KEMET Corporation (the “Company”) (NYSE: KEM), a leading global
supplier of electronic components, today reported preliminary
results for the fourth quarter and fiscal year ended March 31,
2020.
Fourth Quarter Highlights
- Net sales of $293.2 million
- GAAP gross margin of 31.4% and non-GAAP adjusted gross
margin of 31.9%
- GAAP EPS net loss of $0.01 per diluted
share
- Non-GAAP adjusted EPS of $0.37 per diluted
share
Full Year Highlights
- Net sales of $1.26 billion
- GAAP gross margin of 33.4% and non-GAAP adjusted gross
margin of 33.7%
- GAAP EPS of $0.70 per diluted share
- Non-GAAP adjusted EPS of $2.31 per diluted
share
“During these unprecedented times, our number one priority
remains the safety and well-being of our employees, their families,
and the communities in which we operate. I am proud of our
colleagues around the world who have worked together to quickly
implement COVID-19 prevention actions sooner than required by
federal or local governments to keep our employees safe and our
facilities operating while continuing to serve critical
infrastructure customers who need our products,” stated William M.
Lowe Jr., KEMET’s Chief Executive Officer. “Despite COVID-19’s
global impact, I am pleased to report that KEMET's fourth quarter
results exceeded our revenue guidance, as we finished the quarter
with $293.2 million in revenue and with non-GAAP adjusted gross
margin and adjusted EBITDA margin of 31.9% and 18.5% respectively.
This reinforces the fact that the structural changes we have made
in our operations are firmly ingrained in our margin structure.
While estimating the full impact the global COVID-19 pandemic will
have on our upcoming fiscal year remains very challenging, we
continue to believe at this time that our robust financial position
will see us through the storm and position us well for long term
growth. We now expect our combination with Yageo to close this
summer,” continued Lowe.
For the quarter and fiscal year ended March 31, 2020, net
sales were $293.2 million and $1.26 billion, respectively, compared
to $355.8 million and $1.38 billion, respectively, for the same
period last year.
GAAP gross margin for the quarter ended March 31, 2020 was
31.4% compared to 35.5% for the quarter ended March 31, 2019.
Non-GAAP adjusted gross margin for the quarter ended March 31,
2020 was 31.9% compared to 34.8% for the quarter ended
March 31, 2019.
GAAP gross margin for the fiscal year ended March 31, 2020
was 33.4% compared to 33.2% for the fiscal year ended
March 31, 2019. Non-GAAP adjusted gross margin for the fiscal
year ended March 31, 2020 was 33.7% compared to 33.3% for the
fiscal year ended March 31, 2019.
GAAP net loss was $0.3 million or $0.01 per diluted share for
the quarter ended March 31, 2020, compared to GAAP net income
of $93.4 million or $1.58 per diluted share for the quarter ended
March 31, 2019.
GAAP net income was $41.4 million or $0.70 per diluted share for
the fiscal year ended March 31, 2020, compared to GAAP net
income of $206.6 million or $3.50 per diluted share for the fiscal
year ended March 31, 2019.
GAAP net income (loss) for the quarter and fiscal year ended
March 31, 2020 included $17.6 million and $19.7 million in
losses related to the write down of long-lived assets. GAAP net
income for the quarter and fiscal year ended March 31, 2019
included a tax benefit of $50.1 million related to the partial
release of valuation allowances in the U.S. and Japan. The one-time
net income benefit of this release was a result of the significant
improvements in our profitability of the past several years and the
expectation of continued profitability in the future.
Non-GAAP adjusted net income was $22.2 million or $0.37 per
diluted share for the quarter ended March 31, 2020, compared
to non-GAAP adjusted net income of $61.4 million or $1.04 per
diluted share for the quarter ended March 31, 2019.
Non-GAAP adjusted net income was $137.3 million or $2.31 per
diluted share for the fiscal year ended March 31, 2020,
compared to non-GAAP adjusted net income of $207.1 million or $3.51
per diluted share for the fiscal year ended March 31,
2019.
Net income for the quarter and fiscal year ended March 31,
2020, December 31, 2019, and March 31, 2019, 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 net income, 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 the merger with
Yageo Corporation (the “Merger”) and the effects such failure would
have on the Company's financial condition and results of
operations, (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) 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; (v) an increase in the cost or a
decrease in the availability of our principal or single-sourced
purchased raw materials; (vi) changes in the competitive
environment; (vii) uncertainty of the timing of customer product
qualifications in heavily regulated industries; (viii) economic,
political, or regulatory changes in the countries in which we
operate; (ix) difficulties, delays, or unexpected costs in
completing the Company’s restructuring plans; (x) 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; (xi) our business could be negatively
impacted by increased regulatory scrutiny and litigation; (xii)
difficulties associated with retaining, attracting, and training
effective employees and management; (xiii) the need to develop
innovative products to maintain customer relationships and offset
potential price erosion in older products; (xiv) exposure to claims
alleging product defects; (xv) the impact of laws and regulations
that apply to our business, including those relating to
environmental matters, data protection, cyber security and privacy;
(xvi) the impact of international laws relating to trade, export
controls and foreign corrupt practices; (xvii) 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;
(xviii) volatility of financial and credit markets affecting our
access to capital; (xix) default or failure of one or more of our
counterparty financial institutions could cause us to incur
significant losses; (xx) the need to reduce the total costs of our
products to remain competitive; (xxi) potential limitation on the
use of net operating losses to offset possible future taxable
income; (xxii) restrictions in our debt agreements that could limit
our flexibility in operating our business; (xxiii) failure to
maintain effective internal controls over financial reporting;
(xxiv) 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; (xxv) economic and demographic experience for pension
and other post-retirement benefit plans could be less favorable
than our assumptions; (xxvi) fluctuation in distributor sales could
adversely affect our results of operations; (xxvii) earthquakes,
natural disasters, and climate change could disrupt our operations
and have a material adverse effect on our financial condition and
results of operations; (xxviii) global health epidemics such as the
coronavirus could materially affect our business, financial
condition, and results of operations; and (xxix) volatility in our
stock price.
KEMET CORPORATION AND
SUBSIDIARIESConsolidated Statements of
Operations(Amounts in thousands, except per share
data)(Unaudited)
| |
|
Quarter Ended March 31, |
|
Fiscal Year Ended March 31, |
| |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
Net sales |
|
$ |
293,174 |
|
|
$ |
355,794 |
|
|
$ |
1,260,554 |
|
|
$ |
1,382,818 |
|
| Operating costs and
expenses: |
|
|
|
|
|
|
|
|
|
Cost of sales |
|
201,165 |
|
|
229,388 |
|
|
840,066 |
|
|
924,276 |
|
|
Selling, general and administrative expenses |
|
47,523 |
|
|
53,571 |
|
|
194,766 |
|
|
202,642 |
|
|
Research and development |
|
12,191 |
|
|
11,572 |
|
|
49,264 |
|
|
44,612 |
|
|
Restructuring charges |
|
2,952 |
|
|
7,157 |
|
|
8,882 |
|
|
8,779 |
|
|
Loss on write down of long-lived assets |
|
17,615 |
|
|
49 |
|
|
19,710 |
|
|
1,660 |
|
|
Total operating costs and expenses |
|
281,446 |
|
|
301,737 |
|
|
1,112,688 |
|
|
1,181,969 |
|
|
Operating income |
|
11,728 |
|
|
54,057 |
|
|
147,866 |
|
|
200,849 |
|
| Non-operating (income)
expense: |
|
|
|
|
|
|
|
|
|
Interest income |
|
(800 |
) |
|
(710 |
) |
|
(3,325 |
) |
|
(2,035 |
) |
|
Interest expense |
|
2,922 |
|
|
2,436 |
|
|
11,021 |
|
|
21,239 |
|
|
Antitrust class action settlements and regulatory costs |
|
— |
|
|
2,138 |
|
|
64,695 |
|
|
6,701 |
|
|
Other (income) expense, net |
|
(4,806 |
) |
|
2,430 |
|
|
(4,356 |
) |
|
4,513 |
|
|
Income before income taxes and equity income (loss) from equity
method investments |
|
14,412 |
|
|
47,763 |
|
|
79,831 |
|
|
170,431 |
|
| Income tax expense
(benefit) |
|
14,626 |
|
|
(48,660 |
) |
|
38,526 |
|
|
(39,460 |
) |
|
Income before equity income (loss) from equity method
investments |
|
(214 |
) |
|
96,423 |
|
|
41,305 |
|
|
209,891 |
|
| Equity income (loss) from
equity method investments |
|
(87 |
) |
|
(3,003 |
) |
|
76 |
|
|
(3,304 |
) |
|
Net income (loss) |
|
$ |
(301 |
) |
|
$ |
93,420 |
|
|
$ |
41,381 |
|
|
$ |
206,587 |
|
| |
|
|
|
|
|
|
|
|
| Net income (loss) per basic
share |
|
$ |
(0.01 |
) |
|
$ |
1.60 |
|
|
$ |
0.71 |
|
|
$ |
3.57 |
|
| Net income (loss) per diluted
share |
|
$ |
(0.01 |
) |
|
$ |
1.58 |
|
|
$ |
0.70 |
|
|
$ |
3.50 |
|
| |
|
|
|
|
|
|
|
|
| Weighted-average shares
outstanding: |
|
|
|
|
|
|
|
|
|
Basic |
|
58,774 |
|
|
58,233 |
|
|
58,574 |
|
|
57,840 |
|
|
Diluted |
|
58,774 |
|
|
58,975 |
|
|
59,415 |
|
|
59,082 |
|
KEMET CORPORATION AND
SUBSIDIARIESConsolidated Balance
Sheets(Amounts in thousands, except per share
data)(Unaudited)
|
|
|
March 31, 2020 |
|
March 31, 2019 |
| ASSETS |
|
|
|
|
| Current assets: |
|
|
|
|
|
Cash and cash equivalents |
|
$ |
222,399 |
|
|
$ |
207,918 |
|
|
Accounts receivable, net |
|
144,743 |
|
|
154,059 |
|
|
Inventories, net |
|
243,210 |
|
|
241,129 |
|
|
Prepaid expenses and other current assets |
|
36,143 |
|
|
38,947 |
|
|
Total current assets |
|
646,495 |
|
|
642,053 |
|
|
Property, plant and equipment, net |
|
552,636 |
|
|
495,280 |
|
|
Goodwill |
|
41,210 |
|
|
40,294 |
|
|
Intangible assets, net |
|
52,713 |
|
|
53,749 |
|
|
Equity method investments |
|
16,593 |
|
|
12,925 |
|
|
Deferred income taxes |
|
39,750 |
|
|
57,024 |
|
|
Other assets |
|
42,226 |
|
|
16,770 |
|
| Total assets |
|
$ |
1,391,623 |
|
|
$ |
1,318,095 |
|
| LIABILITIES AND STOCKHOLDERS’
EQUITY |
|
|
|
|
| Current liabilities: |
|
|
|
|
|
Current portion of long-term debt |
|
$ |
29,111 |
|
|
$ |
28,430 |
|
|
Accounts payable |
|
103,201 |
|
|
153,287 |
|
|
Accrued expenses |
|
167,622 |
|
|
93,761 |
|
|
Income taxes payable |
|
2,778 |
|
|
2,995 |
|
|
Total current liabilities |
|
302,712 |
|
|
278,473 |
|
|
Long-term debt |
|
235,673 |
|
|
254,771 |
|
|
Other non-current obligations |
|
191,918 |
|
|
136,630 |
|
|
Deferred income taxes |
|
14,058 |
|
|
8,806 |
|
|
Total liabilities |
|
744,361 |
|
|
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
58,273 and 57,822 shares at March 31, 2020 and 2019,
respectively |
|
583 |
|
|
578 |
|
|
Additional paid-in capital |
|
474,488 |
|
|
465,366 |
|
|
Retained earnings |
|
239,773 |
|
|
204,195 |
|
|
Accumulated other comprehensive income (loss) |
|
(67,582 |
) |
|
(30,724 |
) |
|
Total stockholders’ equity |
|
647,262 |
|
|
639,415 |
|
| Total liabilities and
stockholders’ equity |
|
$ |
1,391,623 |
|
|
$ |
1,318,095 |
|
KEMET CORPORATION AND
SUBSIDIARIESConsolidated Statements of Cash
Flows(Amounts in
thousands)(Unaudited)
| |
|
Fiscal Years Ended March 31, |
| |
|
2020 |
|
2019 |
| Operating activities |
|
|
|
|
|
Net income |
|
$ |
41,381 |
|
|
$ |
206,587 |
|
|
Adjustments to reconcile net income to net cash provided by (used
in) operating activities, net of effect of acquisitions: |
|
|
|
|
|
Depreciation and amortization |
|
62,819 |
|
|
52,628 |
|
|
Equity (income) loss from equity method investments |
|
(76 |
) |
|
3,304 |
|
|
Non-cash debt and financing costs |
|
4,173 |
|
|
1,872 |
|
|
Loss on early extinguishment of debt |
|
— |
|
|
15,946 |
|
|
Stock-based compensation expense |
|
12,084 |
|
|
12,866 |
|
|
Pension and other post-retirement benefits |
|
6,816 |
|
|
4,938 |
|
|
Change in deferred income taxes |
|
25,804 |
|
|
(49,757 |
) |
|
Loss on write down of long-lived assets |
|
19,710 |
|
|
1,660 |
|
|
Other, net |
|
270 |
|
|
(285 |
) |
|
Changes in assets and liabilities, net of the effect of
acquisitions: |
|
|
|
|
|
Accounts receivable |
|
5,727 |
|
|
(8,910 |
) |
|
Inventories |
|
(3,594 |
) |
|
(42,806 |
) |
|
Prepaid expenses and other assets |
|
3,962 |
|
|
(4,381 |
) |
|
Accounts payable |
|
(41,442 |
) |
|
7,650 |
|
|
Accrued income taxes |
|
(236 |
) |
|
1,046 |
|
|
Other operating liabilities |
|
21,458 |
|
|
(70,627 |
) |
|
Net cash provided by (used in) operating activities |
|
158,856 |
|
|
131,731 |
|
| Investing activities: |
|
|
|
|
|
Capital expenditures |
|
(146,331 |
) |
|
(146,056 |
) |
|
Contributions to equity method investments |
|
(5,000 |
) |
|
(4,000 |
) |
|
Proceeds from dividend |
|
433 |
|
|
776 |
|
|
Acquisitions, net of cash received |
|
(1,294 |
) |
|
— |
|
|
Proceeds from sale of assets |
|
— |
|
|
2,268 |
|
|
Net investment hedge settlement |
|
8,879 |
|
|
— |
|
|
Net cash provided by (used in) investing activities |
|
(143,313 |
) |
|
(147,012 |
) |
Consolidated Statements of Cash Flows (Unaudited)
(Continued)
| |
|
Fiscal Years Ended March 31, |
| |
|
2020 |
|
2019 |
| Financing activities: |
|
|
|
|
|
Proceeds from issuance of debt |
|
— |
|
|
284,924 |
|
|
Payments of long-term debt |
|
(26,862 |
) |
|
(344,461 |
) |
|
Customer advances related to customer capacity agreements |
|
43,095 |
|
|
13,412 |
|
|
Proceeds from termination of derivative instruments |
|
6,476 |
|
|
— |
|
|
Early extinguishment of debt costs |
|
— |
|
|
(3,234 |
) |
|
Debt issuance costs |
|
— |
|
|
(2,021 |
) |
|
Cash flow hedge settlement |
|
(6,972 |
) |
|
— |
|
|
Principal payments on finance leases |
|
(1,447 |
) |
|
— |
|
|
Proceeds from exercise of stock options |
|
327 |
|
|
485 |
|
|
Proceeds from exercise of stock warrants |
|
— |
|
|
— |
|
|
Payment of dividends |
|
(5,803 |
) |
|
(5,762 |
) |
|
Net cash provided by (used in) financing activities |
|
8,814 |
|
|
(56,657 |
) |
|
Net increase (decrease) in cash and cash equivalents |
|
24,357 |
|
|
(71,938 |
) |
| Effect of foreign currency
fluctuations on cash |
|
(1,812 |
) |
|
(6,990 |
) |
| Cash, cash equivalents, and
restricted cash at beginning of fiscal year |
|
207,918 |
|
|
286,846 |
|
| Cash, cash equivalents, and
restricted cash at end of fiscal year |
|
230,463 |
|
|
207,918 |
|
| Less: Restricted cash at end
of year |
|
8,064 |
|
|
— |
|
|
Cash and cash equivalents at end of year |
|
$ |
222,399 |
|
|
$ |
207,918 |
|
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 |
|
Fiscal Years Ended |
| |
|
|
|
|
| |
|
(Unaudited) |
| |
|
March 31, 2020 |
|
December 31, 2019 |
|
March 31, 2019 |
|
March 31, 2020 |
|
March 31, 2019 |
|
Net sales |
|
$ |
293,174 |
|
|
$ |
294,741 |
|
|
$ |
355,794 |
|
|
$ |
1,260,554 |
|
|
$ |
1,382,818 |
|
| Cost of sales |
|
201,165 |
|
|
201,560 |
|
|
229,388 |
|
|
840,066 |
|
|
924,276 |
|
| Gross Margin (GAAP) |
|
92,009 |
|
|
93,181 |
|
|
126,406 |
|
|
420,488 |
|
|
458,542 |
|
| Gross margin as a % of net
sales |
|
31.4 |
% |
|
31.6 |
% |
|
35.5 |
% |
|
33.4 |
% |
|
33.2 |
% |
| Non-GAAP
adjustments: |
|
|
|
|
|
|
|
|
|
|
|
Plant start-up costs |
|
233 |
|
|
136 |
|
|
(3,346 |
) |
|
369 |
|
|
(927 |
) |
|
Stock-based compensation expense |
|
1,195 |
|
|
792 |
|
|
815 |
|
|
3,843 |
|
|
2,756 |
|
| Adjusted gross margin
(non-GAAP) |
|
$ |
93,437 |
|
|
$ |
94,109 |
|
|
$ |
123,875 |
|
|
$ |
424,700 |
|
|
$ |
460,371 |
|
| Adjusted gross margin as a %
of net sales |
|
31.9 |
% |
|
31.9 |
% |
|
34.8 |
% |
|
33.7 |
% |
|
33.3 |
% |
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 |
|
Fiscal Years Ended |
| |
|
(Unaudited) |
| |
|
March 31, 2020 |
|
December 31, 2019 |
|
March 31, 2019 |
|
March 31, 2020 |
|
March 31, 2019 |
|
SG&A expenses (GAAP) |
|
$ |
47,523 |
|
|
$ |
50,031 |
|
|
$ |
53,571 |
|
|
$ |
194,766 |
|
|
$ |
202,642 |
|
| Non-GAAP
adjustments: |
|
|
|
|
|
|
|
|
|
|
|
ERP integration costs/IT transition costs |
|
1,530 |
|
|
2,029 |
|
|
3,117 |
|
|
6,282 |
|
|
8,813 |
|
|
Stock-based compensation expense |
|
1,500 |
|
|
1,521 |
|
|
1,935 |
|
|
7,803 |
|
|
9,751 |
|
|
Legal expenses related to antitrust class actions |
|
396 |
|
|
(29 |
) |
|
901 |
|
|
5,454 |
|
|
5,195 |
|
|
Merger related expenses |
|
1,836 |
|
|
5,283 |
|
|
— |
|
|
7,119 |
|
|
— |
|
|
Contingent consideration fair value adjustment |
|
62 |
|
|
33 |
|
|
— |
|
|
127 |
|
|
— |
|
| Adjusted SG&A expenses
(non-GAAP) |
|
$ |
42,199 |
|
|
$ |
41,194 |
|
|
$ |
47,618 |
|
|
$ |
167,981 |
|
|
$ |
178,883 |
|
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 |
|
Fiscal Year Ended |
| |
|
|
|
|
| |
|
(Unaudited) |
| |
|
March 31, 2020 |
|
December 31, 2019 |
|
March 31, 2019 |
|
March 31, 2020 |
|
March 31, 2019 |
|
Net sales |
|
$ |
293,174 |
|
|
$ |
294,741 |
|
|
$ |
355,794 |
|
|
$ |
1,260,554 |
|
|
$ |
1,382,818 |
|
| |
|
|
|
|
|
|
|
|
|
|
| Operating income (GAAP) |
|
$ |
11,728 |
|
|
$ |
28,648 |
|
|
$ |
54,057 |
|
|
$ |
147,866 |
|
|
$ |
200,849 |
|
| Operating margin as a % of net
sales |
|
4.0 |
% |
|
9.7 |
% |
|
15.2 |
% |
|
11.7 |
% |
|
14.5 |
% |
| Non-GAAP
adjustments: |
|
|
|
|
|
|
|
|
|
|
|
Loss on write down of long-lived assets |
|
17,615 |
|
|
1,076 |
|
|
49 |
|
|
19,710 |
|
|
1,660 |
|
|
ERP integration costs/IT transition costs |
|
1,530 |
|
|
2,029 |
|
|
3,117 |
|
|
6,282 |
|
|
8,813 |
|
|
Stock-based compensation expense |
|
2,826 |
|
|
2,387 |
|
|
2,855 |
|
|
12,084 |
|
|
12,866 |
|
|
Restructuring charges |
|
2,952 |
|
|
802 |
|
|
7,157 |
|
|
8,882 |
|
|
8,779 |
|
|
Legal expenses related to antitrust class actions |
|
396 |
|
|
(29 |
) |
|
901 |
|
|
5,454 |
|
|
5,195 |
|
|
Plant start-up costs |
|
233 |
|
|
136 |
|
|
(3,346 |
) |
|
369 |
|
|
(927 |
) |
|
Merger related expenses |
|
1,836 |
|
|
5,283 |
|
|
— |
|
|
7,119 |
|
|
— |
|
|
Contingent consideration fair value adjustment |
|
62 |
|
|
33 |
|
|
— |
|
|
127 |
|
|
— |
|
| Adjusted operating income
(non-GAAP) |
|
$ |
39,178 |
|
|
$ |
40,365 |
|
|
$ |
64,790 |
|
|
$ |
207,893 |
|
|
$ |
237,235 |
|
| Adjusted operating margin
(non-GAAP) as a % of net sales |
|
13.4 |
% |
|
13.7 |
% |
|
18.2 |
% |
|
16.5 |
% |
|
17.2 |
% |
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 (loss), 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 |
|
Fiscal Year Ended |
| |
|
|
|
|
| |
|
(Unaudited) |
| |
|
March 31, 2020 |
|
December 31, 2019 |
|
March 31, 2019 |
|
March 31, 2020 |
|
March 31, 2019 |
| GAAP |
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
293,174 |
|
|
$ |
294,741 |
|
|
$ |
355,794 |
|
|
$ |
1,260,554 |
|
|
$ |
1,382,818 |
|
| Net income (loss) |
|
$ |
(301 |
) |
|
$ |
16,602 |
|
|
$ |
93,420 |
|
|
$ |
41,381 |
|
|
$ |
206,587 |
|
| |
|
|
|
|
|
|
|
|
|
|
| Net income (loss) per basic
share |
|
$ |
(0.01 |
) |
|
$ |
0.28 |
|
|
$ |
1.60 |
|
|
$ |
0.71 |
|
|
$ |
3.57 |
|
| Net income (loss) per diluted
share |
|
$ |
(0.01 |
) |
|
$ |
0.28 |
|
|
$ |
1.58 |
|
|
$ |
0.70 |
|
|
$ |
3.50 |
|
| |
|
|
|
|
|
|
|
|
|
|
| Non-GAAP |
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) (GAAP) |
|
(301 |
) |
|
16,602 |
|
|
93,420 |
|
|
41,381 |
|
|
206,587 |
|
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
|
|
|
Equity (income) loss from equity method investments |
|
87 |
|
|
59 |
|
|
3,003 |
|
|
(76 |
) |
|
3,304 |
|
|
Loss on write down of long-lived assets |
|
17,615 |
|
|
1,076 |
|
|
49 |
|
|
19,710 |
|
|
1,660 |
|
|
Restructuring charges |
|
2,952 |
|
|
802 |
|
|
7,157 |
|
|
8,882 |
|
|
8,779 |
|
|
R&D grant reimbursements and grant income |
|
(1,572 |
) |
|
(7 |
) |
|
(2 |
) |
|
(1,595 |
) |
|
(4,559 |
) |
|
ERP integration costs/IT transition costs |
|
1,530 |
|
|
2,029 |
|
|
3,117 |
|
|
6,282 |
|
|
8,813 |
|
|
Stock-based compensation |
|
2,826 |
|
|
2,387 |
|
|
2,855 |
|
|
12,084 |
|
|
12,866 |
|
|
Settlements, regulatory costs, and legal expenses related to
antitrust class actions |
|
396 |
|
|
1,568 |
|
|
3,039 |
|
|
70,149 |
|
|
11,896 |
|
|
Net foreign exchange (gain) loss |
|
(8,089 |
) |
|
4,113 |
|
|
2,316 |
|
|
(6,762 |
) |
|
(7,230 |
) |
|
Plant start-up costs |
|
233 |
|
|
136 |
|
|
(3,346 |
) |
|
369 |
|
|
(927 |
) |
|
Income tax effect of non-GAAP adjustments |
|
2,134 |
|
|
(5,693 |
) |
|
(50,208 |
) |
|
(22,085 |
) |
|
(50,012 |
) |
|
(Gain) loss on early extinguishment of debt |
|
— |
|
|
— |
|
|
(42 |
) |
|
— |
|
|
15,946 |
|
|
Write off of debt issuance costs |
|
453 |
|
|
— |
|
|
— |
|
|
453 |
|
|
— |
|
|
Merger related expenses |
|
1,836 |
|
|
5,283 |
|
|
— |
|
|
7,119 |
|
|
— |
|
|
Curtailment/settlement expense on defined benefit pension
plans |
|
1,949 |
|
|
— |
|
|
— |
|
|
1,949 |
|
|
— |
|
|
Unrealized (gain) loss on equity securities |
|
89 |
|
|
(794 |
) |
|
— |
|
|
(705 |
) |
|
— |
|
|
Contingent consideration fair value adjustment |
|
62 |
|
|
33 |
|
|
— |
|
|
127 |
|
|
— |
|
| Adjusted net income
(non-GAAP) |
|
$ |
22,200 |
|
|
$ |
27,594 |
|
|
$ |
61,358 |
|
|
$ |
137,282 |
|
|
$ |
207,123 |
|
| |
|
|
|
|
|
|
|
|
|
|
| Adjusted net income per basic
share (non-GAAP) |
|
$ |
0.38 |
|
|
$ |
0.47 |
|
|
$ |
1.05 |
|
|
$ |
2.34 |
|
|
$ |
3.58 |
|
| Adjusted net income per
diluted share (non-GAAP) |
|
$ |
0.37 |
|
|
$ |
0.46 |
|
|
$ |
1.04 |
|
|
$ |
2.31 |
|
|
$ |
3.51 |
|
| |
|
|
|
|
|
|
|
|
|
|
| Weighted average shares
outstanding: |
|
|
|
|
|
|
|
|
|
|
| Basic |
|
58,774 |
|
|
58,646 |
|
|
58,233 |
|
|
58,574 |
|
|
57,840 |
|
| Diluted (1) |
|
59,612 |
|
|
59,529 |
|
|
58,975 |
|
|
59,415 |
|
|
59,082 |
|
_________________________________________(1) For the quarter
ended March 31, 2020, 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 tables 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):
| |
|
Fiscal Year 2020 |
| |
|
Q1 |
|
Q2 |
|
Q3 |
|
Q4 |
|
Total |
| |
|
(Unaudited) |
|
Net Sales |
|
$ |
345,242 |
|
|
$ |
327,397 |
|
|
$ |
294,741 |
|
|
$ |
293,174 |
|
|
$ |
1,260,554 |
|
| |
|
|
|
|
|
|
|
|
|
|
| Net income (loss) (GAAP) |
|
$ |
40,340 |
|
|
$ |
(15,260 |
) |
|
$ |
16,602 |
|
|
$ |
(301 |
) |
|
$ |
41,381 |
|
| Net income (loss) margin as a
% of net sales |
|
11.7 |
% |
|
(4.7 |
)% |
|
5.6 |
% |
|
(0.1 |
)% |
|
3.3 |
% |
| Non-GAAP
adjustments: |
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit) |
|
16,800 |
|
|
1,700 |
|
|
5,400 |
|
|
14,626 |
|
|
38,526 |
|
|
Interest expense, net |
|
1,736 |
|
|
1,939 |
|
|
1,899 |
|
|
2,122 |
|
|
7,696 |
|
|
Depreciation and amortization |
|
14,259 |
|
|
15,117 |
|
|
16,154 |
|
|
17,289 |
|
|
62,819 |
|
|
EBITDA (non-GAAP) |
|
73,135 |
|
|
3,496 |
|
|
40,055 |
|
|
33,736 |
|
|
150,422 |
|
| Excluding the following
items: |
|
|
|
|
|
|
|
|
|
|
|
Equity (income) loss from equity method investments |
|
250 |
|
|
(472 |
) |
|
59 |
|
|
87 |
|
|
(76 |
) |
|
Loss on write down of long-lived assets |
|
960 |
|
|
59 |
|
|
1,076 |
|
|
17,615 |
|
|
19,710 |
|
|
ERP integration costs/IT transition costs |
|
1,215 |
|
|
1,508 |
|
|
2,029 |
|
|
1,530 |
|
|
6,282 |
|
|
Stock-based compensation |
|
2,725 |
|
|
4,146 |
|
|
2,387 |
|
|
2,826 |
|
|
12,084 |
|
|
Restructuring charges |
|
2,208 |
|
|
2,920 |
|
|
802 |
|
|
2,952 |
|
|
8,882 |
|
|
R&D grant reimbursements and grant income |
|
(35 |
) |
|
19 |
|
|
(7 |
) |
|
(1,572 |
) |
|
(1,595 |
) |
|
Settlements, regulatory costs, and legal expenses related to
antitrust class actions |
|
2,559 |
|
|
65,626 |
|
|
1,568 |
|
|
396 |
|
|
70,149 |
|
|
Net foreign exchange (gain) loss |
|
(489 |
) |
|
(2,297 |
) |
|
4,113 |
|
|
(8,089 |
) |
|
(6,762 |
) |
|
Plant start-up costs |
|
34 |
|
|
(34 |
) |
|
136 |
|
|
233 |
|
|
369 |
|
|
Write off of debt issuance costs |
|
— |
|
|
— |
|
|
— |
|
|
453 |
|
|
453 |
|
|
Merger related expenses |
|
— |
|
|
— |
|
|
5,283 |
|
|
1,836 |
|
|
7,119 |
|
|
Curtailment/settlement expense on defined benefit pension
plans |
|
— |
|
|
— |
|
|
— |
|
|
1,949 |
|
|
1,949 |
|
|
Unrealized (gain) loss on equity securities |
|
— |
|
|
— |
|
|
(794 |
) |
|
89 |
|
|
(705 |
) |
|
Contingent consideration fair value adjustment |
|
— |
|
|
32 |
|
|
33 |
|
|
62 |
|
|
127 |
|
|
Adjusted EBITDA (non-GAAP) |
|
$ |
82,562 |
|
|
$ |
75,003 |
|
|
$ |
56,740 |
|
|
$ |
54,103 |
|
|
$ |
268,408 |
|
|
Adjusted EBITDA margin (non-GAAP) as a % of net sales |
|
23.9 |
% |
|
22.9 |
% |
|
19.3 |
% |
|
18.5 |
% |
|
21.3 |
% |
| |
|
Fiscal Year 2019 |
| |
|
Q1 |
|
Q2 |
|
Q3 |
|
Q4 |
|
Total |
| |
|
(Unaudited) |
|
Net Sales |
|
$ |
327,616 |
|
|
$ |
349,233 |
|
|
$ |
350,175 |
|
|
$ |
355,794 |
|
|
$ |
1,382,818 |
|
| |
|
|
|
|
|
|
|
|
|
|
| Net income (GAAP) |
|
$ |
35,220 |
|
|
$ |
37,141 |
|
|
$ |
40,806 |
|
|
$ |
93,420 |
|
|
$ |
206,587 |
|
| Net income (loss) margin as a
% of net sales |
|
10.8 |
% |
|
10.6 |
% |
|
11.7 |
% |
|
26.3 |
% |
|
14.9 |
% |
|
Non-GAAP-adjustments: |
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit) |
|
4,600 |
|
|
2,000 |
|
|
2,600 |
|
|
(48,660 |
) |
|
(39,460 |
) |
|
Interest expense, net |
|
6,658 |
|
|
6,912 |
|
|
3,908 |
|
|
1,726 |
|
|
19,204 |
|
|
Depreciation and amortization |
|
13,097 |
|
|
12,545 |
|
|
12,763 |
|
|
14,223 |
|
|
52,628 |
|
|
EBITDA (non-GAAP) |
|
59,575 |
|
|
58,598 |
|
|
60,077 |
|
|
60,709 |
|
|
238,959 |
|
| Excluding the following
items: |
|
|
|
|
|
|
|
|
|
|
|
Equity (income) loss from equity method investments |
|
69 |
|
|
(64 |
) |
|
296 |
|
|
3,003 |
|
|
3,304 |
|
|
Loss on write down of long-lived assets |
|
511 |
|
|
312 |
|
|
788 |
|
|
49 |
|
|
1,660 |
|
|
ERP integration costs/IT transition costs |
|
1,650 |
|
|
1,593 |
|
|
2,453 |
|
|
3,117 |
|
|
8,813 |
|
|
Stock-based compensation |
|
4,060 |
|
|
4,417 |
|
|
1,534 |
|
|
2,855 |
|
|
12,866 |
|
|
Restructuring charges |
|
(96 |
) |
|
— |
|
|
1,718 |
|
|
7,157 |
|
|
8,779 |
|
|
R&D grant reimbursements and grant income |
|
(4,087 |
) |
|
— |
|
|
(470 |
) |
|
(2 |
) |
|
(4,559 |
) |
|
Settlements, regulatory costs, and legal expenses related to
antitrust class actions |
|
1,248 |
|
|
6,060 |
|
|
1,549 |
|
|
3,039 |
|
|
11,896 |
|
|
Net foreign exchange (gain) loss |
|
(7,521 |
) |
|
193 |
|
|
(2,218 |
) |
|
2,316 |
|
|
(7,230 |
) |
|
Plant start-up costs |
|
753 |
|
|
1,361 |
|
|
305 |
|
|
(3,346 |
) |
|
(927 |
) |
|
(Gain) loss on early extinguishment of debt |
|
— |
|
|
— |
|
|
15,988 |
|
|
(42 |
) |
|
15,946 |
|
|
Adjusted EBITDA (non-GAAP) |
|
$ |
56,162 |
|
|
$ |
72,470 |
|
|
$ |
82,020 |
|
|
$ |
78,855 |
|
|
$ |
289,507 |
|
|
Adjusted EBITDA margin (non-GAAP) as a % of net sales |
|
17.1 |
% |
|
20.8 |
% |
|
23.4 |
% |
|
22.2 |
% |
|
20.9 |
% |
|
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 |
KraneShares Trus (NYSE:KEM)
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