KEMET Corporation (“KEMET” or the “Company”) (NYSE: KEM), a leading
global supplier of passive electronic components, today reported
results for its second fiscal quarter ended September 30,
2019.
Chief Executive Officer, William M. Lowe Jr. stated, “Sales of
our high capacitance large case ceramics in our Ceramics product
line remains robust, insulating us somewhat from the general
slow-down in the electronics industry. We also maintained during
the second quarter our overall non-GAAP adjusted gross margin at
35.0% and our adjusted EBITDA margin at 22.9%, reinforcing our past
statements that the many operational changes we have made over the
years are embedded in our margin structure. As we look forward to
the rest of our fiscal year, we expect adjusting inventory levels
in the distribution channel, a slowdown in the automotive segment,
and Europe from a geographical sense, to apply downward pressure on
sales. As a result, we expect revenue to decline in the range of
8.0% to 13.0% in our third quarter from the current second quarter,
however; non-GAAP adjusted gross margin is expected to remain at a
historical high ranging from 30.0% to 32.5% next quarter.”
For the three-month and six-month periods ended
September 30, 2019, net sales were $327.4 million and $672.6
million, respectively, compared to $349.2 million and $676.8
million, respectively, for the same period last year. Sales were
essentially flat for the first six months of the current fiscal
year compared to the prior year with a slight decline in the
current quarter reflecting a slow-down in the general electronics
industry and extended inventory levels in the distribution channel
of certain products, but offset by continued strong demand for
large case size ceramics. The Ceramics product line revenue was up
24.1% over the same quarter last year.
GAAP operating margin for the quarter ended September 30,
2019 increased slightly to 15.0% compared to 14.3% for the quarter
ended September 30, 2018. Non-GAAP adjusted operating margin
for the quarter ended September 30, 2019 increased slightly to
18.4% compared to 17.0% for the quarter ended September 30,
2018. Cash on the balance sheet was $192.7 million at
September 30, 2019.
Non-GAAP adjusted net income was $39.3 million or $0.66 per
diluted share for the quarter ended September 30, 2019,
compared to non-GAAP adjusted net income of $50.8 million or $0.86
per diluted share for the quarter ended September 30,
2018.
The Company recorded a charge related to antitrust settlements
of $63.1 million during the quarter which gave rise to a GAAP net
loss of $15.3 million or $0.26 per diluted share for the quarter
ended September 30, 2019, compared to GAAP net income of $37.1
million or $0.63 per diluted share for the quarter ended
September 30, 2018.
Net income for the quarters ended September 30, 2019,
June 30, 2019, and September 30, 2018 include various
items affecting comparability as denoted in the GAAP to non-GAAP
reconciliation table included hereafter.
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.
The Company also has presented non-GAAP adjusted gross margin as
projected for the third quarter of fiscal year 2020. A
reconciliation of GAAP to non-GAAP adjusted gross margin guidance
is not provided because the Company does not forecast GAAP gross
margin as it cannot, without unreasonable effort, estimate or
predict with certainty various components of such measure.
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) 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; (ii) an increase in the cost or a
decrease in the availability of our principal or single-sourced
purchased raw materials; (iii) changes in the competitive
environment; (iv) uncertainty of the timing of customer product
qualifications in heavily regulated industries; (v) economic,
political, or regulatory changes in the countries in which we
operate; (vi) difficulties, delays, or unexpected costs in
completing the Company’s restructuring plans; (vii) 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; (viii) our acquisition of TOKIN
Corporation may not achieve all of the anticipated results; (ix)
our business could be negatively impacted by increased regulatory
scrutiny and litigation; (x) difficulties associated with
retaining, attracting, and training effective employees and
management; (xi) the need to develop innovative products to
maintain customer relationships and offset potential price erosion
in older products; (xii) exposure to claims alleging product
defects; (xiii) the impact of laws and regulations that apply to
our business, including those relating to environmental matters,
data protection, cyber security and privacy; (xiv) the impact of
international laws relating to trade, export controls and foreign
corrupt practices; (xv) 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; (xvi) volatility of financial
and credit markets affecting our access to capital; (xvii) default
or failure of one or more of our counterparty financial
institutions could cause us to incur significant losses; (xviii)
the need to reduce the total costs of our products to remain
competitive; (xix) potential limitation on the use of net operating
losses to offset possible future taxable income; (xx) restrictions
in our debt agreements that could limit our flexibility in
operating our business; (xxi) failure to maintain effective
internal controls over financial reporting; (xxii) 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;
(xxiii) economic and demographic experience for pension and other
post-retirement benefit plans could be less favorable than our
assumptions; (xxiv) fluctuation in distributor sales could
adversely affect our results of operations; (xxv) earthquakes and
other natural disasters could disrupt our operations and have a
material adverse effect on our financial condition and results of
operations; and (xxvi) volatility in our stock price.
KEMET CORPORATION AND
SUBSIDIARIESCondensed Consolidated Statements of
Operations(Amounts in thousands, except per share
data)(Unaudited)
|
|
Three Months Ended |
|
Six Months Ended |
|
September 30, |
|
September 30, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Net sales |
$ |
327,397 |
|
|
$ |
349,233 |
|
|
$ |
672,639 |
|
|
$ |
676,849 |
|
Operating costs and
expenses: |
|
|
|
|
|
|
|
Cost of sales |
213,727 |
|
|
235,668 |
|
|
437,341 |
|
|
468,463 |
|
Selling, general and administrative expenses |
49,327 |
|
|
52,258 |
|
|
97,212 |
|
|
100,800 |
|
Research and development |
12,274 |
|
|
10,995 |
|
|
24,449 |
|
|
21,683 |
|
Restructuring charges |
2,920 |
|
|
— |
|
|
5,128 |
|
|
(96 |
) |
(Gain) loss on write down and disposal of long-lived assets |
59 |
|
|
312 |
|
|
1,019 |
|
|
823 |
|
Total operating costs and expenses |
278,307 |
|
|
299,233 |
|
|
565,149 |
|
|
591,673 |
|
Operating income |
49,090 |
|
|
50,000 |
|
|
107,490 |
|
|
85,176 |
|
Non-operating (income)
expense |
|
|
|
|
|
|
|
Interest income |
(812 |
) |
|
(375 |
) |
|
(1,621 |
) |
|
(753 |
) |
Interest expense |
2,751 |
|
|
7,287 |
|
|
5,296 |
|
|
14,323 |
|
Antitrust class action settlements and regulatory costs |
63,098 |
|
|
4,320 |
|
|
63,098 |
|
|
4,282 |
|
Other (income) expense, net |
(1,915 |
) |
|
(309 |
) |
|
(2,641 |
) |
|
(11,642 |
) |
Income (loss) before income taxes and equity income (loss) from
equity method investments |
(14,032 |
) |
|
39,077 |
|
|
43,358 |
|
|
78,966 |
|
Income tax expense |
1,700 |
|
|
2,000 |
|
|
18,500 |
|
|
6,600 |
|
Income (loss) before equity income (loss) from equity method
investments |
(15,732 |
) |
|
37,077 |
|
|
24,858 |
|
|
72,366 |
|
Equity income (loss) from
equity method investments |
472 |
|
|
64 |
|
|
222 |
|
|
(5 |
) |
Net income (loss) |
$ |
(15,260 |
) |
|
$ |
37,141 |
|
|
$ |
25,080 |
|
|
$ |
72,361 |
|
|
|
|
|
|
|
|
|
Net income (loss) per basic
share |
$ |
(0.26 |
) |
|
$ |
0.64 |
|
|
$ |
0.43 |
|
|
$ |
1.26 |
|
Net income (loss) per diluted
share |
$ |
(0.26 |
) |
|
$ |
0.63 |
|
|
$ |
0.42 |
|
|
$ |
1.22 |
|
|
|
|
|
|
|
|
|
Weighted-average shares
outstanding: |
|
|
|
|
|
|
|
Basic |
58,528 |
|
|
57,799 |
|
|
58,440 |
|
|
57,570 |
|
Diluted |
58,528 |
|
|
59,197 |
|
|
59,175 |
|
|
59,119 |
|
|
|
|
|
|
|
|
|
|
|
|
|
KEMET CORPORATION AND
SUBSIDIARIESCondensed Consolidated Balance
Sheets(Amounts in thousands, except per share
data)(Unaudited)
|
September 30,2019 |
|
March 31,2019 |
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
192,702 |
|
|
$ |
207,918 |
|
Accounts receivable, net |
163,398 |
|
|
154,059 |
|
Inventories, net |
268,220 |
|
|
241,129 |
|
Prepaid expenses and other current assets |
48,571 |
|
|
38,947 |
|
Total current assets |
672,891 |
|
|
642,053 |
|
Property, plant and equipment, net of accumulated depreciation of
$891,155 and $880,451 as of September 30, 2019 and March 31, 2019,
respectively |
527,887 |
|
|
495,280 |
|
Goodwill |
40,294 |
|
|
40,294 |
|
Intangible assets, net |
56,358 |
|
|
53,749 |
|
Equity method investments |
13,673 |
|
|
12,925 |
|
Deferred income taxes |
45,027 |
|
|
57,024 |
|
Other assets |
45,595 |
|
|
16,770 |
|
Total assets |
$ |
1,401,725 |
|
|
$ |
1,318,095 |
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’
EQUITY |
|
|
|
Current liabilities: |
|
|
|
Current portion of long-term debt |
$ |
29,164 |
|
|
$ |
28,430 |
|
Accounts payable |
137,263 |
|
|
153,287 |
|
Accrued expenses |
143,977 |
|
|
93,761 |
|
Income taxes payable |
2,265 |
|
|
2,995 |
|
Total current liabilities |
312,669 |
|
|
278,473 |
|
Long-term debt |
276,429 |
|
|
266,041 |
|
Other non-current obligations |
148,835 |
|
|
125,360 |
|
Deferred income taxes |
12,875 |
|
|
8,806 |
|
Total liabilities |
750,808 |
|
|
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
58,067 and 57,822 shares at September 30, 2019 and March 31,
2019, respectively |
581 |
|
|
578 |
|
Additional paid-in capital |
470,937 |
|
|
465,366 |
|
Retained earnings |
223,472 |
|
|
204,195 |
|
Accumulated other comprehensive income (loss) |
(44,073 |
) |
|
(30,724 |
) |
Total stockholders’ equity |
650,917 |
|
|
639,415 |
|
Total liabilities and
stockholders’ equity |
$ |
1,401,725 |
|
|
$ |
1,318,095 |
|
|
|
|
|
|
|
|
|
KEMET CORPORATION AND
SUBSIDIARIESCondensed Consolidated Statements of
Cash Flows(Amounts in
thousands)(Unaudited)
|
Six months ended September 30, |
Operating Activities: |
2019 |
|
2018 |
Net income |
$ |
25,080 |
|
|
$ |
72,361 |
|
Adjustments to reconcile net income to net cash provided by (used
in) operating activities, net of effect of acquisitions: |
|
|
|
Depreciation and amortization |
29,376 |
|
|
25,642 |
|
Equity (income) loss from equity method investments |
(222 |
) |
|
5 |
|
Non-cash debt and financing costs |
1,914 |
|
|
635 |
|
Stock-based compensation expense |
6,871 |
|
|
8,477 |
|
(Gain) loss on write down and disposal of long-lived assets |
1,019 |
|
|
823 |
|
Pension and other post-retirement benefits |
2,663 |
|
|
2,549 |
|
Change in deferred income taxes |
16,505 |
|
|
578 |
|
Change in operating assets |
(46,220 |
) |
|
(19,956 |
) |
Change in operating liabilities |
15,212 |
|
|
(58,049 |
) |
Other |
(528 |
) |
|
(66 |
) |
Net cash provided by (used in) operating activities |
51,670 |
|
|
32,999 |
|
Investing activities: |
|
|
|
Capital expenditures |
(73,351 |
) |
|
(40,478 |
) |
Net investment hedge settlement |
4,536 |
|
|
— |
|
Acquisitions, net of cash received |
(1,294 |
) |
|
— |
|
Proceeds from dividend |
433 |
|
|
776 |
|
Contributions to equity method investments |
(2,000 |
) |
|
(1,000 |
) |
Net cash provided by (used in) investing activities |
(71,676 |
) |
|
(40,702 |
) |
Financing activities: |
|
|
|
Payments of long-term debt |
(13,149 |
) |
|
(8,625 |
) |
Proceeds from long term debt |
21,540 |
|
|
510 |
|
Proceeds from termination of derivative instruments |
6,476 |
|
|
— |
|
Cash flow hedge settlement |
(2,839 |
) |
|
— |
|
Principal payments on finance leases |
(745 |
) |
|
— |
|
Proceeds from exercise of stock options |
118 |
|
|
471 |
|
Payment of dividends |
(5,803 |
) |
|
— |
|
Net cash provided by (used in) financing activities |
5,598 |
|
|
(7,644 |
) |
Net increase (decrease) in cash, cash equivalents and restricted
cash |
(14,408 |
) |
|
(15,347 |
) |
Effect of foreign currency
fluctuations on cash, cash equivalents and restricted cash |
(252 |
) |
|
(8,452 |
) |
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 |
193,258 |
|
|
263,047 |
|
Less: Restricted cash at end
of period |
556 |
|
|
— |
|
Cash and cash equivalents at
end of period |
$ |
192,702 |
|
|
$ |
263,047 |
|
|
|
|
|
|
|
|
|
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) |
|
September 30,2019 |
|
June 30,2019 |
|
September 30,2018 |
Net sales |
$ |
327,397 |
|
|
$ |
345,242 |
|
|
$ |
349,233 |
|
Cost of sales |
213,727 |
|
|
223,614 |
|
|
235,668 |
|
Gross margin (GAAP) |
113,670 |
|
|
121,628 |
|
|
113,565 |
|
Gross margin as a % of net
sales |
34.7 |
% |
|
35.2 |
% |
|
32.5 |
% |
Non-GAAP
adjustments: |
|
|
|
|
|
Stock-based compensation expense |
982 |
|
|
874 |
|
|
686 |
|
Plant start-up costs |
(34 |
) |
|
34 |
|
|
1,361 |
|
Adjusted gross margin
(non-GAAP) |
$ |
114,618 |
|
|
$ |
122,536 |
|
|
$ |
115,612 |
|
Adjusted gross margin
(non-GAAP) as a % of net sales |
35.0 |
% |
|
35.5 |
% |
|
33.1 |
% |
|
|
|
|
|
|
|
|
|
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) |
|
September 30,2019 |
|
June 30,2019 |
|
September 30,2018 |
SG&A expenses (GAAP) |
$ |
49,327 |
|
|
$ |
47,885 |
|
|
$ |
52,258 |
|
Non-GAAP
adjustments: |
|
|
|
|
|
ERP integration costs/IT transition costs |
1,508 |
|
|
1,215 |
|
|
1,593 |
|
Stock-based compensation expense |
3,047 |
|
|
1,735 |
|
|
3,647 |
|
Legal expenses related to antitrust class actions |
2,528 |
|
|
2,559 |
|
|
1,740 |
|
Contingent consideration fair value adjustment |
32 |
|
|
— |
|
|
— |
|
Adjusted SG&A expenses
(non-GAAP) |
$ |
42,212 |
|
|
$ |
42,376 |
|
|
$ |
45,278 |
|
|
|
|
|
|
|
|
|
|
|
|
|
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) |
|
September 30,2019 |
|
June 30,2019 |
|
September 30,2018 |
Net Sales |
$ |
327,397 |
|
|
$ |
345,242 |
|
|
$ |
349,233 |
|
|
|
|
|
|
|
Operating income (GAAP) |
$ |
49,090 |
|
|
$ |
58,400 |
|
|
$ |
50,000 |
|
Operating margin as a % of net
sales |
15.0 |
% |
|
16.9 |
% |
|
14.3 |
% |
Non-GAAP
adjustments: |
|
|
|
|
|
Restructuring charges |
2,920 |
|
|
2,208 |
|
|
— |
|
ERP integration/IT transition costs |
1,508 |
|
|
1,215 |
|
|
1,593 |
|
Stock-based compensation expense |
4,146 |
|
|
2,725 |
|
|
4,417 |
|
Legal expenses related to antitrust class actions |
2,528 |
|
|
2,559 |
|
|
1,740 |
|
Plant start-up costs |
(34 |
) |
|
34 |
|
|
1,361 |
|
(Gain) loss on write down and disposal of long-lived assets |
59 |
|
|
960 |
|
|
312 |
|
Contingent consideration fair value adjustment |
32 |
|
|
— |
|
|
— |
|
Adjusted operating income
(non-GAAP) |
$ |
60,249 |
|
|
$ |
68,101 |
|
|
$ |
59,423 |
|
Adjusted operating margin
(non-GAAP) as a % of net sales |
18.4 |
% |
|
19.7 |
% |
|
17.0 |
% |
|
|
|
|
|
|
|
|
|
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) |
|
September 30,2019 |
|
June 30,2019 |
|
September 30,2018 |
GAAP |
|
Net sales |
$ |
327,397 |
|
|
$ |
345,242 |
|
|
$ |
349,233 |
|
Net income (loss) |
$ |
(15,260 |
) |
|
$ |
40,340 |
|
|
$ |
37,141 |
|
|
|
|
|
|
|
Net income (loss) per basic
share |
$ |
(0.26 |
) |
|
$ |
0.69 |
|
|
$ |
0.64 |
|
Net income (loss) per diluted
share |
$ |
(0.26 |
) |
|
$ |
0.68 |
|
|
$ |
0.63 |
|
|
|
|
|
|
|
Non-GAAP |
|
|
|
|
|
Net income (loss) (GAAP) |
$ |
(15,260 |
) |
|
$ |
40,340 |
|
|
$ |
37,141 |
|
Non-GAAP adjustments: |
|
|
|
|
|
Restructuring charges |
2,920 |
|
|
2,208 |
|
|
— |
|
R&D grant reimbursements and grant income |
19 |
|
|
(35 |
) |
|
— |
|
ERP integration/IT transition costs |
1,508 |
|
|
1,215 |
|
|
1,593 |
|
Stock-based compensation expense |
4,146 |
|
|
2,725 |
|
|
4,417 |
|
Settlements, regulatory costs, and legal expenses related to
antitrust class actions |
65,626 |
|
|
2,559 |
|
|
6,060 |
|
Net foreign exchange (gain) loss |
(2,297 |
) |
|
(489 |
) |
|
193 |
|
Equity (income) loss from equity method investments |
(472 |
) |
|
250 |
|
|
(64 |
) |
Plant start-up costs |
(34 |
) |
|
34 |
|
|
1,361 |
|
(Gain) loss on write down and disposal of long-lived assets |
59 |
|
|
960 |
|
|
312 |
|
Income tax effect of non-GAAP adjustments |
(16,958 |
) |
|
(1,568 |
) |
|
(164 |
) |
Contingent consideration fair value adjustment |
32 |
|
|
— |
|
|
— |
|
Adjusted net income
(non-GAAP) |
$ |
39,289 |
|
|
$ |
48,199 |
|
|
$ |
50,849 |
|
Adjusted net income per basic
share (non-GAAP) |
$ |
0.67 |
|
|
$ |
0.83 |
|
|
$ |
0.88 |
|
Adjusted net income per
diluted share (non-GAAP) |
$ |
0.66 |
|
|
$ |
0.82 |
|
|
$ |
0.86 |
|
Weighted average shares
outstanding: |
|
|
|
|
|
Weighted average
shares-basic |
58,528 |
|
|
58,350 |
|
|
57,799 |
|
Weighted average
shares-diluted (1) |
59,271 |
|
|
59,055 |
|
|
59,197 |
|
_________________(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, the most directly comparable GAAP measure (amounts
in thousands, except percentages):
|
|
|
Quarters Ended |
|
(Unaudited) |
|
September 30,2019 |
|
June 30,2019 |
|
September 30,2018 |
Net sales |
$ |
327,397 |
|
|
$ |
345,242 |
|
|
$ |
349,233 |
|
|
|
|
|
|
|
Net income (loss) (GAAP) |
$ |
(15,260 |
) |
|
$ |
40,340 |
|
|
$ |
37,141 |
|
Net income (loss) margin as a
% of net sales |
(4.7 |
)% |
|
11.7 |
% |
|
10.6 |
% |
Non-GAAP
adjustments: |
|
|
|
|
|
Interest expense, net |
1,939 |
|
|
1,736 |
|
|
6,912 |
|
Income tax expense |
1,700 |
|
|
16,800 |
|
|
2,000 |
|
Depreciation and
amortization |
15,117 |
|
|
14,259 |
|
|
12,545 |
|
EBITDA (non-GAAP) |
3,496 |
|
|
73,135 |
|
|
58,598 |
|
Excluding the following
items: |
|
|
|
|
|
Restructuring charges |
2,920 |
|
|
2,208 |
|
|
— |
|
R&D grant reimbursements
and grant income |
19 |
|
|
(35 |
) |
|
— |
|
ERP integration/IT transition
costs |
1,508 |
|
|
1,215 |
|
|
1,593 |
|
Stock-based compensation
expense |
4,146 |
|
|
2,725 |
|
|
4,417 |
|
Settlements, regulatory costs,
and legal expenses related to antitrust class actions |
65,626 |
|
|
2,559 |
|
|
6,060 |
|
Net foreign exchange (gain)
loss |
(2,297 |
) |
|
(489 |
) |
|
193 |
|
Equity (income) loss from
equity method investments |
(472 |
) |
|
250 |
|
|
(64 |
) |
Plant start-up costs |
(34 |
) |
|
34 |
|
|
1,361 |
|
(Gain) loss on write down and
disposal of long-lived assets |
59 |
|
|
960 |
|
|
312 |
|
Contingent consideration fair
value adjustment |
32 |
|
|
— |
|
|
— |
|
Adjusted EBITDA (non-GAAP) |
$ |
75,003 |
|
|
$ |
82,562 |
|
|
$ |
72,470 |
|
Adjusted EBITDA margin (non-GAAP) as a % of net sales |
22.9 |
% |
|
23.9 |
% |
|
20.8 |
% |
|
|
|
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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