<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934.
For the period ended June 30, 1997.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the period from ___________to_____________
Commission File Number: 0-20289
KEMET CORPORATION
Exact name of registrant as specified in its charter
DELAWARE 57-0923789
(State or other (IRS Employer
jurisdiction of Identification No.)
incorporation or organization)
2835 KEMET WAY, SIMPSONVILLE, SOUTH CAROLINA 29681
- ------------------------------------------------------------------------------
(Address of principal executive offices, zip code)
864-963-6300
-------------------------------
(Registrant's telephone number, including area code)
Former name, former address and former fiscal year, if changed since last
report: N/A
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
Common Stock Outstanding at: August 7, 1997
Title of Each Class Number of Shares Outstanding
- --------------------------------------------------------------------------------
Common Stock, $.01 Par Value 37,855,579
Non-Voting Common Stock, $.01 Par Value 1,096,610
<PAGE> 2
Part I - FINANCIAL INFORMATION
ITEM 1 - Financial Statements
KEMET CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Dollars in Thousands Except Per Share Data
<TABLE>
<CAPTION>
June 30, March 31,
1997 1997
---------- ----------
(unaudited)
ASSETS
<S> <C> <C>
Current Assets:
Cash $ 4,802 $ 2,188
Notes and accounts receivable (less allowances of $9,600 and $6,999
June 30, 1997 and March 31, 1997, respectively) 51,809 55,189
Inventories:
Raw materials and supplies 37,347 35,880
Work in process 43,179 39,373
Finished goods 23,149 22,116
-------- --------
Total inventories 103,675 97,369
Prepaid expenses 2,123 2,402
Deferred income taxes 13,167 12,552
-------- --------
Total current assets 175,576 169,700
Property and equipment (less accumulated depreciation of $158,866 and
$145,124 at June 30, 1997 and March 31, 1997, respectively) 339,584 319,509
Intangible assets (less accumulated amortization of $12,682 and
$12,278 at June 30, 1997 and March 31, 1997, respectively) 48,028 48,431
Other assets 5,581 5,604
-------- --------
Total assets $568,769 $543,244
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 10,000 $ 72
Accounts payable, trade 67,258 62,159
Accrued expenses 30,610 29,310
Income taxes 10,435 15,091
-------- --------
Total current liabilities 118,303 106,632
Long-term debt, excluding current installments 101,200 102,900
Other non-current obligations 67,250 68,848
Deferred income taxes 14,595 12,741
-------- --------
Total liabilities $301,348 $291,121
Stockholders' equity:
Common stock, par value $.01, authorized 100,000,000 shares, issued
and outstanding 37,806,931 and 37,717,011 shares at June 30, 1997 and
March 31, 1997, respectively 378 377
Non-voting common stock, par value $.01, authorized 12,000,000 shares,
issued and outstanding 1,096,610 at June 30, 1997 and March 31, 1997 11 11
Additional paid-in capital 140,633 139,352
Retained earnings 126,396 112,387
-------- --------
267,418 252,127
Equity adjustments from foreign currency translation 3 (4)
-------- --------
Total stockholders' equity 267,421 252,123
-------- --------
Total liabilities and stockholders' equity $568,769 $543,244
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 3
ITEM 1 - Financial Statements
KEMET CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS OF EARNINGS
(Dollars in Thousands Except Per Share Data)
<TABLE>
<CAPTION>
Three months ended
June 30,
-------------------
1997 1996
----- -----
(unaudited) (unaudited)
<S> <C> <C>
Net Sales $161,204 $125,726
Operating costs and expenses:
Cost of goods sold, exclusive of depreciation 110,587 84,842
Selling, general and administrative expenses 12,136 11,201
Research, development and engineering 5,628 4,782
Depreciation and amortization 9,344 7,978
-------- --------
137,695 108,803
Operating income 23,509 16,923
Other expense:
Interest expense 1,512 1,253
Other 1,414 358
-------- --------
Earnings before income taxes 20,583 15,312
Income tax expense 6,574 5,587
-------- --------
Net earnings available for common shareholders $14,009 $ 9,725
======== ========
Per Common Share Information:
Net earnings per common share $0.36 $0.25
======== ========
Weighted average shares outstanding 39,351,152 39,210,818
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
ITEM 1 - Financial Statements
KEMET CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Dollars in Thousands
<TABLE>
<CAPTION>
Three months ended
June 30,
---------------------------
1997 1996
----- -----
(unaudited) (unaudited)
<S> <C> <C>
Sources (uses) of cash:
Net cash from operating activities $22,948 $(8,211)
Investing activities:
Additions to property and equipment (29,851) (30,290)
Proceeds from disposals of property 0 60
Other 8 (7)
-------- --------
Net cash used by investing transactions (29,843) (30,237)
Financing activities:
Proceeds from employees savings plan 486 537
Proceeds from exercise stock options including related tax benefit 795 271
Repayment of long-term debt (72) (65)
Net proceeds from revolving/swingline loan 8,300 37,850
-------- --------
Net cash provided financing transactions 9,509 38,593
-------- --------
Net increase in cash 2,614 145
Cash at beginning of period 2,188 3,408
------- --------
Cash at end of period $4,802 $3,553
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
Note 1. Basis of Financial Statement Preparation
The consolidated financial statements contained herein are unaudited and have
been prepared from the books and records of KEMET Corporation and Subsidiaries
(KEMET or the Company). In the opinion of management, the consolidated financial
statements reflect all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results for the interim
periods. The consolidated financial statements have been prepared in accordance
with the instructions to Form 10-Q and, therefore, do not include all
information and footnotes necessary for a complete presentation of financial
position, results of operations and cash flows in conformity with generally
accepted accounting principles. Although the Company believes that the
disclosures are adequate to make the information presented not misleading, it is
suggested that these consolidated financial statements be read in conjunction
with the audited financial statements and notes thereto included in the
Company's fiscal year ending March 31, 1997 Form 10-K. Net sales and operating
results for the three months ended June 30, 1997 are not necessarily indicative
of the results to be expected for the full year.
The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. In consolidation all significant
intercompany amounts and transactions have been eliminated.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
Three Month Period Ended June 30, 1997 and Three Month Period Ended June 30,
1996
Net sales for the three months ended June 30, 1997 were $161.2 million, an
increase of 28% from net sales of $125.7 million for the three months ended June
30, 1996. The increase in first quarter net sales reflects the increased demand
for surface-mount products. This demand was met by improving manufacturing
processes and adding production capacity. Sales of surface-mount capacitors
were $119.4 million for the first quarter of fiscal 1998, an increase of 38%
from $86.6 million in the prior year's first quarter and sales of leaded
capacitors increased 7% to $41.8 million from $39.1 million. Globally, sales
increased significantly with domestic sales increasing 25% to $92.0 million and
export sales increasing 33% to $69.2 million as compared to the prior year's
first quarter.
Cost of sales, exclusive of depreciation, for the three months ended June 30,
1997 was $110.6 million compared to $84.8 million for the three months ended
June 30, 1996. As a percentage of net sales, cost of sales, exclusive of
depreciation, increased to 69% from 67% primarily as a result of a decline in
selling prices offset in part by improvements in manufacturing efficiencies and
continued efforts to reduce manufacturing costs.
Selling, general and administrative expenses for the three months ended June 30,
1997 were $12.1 million, or 8% of net sales, as compared to $11.2 million, or 9%
of net sales, for the three months ended June 30, 1996. Selling, general and
administrative expenses as a percent of sales decreased primarily as a result of
efficiencies associated with the increased sales volume.
Research, development and engineering expenses for the three months ended June
30, 1997 were $5.6 million compared to $4.8 million for the three months ended
June 30, 1996. The increase reflects the Company's continued investments in new
products and technologies and the enhancement of manufacturing efficiencies.
<PAGE> 6
Depreciation and amortization expense was $9.3 million for the
three months ended June 30, 1997, as compared to $8.0 million from the prior
year's first quarter and resulted primarily from increased capital expenditures
over the past fiscal years.
Operating income for the three months ended June 30, 1997 was $23.5 million
compared to $16.9 million for the three months ended June 30, 1996. The
increase resulted primarily from the increase in net sales as discussed above.
Income tax expense was 32.0% and 36.5% of earnings for the three month periods
ended June 30, 1997 and 1996, respectively. The decrease in the effective
income tax rate was primarily the result of increased foreign sales corporation
benefits and the implementation of various state tax savings strategies, which
were put in place late in fiscal year 1997.
Liquidity and Capital Resources
The Company's liquidity needs arise primarily from working capital requirements,
capital expenditures and interest payments on its indebtedness. The Company
intends to satisfy its liquidity requirements primarily with funds provided by
operations, borrowings under its revolving credit facility and amounts advanced
under its foreign accounts receivable discounting arrangements.
Cash flows from operating activities for the three months ended June 30, 1997
amounted to a surplus of $22.9 million compared with a deficit of $8.2 million
for the three months ended June 30, 1996. The increase in cash flow was
primarily a result of the increase in net income and the timing of cash flows
from current assets and liabilities such as accounts receivables, inventories,
accounts payables, accrued liabilities and income taxes payable.
Capital expenditures were $29.9 million for the three months ended June 30, 1997
compared to $30.3 million for the three months ended June 30, 1996. The Company
is continuing to invest in key capital projects for the future with the majority
of capital expenditures devoted to surface-mount production capacity.
During the three months ended June 30, 1997 the Company increased its
indebtedness (long-term debt and current portion of long-term debt) by $8.3
million which consisted primarily of the financing of capital expenditures. The
Company had unused availability under its revolving credit facility as of June
30, 1997 of approximately $73.8 million.
KEMET believes its strong financial position will permit the financing of its
business needs and opportunities in an orderly manner. It is anticipated that
ongoing operations will be financed primarily by internally generated funds. In
addition, the Company has the flexibility to meet short-term working capital and
other temporary requirements through utilization of its borrowings under its
bank credit facilities.
Certain statements contained above may be forward looking statements involving
risks and uncertainties discussed in detail in the Company's Securities and
Exchange Commission filings and reports, including the Company's 1997 Annual
Report to Stockholders. Actual results may vary due to these or other risks and
uncertainties.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Other than as reported above and in the Company's fiscal year ending March 31,
1997 Form 10-K under the caption "Item 3. Legal Proceedings", the Company is
not currently a party to any material pending legal proceedings, other than
<PAGE> 7
routine litigation incidental to the business of the Company.
Item 2. Change in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
On July 23, 1997, at the Company's annual meeting, shareholders re-elected
Charles E. Volpe and Charles E. Corpening as Directors of the Company to serve
three-year terms. The Company's shareholders also approved the appointment of
KPMG Peat Marwick LLP as independent public accountants for the fiscal year
ending March 31, 1998.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
11.1 Computation of Per Share Earnings.
(b) Reports on Form 8-K.
<PAGE> 8
Signatures
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Date: August 8, 1997
KEMET Corporation
/S/ D.R. Cash
--------------------------
D.R. Cash
Senior Vice President of Administration,
Treasurer and Assistant Secretary
(Principal Accounting and
Financial Officer)
<PAGE>1
EXHIBIT 11.1
COMPUTATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE
DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA
<TABLE>
<CAPTION>
Three months ended
June 30,
------------------
1996 1996
--------- ---------
<S> <C> <C>
Primary:
Net earnings available for common and
common equivalent shares $14,009 $9,725
----------- ----------
Weighted average common and common
equivalent shares outstanding 39,351,152 39,210,818
----------- ----------
Primary earnings per common share $0.36 $0.25
=========== ==========
Fully Diluted:
Net earnings available for common and
common equivalent shares $14,009 $9,725
----------- ----------
Weighted average common and common
equivalent shares outstanding assuming
ending market price 39,392,747 39,210,818
----------- ----------
Fully diluted earnings per common share $0.36 $0.25
=========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE>5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 4802
<SECURITIES> 0
<RECEIVABLES> 61409
<ALLOWANCES> 9600
<INVENTORY> 103675
<CURRENT-ASSETS> 175576
<PP&E> 498450
<DEPRECIATION> 158866
<TOTAL-ASSETS> 568769
<CURRENT-LIABILITIES> 118303
<BONDS> 0
0
0
<COMMON> 378
<OTHER-SE> 267043
<TOTAL-LIABILITY-AND-EQUITY> 568769
<SALES> 161204
<TOTAL-REVENUES> 161204
<CGS> 110587
<TOTAL-COSTS> 137695
<OTHER-EXPENSES> 1414
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1512
<INCOME-PRETAX> 20583
<INCOME-TAX> 6574
<INCOME-CONTINUING> 14009
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14009
<EPS-PRIMARY> .36
<EPS-DILUTED> .36
</TABLE>
