unaudited) |
|
|
Nine months ended December 31, |
Operating Activities: |
2019 |
|
2018 |
Net income |
$ |
41,682 |
|
|
$ |
113,167 |
|
Adjustments to reconcile net income to net cash provided by (used
in) operating activities, net of effect of acquisitions: |
|
|
|
|
|
Depreciation and amortization |
45,530 |
|
|
38,405 |
|
Equity (income) loss from equity method investments |
(163 |
) |
|
301 |
|
Non-cash debt and financing costs |
3,013 |
|
|
1,085 |
|
(Gain) loss on early extinguishment of debt |
— |
|
|
15,988 |
|
Stock-based compensation expense |
9,258 |
|
|
10,011 |
|
(Gain) loss on write down and disposal of long-lived assets |
2,095 |
|
|
1,611 |
|
Pension and other post-retirement benefits |
4,009 |
|
|
3,823 |
|
Change in deferred income taxes |
13,430 |
|
|
1,395 |
|
Change in operating assets |
(7,697 |
) |
|
(42,130 |
) |
Change in operating liabilities |
(20,327 |
) |
|
(61,485 |
) |
Other |
(95 |
) |
|
556 |
|
Net cash provided by (used in) operating activities |
90,735 |
|
|
82,727 |
|
Investing activities: |
|
|
|
Capital expenditures |
(104,129 |
) |
|
(77,650 |
) |
Proceeds from sale of assets |
— |
|
|
169 |
|
Acquisitions, net of cash received |
(1,294 |
) |
|
— |
|
Proceeds from dividend |
433 |
|
|
776 |
|
Contributions to equity method investments |
(5,000 |
) |
|
(2,000 |
) |
Net investment hedge settlement |
4,536 |
|
|
— |
|
Net cash provided by (used in) investing activities |
(105,454 |
) |
|
(78,705 |
) |
Financing activities: |
|
|
|
Payments of long-term debt |
(13,149 |
) |
|
(332,063 |
) |
Proceeds from long-term debt |
— |
|
|
283,853 |
|
Customer advances related to customer capacity agreements |
31,611 |
|
|
9,495 |
|
Proceeds from termination of derivative instruments |
6,476 |
|
|
— |
|
Early extinguishment of debt issuance costs |
— |
|
|
(3,234 |
) |
Debt issuance costs |
— |
|
|
(1,797 |
) |
Cash flow hedge settlement |
(2,839 |
) |
|
— |
|
Principal payments on finance leases |
(1,153 |
) |
|
— |
|
Proceeds from exercise of stock options |
298 |
|
|
480 |
|
Payment of dividends |
(5,803 |
) |
|
(2,873 |
) |
Net cash provided by (used in) financing activities |
15,441 |
|
|
(46,139 |
) |
Net increase (decrease) in cash, cash equivalents and restricted
cash |
722 |
|
|
(42,117 |
) |
Effect of foreign currency
fluctuations on cash, cash equivalents and restricted cash |
1,221 |
|
|
(7,236 |
) |
Cash, cash equivalents, and
restricted cash, at beginning of fiscal period |
207,918 |
|
|
286,846 |
|
Cash, cash equivalents, and
restricted cash, at end of fiscal period |
209,861 |
|
|
237,493 |
|
Less: Restricted cash at end
of period |
1,413 |
|
|
3,134 |
|
Cash and cash equivalents at
end of period |
$ |
208,448 |
|
|
$ |
234,359 |
|
|
|
|
|
|
|
|
|
Non-GAAP Financial Measures
The Company utilizes certain Non-GAAP financial measures,
including “Adjusted gross margin,” “Adjusted SG&A expenses,”
“Adjusted operating income,” “Adjusted net income,” “Adjusted net
income per basic and diluted share,” “EBITDA,” and “Adjusted
EBITDA,” and certain related ratios. Management believes that
investors may find it useful to review the Company’s financial
results as adjusted to exclude items as determined by management as
further described below.
Adjusted Gross Margin
Adjusted gross margin represents net sales less cost of sales
excluding adjustments which are outlined in the quantitative
reconciliation provided below. Management uses adjusted gross
margin to facilitate our analysis and understanding of our business
operations by excluding the items outlined in the quantitative
reconciliation provided below which might otherwise make
comparisons of our ongoing business with prior periods more
difficult and obscure trends in ongoing operations. The Company
believes that adjusted gross margin is useful to investors because
it provides a supplemental way to understand the underlying
operating performance of the Company. Adjusted gross margin should
not be considered as an alternative to gross margin or any other
performance measure derived in accordance with GAAP.
The following table provides a reconciliation from non-GAAP
adjusted gross margin to GAAP gross margin, the most directly
comparable GAAP measure (amounts in thousands, except
percentages):
|
Quarters Ended |
|
(Unaudited) |
|
December 31,2019 |
|
September 30,2019 |
|
December 31,2018 |
Net sales |
$ |
294,741 |
|
|
$ |
327,397 |
|
|
$ |
350,175 |
|
Cost of sales |
201,560 |
|
|
213,727 |
|
|
226,425 |
|
Gross margin (GAAP) |
93,181 |
|
|
113,670 |
|
|
123,750 |
|
Gross margin as a % of net
sales |
31.6 |
% |
|
34.7 |
% |
|
35.3 |
% |
Non-GAAP
adjustments: |
|
|
|
|
|
Plant start-up costs |
136 |
|
|
(34 |
) |
|
305 |
|
Stock-based compensation expense |
792 |
|
|
982 |
|
|
666 |
|
Adjusted gross margin
(non-GAAP) |
$ |
94,109 |
|
|
$ |
114,618 |
|
|
$ |
124,721 |
|
Adjusted gross margin
(non-GAAP) as a % of net sales |
31.9 |
% |
|
35.0 |
% |
|
35.6 |
% |
|
|
|
|
|
|
|
|
|
Adjusted SG&A Expenses
Adjusted SG&A expenses represents SG&A expenses
excluding adjustments which are outlined in the quantitative
reconciliation provided below. Management uses adjusted SG&A
expenses to facilitate our analysis and understanding of our
business operations by excluding these items which might otherwise
make comparisons of our ongoing business with prior periods more
difficult and obscure trends in ongoing operations. The Company
believes that adjusted SG&A expenses is useful to investors
because it provides a supplemental way to understand the underlying
operating performance of the Company. Adjusted SG&A expenses
should not be considered as an alternative to SG&A expenses or
any other performance measure derived in accordance with GAAP.
The following table provides a reconciliation from non-GAAP
adjusted SG&A expenses to GAAP SG&A expenses, the most
directly comparable GAAP measure (amounts in thousands):
|
Quarters Ended |
|
(Unaudited) |
|
December 31,2019 |
|
September 30,2019 |
|
December 31,2018 |
SG&A expenses (GAAP) |
$ |
50,031 |
|
|
$ |
49,327 |
|
|
$ |
48,271 |
|
Non-GAAP
adjustments: |
|
|
|
|
|
|
|
|
ERP integration costs/IT transition costs |
2,029 |
|
|
1,508 |
|
|
2,453 |
|
Stock-based compensation expense |
1,521 |
|
|
3,047 |
|
|
767 |
|
Legal expenses related to antitrust class actions |
(29 |
) |
|
2,528 |
|
|
1,268 |
|
Merger related expenses |
5,283 |
|
|
— |
|
|
— |
|
Contingent consideration fair value adjustment |
33 |
|
|
32 |
|
|
— |
|
Adjusted SG&A expenses
(non-GAAP) |
$ |
41,194 |
|
|
$ |
42,212 |
|
|
$ |
43,783 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating Income
Adjusted operating income represents operating income, excluding
adjustments which are outlined in the quantitative reconciliation
provided below. We use adjusted operating income to facilitate our
analysis and understanding of our business operations by excluding
the items outlined in the quantitative reconciliation provided
below, which might otherwise make comparisons of our ongoing
business with prior periods more difficult and obscure trends in
ongoing operations. The Company believes that adjusted operating
income is useful to investors to provide a supplemental way to
understand our underlying operating performance and allows
investors to monitor and understand changes in our ability to
generate income from ongoing business operations. Adjusted
operating income should not be considered as an alternative to
operating income or any other performance measure derived in
accordance with GAAP.
The following table provides a reconciliation from non-GAAP
adjusted operating income to GAAP operating income, the most
directly comparable GAAP measure (amounts in thousands, except
percentages):
|
Quarters Ended |
|
(Unaudited) |
|
December 31,2019 |
|
September 30,2019 |
|
December 31,2018 |
Net Sales |
$ |
294,741 |
|
|
$ |
327,397 |
|
|
$ |
350,175 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (GAAP) |
$ |
28,648 |
|
|
$ |
49,090 |
|
|
$ |
61,616 |
|
Operating margin as a % of net
sales |
9.7 |
% |
|
15.0 |
% |
|
17.6 |
% |
Non-GAAP
adjustments: |
|
|
|
|
|
Restructuring charges |
802 |
|
|
2,920 |
|
|
1,718 |
|
ERP integration/IT transition costs |
2,029 |
|
|
1,508 |
|
|
2,453 |
|
Stock-based compensation expense |
2,387 |
|
|
4,146 |
|
|
1,534 |
|
Legal expenses related to antitrust class actions |
(29 |
) |
|
2,528 |
|
|
1,268 |
|
Plant start-up costs |
136 |
|
|
(34 |
) |
|
305 |
|
(Gain) loss on write down and disposal of long-lived assets |
1,076 |
|
|
59 |
|
|
788 |
|
Merger related expenses |
5,283 |
|
|
— |
|
|
— |
|
Contingent consideration fair value adjustment |
33 |
|
|
32 |
|
|
— |
|
Adjusted operating income
(non-GAAP) |
$ |
40,365 |
|
|
$ |
60,249 |
|
|
$ |
69,682 |
|
Adjusted operating margin
(non-GAAP) as a % of net sales |
13.7 |
% |
|
18.4 |
% |
|
19.9 |
% |
|
|
|
|
|
|
|
|
|
Adjusted Net Income and Adjusted Net Income Per
Share
Adjusted net income and adjusted net income per basic and
diluted share represent net income (loss) and net income (loss) per
basic and diluted share excluding adjustments which are outlined in
the quantitative reconciliation provided below. The Company
believes that these non-GAAP financial measures are useful to
investors because they provide a supplemental way to understand the
underlying operating performance of the Company and allow investors
to monitor and understand changes in our ability to generate income
from ongoing business operations. Management uses these non-GAAP
financial measures to evaluate operating performance by excluding
the items outlined in the quantitative reconciliation provided
below which might otherwise make comparisons of our ongoing
business with prior periods more difficult and obscure trends in
ongoing operations. Non-GAAP financial measures should not be
considered as an alternative to net income, operating income or any
other performance measures derived in accordance with GAAP.
The following table provides a reconciliation from non-GAAP
adjusted net income and adjusted net income per basic and diluted
share to GAAP net income (loss) and GAAP net income (loss) per
basic and diluted share, the most directly comparable GAAP measures
(amounts in thousands, except per share data):
|
Quarters Ended |
|
(Unaudited) |
|
December 31,2019 |
|
September 30,2019 |
|
December 31,2018 |
GAAP |
|
|
|
|
|
|
|
|
|
|
|
Net sales |
$ |
294,741 |
|
|
$ |
327,397 |
|
|
$ |
350,175 |
|
Net income (loss) |
$ |
16,602 |
|
|
$ |
(15,260 |
) |
|
$ |
40,806 |
|
|
|
|
|
|
|
Net income (loss) per basic
share |
$ |
0.28 |
|
|
$ |
(0.26 |
) |
|
$ |
0.70 |
|
Net income (loss) per diluted
share |
$ |
0.28 |
|
|
$ |
(0.26 |
) |
|
$ |
0.69 |
|
|
|
|
|
|
|
Non-GAAP |
|
|
|
|
|
Net income (loss) (GAAP) |
$ |
16,602 |
|
|
$ |
(15,260 |
) |
|
$ |
40,806 |
|
Non-GAAP adjustments: |
|
|
|
|
|
Restructuring charges |
802 |
|
|
2,920 |
|
|
1,718 |
|
R&D grant reimbursements and grant income |
(7 |
) |
|
19 |
|
|
(470 |
) |
ERP integration/IT transition costs |
2,029 |
|
|
1,508 |
|
|
2,453 |
|
Stock-based compensation expense |
2,387 |
|
|
4,146 |
|
|
1,534 |
|
Settlements, regulatory costs, and legal expenses related to
antitrust class actions |
1,568 |
|
|
65,626 |
|
|
1,549 |
|
(Gain) loss on early extinguishment of debt |
— |
|
|
— |
|
|
15,988 |
|
Net foreign exchange (gain) loss |
4,113 |
|
|
(2,297 |
) |
|
(2,218 |
) |
Equity (income) loss from equity method investments |
59 |
|
|
(472 |
) |
|
296 |
|
Plant start-up costs |
136 |
|
|
(34 |
) |
|
305 |
|
(Gain) loss on write down and disposal of long-lived assets |
1,076 |
|
|
59 |
|
|
788 |
|
Income tax effect of non-GAAP adjustments |
(5,693 |
) |
|
(16,958 |
) |
|
(91 |
) |
Merger related expenses |
5,283 |
|
|
— |
|
|
— |
|
Unrealized gain on equity securities |
(794 |
) |
|
— |
|
|
— |
|
Contingent consideration fair value adjustment |
33 |
|
|
32 |
|
|
— |
|
Adjusted net income
(non-GAAP) |
$ |
27,594 |
|
|
$ |
39,289 |
|
|
$ |
62,658 |
|
Adjusted net income per basic
share (non-GAAP) |
$ |
0.47 |
|
|
$ |
0.67 |
|
|
$ |
1.08 |
|
Adjusted net income per
diluted share (non-GAAP) |
$ |
0.46 |
|
|
$ |
0.66 |
|
|
$ |
1.06 |
|
Weighted average shares
outstanding: |
|
|
|
|
|
Weighted average
shares-basic |
58,646 |
|
|
58,528 |
|
|
58,010 |
|
Weighted average
shares-diluted (1) |
59,529 |
|
|
59,271 |
|
|
59,111 |
|
_________________ |
(1) For the
quarter ended September 30, 2019, diluted shares were used to
compute adjusted net income per diluted share (non-GAAP). |
|
EBITDA and Adjusted EBITDA
EBITDA represents net income before income tax expense, interest
expense, net, and depreciation and amortization expense. We
present EBITDA as a supplemental measure of our ability to service
debt. We believe EBITDA is an appropriate supplemental measure of
debt service capacity because cash expenditures on interest are, by
definition, available to pay interest, and tax expense is inversely
correlated to interest expense because tax expense goes down as
deductible interest expense goes up; and depreciation and
amortization are non-cash charges.
We also present adjusted EBITDA, which is EBITDA excluding
adjustments that are outlined in the following quantitative
reconciliation provided, as a supplemental measure of our
performance and because we believe this measure is frequently used
by securities analysts, investors, and other interested parties in
the evaluation of companies in our industry. The items excluded
from adjusted EBITDA are excluded in order to better reflect our
continuing operations.
In evaluating adjusted EBITDA, you should be aware that in the
future we may incur expenses similar to the adjustments noted
below. Our presentation of adjusted EBITDA should not be construed
as an inference that our future results will be unaffected by these
types of adjustments. Adjusted EBITDA is not a measurement of
our financial performance under GAAP and should not be considered
as an alternative to net income, operating income or any other
performance measures derived in accordance with GAAP or as an
alternative to cash flow from operating activities as a measure of
our liquidity.
Our adjusted EBITDA measure has limitations as an analytical
tool, and should not be considered in isolation or as a substitute
for analysis of our results as reported under GAAP. Some of these
limitations are:
- it does not reflect our cash expenditures, future requirements
for capital expenditures or contractual commitments;
- it does not reflect changes in, or cash requirements for, our
working capital needs;
- it does not reflect the significant interest expense or the
cash requirements necessary to service interest or principal
payments on our debt;
- although depreciation and amortization are non-cash charges,
the assets being depreciated and amortized will often have to be
replaced in the future, and our adjusted EBITDA measure does not
reflect any cash requirements for such replacements;
- it is not adjusted for all non-cash income or expense items
that are reflected in our statements of cash flows;
- it does not reflect the impact of earnings or charges resulting
from matters we consider not to be indicative of our ongoing
operations;
- it does not reflect limitations on or costs related to
transferring earnings from our subsidiaries to us; and
- other companies in our industry may calculate this measure
differently than we do, limiting its usefulness as a comparative
measure.
Because of these limitations, adjusted EBITDA should not be
considered as a measure of discretionary cash available to us to
invest in the growth of our business or as a measure of cash that
will be available to us to meet our obligations. You should
compensate for these limitations by relying primarily on our GAAP
results and using adjusted EBITDA as supplementary information.
The following table provides a reconciliation from EBITDA,
non-GAAP adjusted EBITDA, and non-GAAP adjusted EBITDA Margin to
GAAP net income (loss), the most directly comparable GAAP measure
(amounts in thousands, except percentages):
|
Quarters Ended |
|
(Unaudited) |
|
December 31,2019 |
|
September 30,2019 |
|
December 31,2018 |
Net sales |
$ |
294,741 |
|
|
$ |
327,397 |
|
|
$ |
350,175 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) (GAAP) |
$ |
16,602 |
|
|
$ |
(15,260 |
) |
|
$ |
40,806 |
|
Net income (loss) margin as a
% of net sales |
5.6 |
% |
|
(4.7 |
)% |
|
11.7 |
% |
Non-GAAP
adjustments: |
|
|
|
|
|
Interest expense, net |
1,899 |
|
|
1,939 |
|
|
3,908 |
|
Income tax expense |
5,400 |
|
|
1,700 |
|
|
2,600 |
|
Depreciation and amortization |
16,154 |
|
|
15,117 |
|
|
12,763 |
|
EBITDA (non-GAAP) |
40,055 |
|
|
3,496 |
|
|
60,077 |
|
Excluding the following items: |
|
|
|
|
|
Restructuring charges |
802 |
|
|
2,920 |
|
|
1,718 |
|
R&D grant reimbursements and grant income |
(7 |
) |
|
19 |
|
|
(470 |
) |
ERP integration/IT transition costs |
2,029 |
|
|
1,508 |
|
|
2,453 |
|
Stock-based compensation expense |
2,387 |
|
|
4,146 |
|
|
1,534 |
|
Settlements, regulatory costs, and legal expenses related to
antitrust class actions |
1,568 |
|
|
65,626 |
|
|
1,549 |
|
Net foreign exchange (gain) loss |
4,113 |
|
|
(2,297 |
) |
|
(2,218 |
) |
Equity (income) loss from equity method investments |
59 |
|
|
(472 |
) |
|
296 |
|
(Gain) loss on early extinguishment of debt |
— |
|
|
— |
|
|
15,988 |
|
Plant start-up costs |
136 |
|
|
(34 |
) |
|
305 |
|
(Gain) loss on write down and disposal of long-lived assets |
1,076 |
|
|
59 |
|
|
788 |
|
Merger related expenses |
5,283 |
|
|
— |
|
|
— |
|
Unrealized gain on equity securities |
(794 |
) |
|
— |
|
|
— |
|
Contingent consideration fair value adjustment |
33 |
|
|
32 |
|
|
— |
|
Adjusted EBITDA (non-GAAP) |
$ |
56,740 |
|
|
$ |
75,003 |
|
|
$ |
82,020 |
|
Adjusted EBITDA margin (non-GAAP) as a % of net sales |
19.3 |
% |
|
22.9 |
% |
|
23.4 |
% |
Contact: |
Gregory C. Thompson |
Richard Vatinelle |
|
Executive Vice President and |
Vice President and |
|
Chief Financial Officer |
Treasurer |
|
GregThompson@KEMET.com |
InvestorRelations@KEMET.com |
|
954-595-5081 |
954-766-2819 |
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