KEMET Announces Fourth Quarter and Fiscal Year Results

 

FORT LAUDERDALE, Fla., May 14, 2020 (GLOBE NEWSWIRE) -- 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 SUBSIDIARIES

Consolidated 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 SUBSIDIARIES
Consolidated 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 SUBSIDIARIES
Consolidated 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. ThompsonRichard Vatinelle
 Executive Vice President andVice President and
 Chief Financial OfficerTreasurer
 GregThompson@KEMET.comInvestorRelations@KEMET.com
 954-595-5081954-766-2819