UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QA
(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, 2000.
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934.
Commission File Number: 0-20289
KEMET Corporation
Exact name of registrant as specified in its charter
DELAWARE 57-0923789
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
2835 KEMET Way, Simpsonville, South Carolina 29681
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(Address of principal executive offices, zip code)
(864) 963-6300
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(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 8, 2000
Title of Each Class Number of Shares Outstanding
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Common Stock, $.01 Par Value 87,420,004
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,
2000 2000
---------- --------
(unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 76,596 $75,735
Short-term investments 137,299 123,687
Accounts receivable (less allowance of $19,794 and
$15,779 at June 30, 2000, and March 31, 2000, respectively) 123,240 94,127
Inventories:
Raw materials and supplies 57,430 53,532
Work in process 57,687 58,220
Finished goods 19,873 19,207
----------- ------
Total inventories 134,990 130,959
Prepaid expenses 3,948 4,688
Deferred income taxes 21,165 20,099
----------- ------
Total current assets 497,238 449,295
Property and equipment (less accumulated depreciation
of $278,495 and $276,841 at June 30, 2000, and
March 31, 2000, respectively) 470,982 423,399
Intangible assets (less accumulated amortization of
$19,620 and $17,654 at June 30, 2000, and March 31,
2000, respectively) 45,656 46,198
Other assets 8,066 8,364
---------- -------
Total assets $1,021,942 $927,256
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, trade $ 119,680 $123,708
Accrued expenses 35,568 42,045
Income taxes 39,847 23,388
----------- --------
Total current liabilities 195,095 189,141
Long-term debt 100,000 100,000
Other non-current obligations 54,754 54,757
Deferred income taxes 37,946 35,902
----------- ---------
Total liabilities 387,795 379,800
Stockholders' equity:
Common stock, par value $.01, authorized 100,000,000
shares, issued and outstanding 87,400,809 and 87,025,908
shares at June 30, 2000, and March 31, 2000, respectively 874 870
Additional paid-in capital 315,173 308,724
Retained earnings 318,043 237,846
Accumulated other comprehensive income 57 16
----------- --------
Total stockholders' equity 634,147 547,456
----------- --------
Total liabilities and stockholders' equity $1,021,942 $927,256
=========== ========
</TABLE>
See accompanying notes to consolidated financial statements
KEMET CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars in Thousands Except Per Share Data)
<TABLE>
<CAPTION> Three months ended June 30,
---------------------------
2000 1999
(unaudited) (unaudited)
------------ ----------
<S> <C> <C>
Net Sales $ 329,169 $ 162,649
Operating costs and expenses:
Cost of goods sold, exclusive of depreciation 169,836 122,984
Selling, general and administrative expenses 12,861 10,944
Research, development and engineering 5,622 4,388
Depreciation and amortization 15,264 13,040
---------- ----------
Total operating costs and expenses 203,583 151,356
---------- ----------
Operating income 125,586 11,293
Other expense:
Interest income (3,039) -
Interest expense 1,836 2,734
Other 3,352 1,656
---------- ----------
Total other expense 2,149 4,390
---------- ----------
Earnings before income taxes 123,437 6,903
Income tax expense 43,203 2,209
---------- ----------
Net earnings $ 80,234 $ 4,694
========== ==========
Per Share Information:
Net earnings per share:
Basic $0.92 $0.06
Diluted $0.90 $0.06
Weighted average shares outstanding:
Basic 87,324,021 78,571,116
Diluted 88,915,974 79,778,122
</TABLE>
See accompanying notes to consolidated financial statements.
KEMET CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands Except Per Share Data)
<TABLE>
<CAPTION> Three months ended June 30,
---------------------------
2000 1999
(unaudited) (unaudited)
------------ -----------
<S> <C> <C>
Sources (uses) of cash:
Net cash from operating activities $ 70,645 $ 23,676
Investing activities:
Purchases of short-term investment (23,407) -
Proceeds from maturity of short-term investment 9,794 -
Additions to property and equipment (62,664) (17,132)
Other 42 (20)
---------- ----------
Net cash used by investing activities (76,235) (17,152)
Financing activities:
Proceeds from employees savings plan 379 328
Proceeds from exercise of stock options including
related tax benefit 6,072 208
Net proceeds/(repayments) from revolving/
swingline loan - 2,000
---------- ----------
Net cash provided by financing activities 6,451 2,536
---------- ----------
Net increase in cash 861 9,060
Cash at beginning of period 75,735 3,914
---------- ----------
Cash at end of period $ 76,596 $ 12,974
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
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, 2000, Form 10-K. Net
sales and operating results for the three months ended June 30,
2000, 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.
Note 2. Reconciliation of basic earnings per common share to
diluted earnings per common share.
In accordance with FASB Statement No. 128, the Company has
included the following table presenting a reconciliation of
basic EPS to diluted EPS fully displaying the effect of dilutive
securities.
<TABLE>
<CAPTION>
Computation of Basic and Diluted Earnings Per Share
(Dollars in Thousands Except Per share Data)
For the three months ended June 30,
2000 1999
---------------------------------- ----------------------------------
Per- Per-
Income Shares Share Income Shares Share
(numerator) (denominator) Amount (numerator) (denominator) Amount
----------- ------------ ------ ---------- ------------ -------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS $80,234 87,324,021 $0.92 $ 4,694 $78,571,116 $0.06
Effect of diluted
securities:
Stock options - 1,591,953 $0.02 - 1,207,006 -
Diluted EPS $80,234 88,915,974 $0.90 $ 4,694 79,778,122 $0.06
</TABLE>
Note 3. At June 30, 2000, the Company had outstanding forward
exchange contracts to purchase Mexican pesos with notional
amounts totaling $88.3 million. The carrying value and fair
value of the contracts is a liability of $1.0 million. All
contracts mature within one year.
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
RESULTS OF OPERATIONS
Three Month Period Ended June 30, 2000, and Three Month Period
Ended June 30, 1999
Net sales for the three months ended June 30, 2000, increased
102% to $329.1 million from $162.6 million for the three months
ended June 30, 1999. The increase in net sales resulted from
higher unit volume and increased selling prices in both tantalum
and ceramic capacitors. The strong demand in the computer,
telecommunications, automotive, and internet infrastructure
market segments resulted in the higher unit volume, and the
demand for capacitors exceeding the industry capacity led to
increased selling prices. Sales of surface-mount capacitors
were $294.1 million for the first quarter of fiscal 2000, an
increase of 119% from $134.2 million in the prior year's first
quarter. Globally, domestic sales increased 77% to $154.4
million during the quarter. Export sales, led by strong sales
in both Europe and Asia, increased 132% to $174.8 million,
compared to $75.2 million in the prior year's first quarter.
Cost of sales, exclusive of depreciation, for the three months
ended June 30, 2000, was $169.8 million, compared to $123.0
million for the three months ended June 30, 1999. As a
percentage of net sales, cost of sales, exclusive of
depreciation, decreased to 52%, compared to 76% for the prior
year quarter. The decrease in cost of goods sold as a
percentage of sales is primarily the result of increased sales
(as explained above) and improved manufacturing margins achieved
through operating efficiencies and cost reduction programs.
Selling, general and administrative expenses for the three
months ended June 30, 2000, were $12.9 million, or 4% of net
sales, as compared to $10.9 million, or 7% of net sales, for the
three months ended June 30, 1999. Selling, general and
administrative expenses as a percent of sales decreased
primarily as a result of increased sales.
Research, development, and engineering expenses for the three
months ended June 30, 2000, were $5.6 million, as compared to
$4.4 million for the prior year period. The increase is the
result of the Company's continuing efforts to invest in the
development of new products and technologies.
Depreciation and amortization expense was $15.3 million for the
three months ended June 30, 2000, as compared to $13.0 million
for the prior year period. This increase was primarily due to
the increase in capital expenditures as the Company continues to
invest in additional capacity to support existing and new
product expansions.
Operating income for the three months ended June 30, 2000, was
$125.6 million compared to $11.3 million for the three months
ended June 30, 1999. The increase resulted primarily from the
increase in net sales as discussed above.
Income tax expense was 35.0% and 32.0% of earnings for the three
month periods ended June 30, 2000 and 1999, respectively. The
difference from the statutory income tax rate was primarily the
result of increased foreign sales corporation benefits and the
implementation of various state tax savings strategies.
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, 2000, amounted to a surplus of $70.6 million compared
to $23.7 million for the three months ended June 30, 1999. 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
payable, accrued liabilities and income taxes payable.
Capital expenditures were $62.7 million for the three months
ended June 30, 2000, compared to $17.1 million for the three
months ended June 30, 1999. The first quarter's expenditures
reflect the completion of projects initiated during fiscal year
2000. The Company estimates its capital expenditures for fiscal
year 2001 to be approximately $240.0 million.
During the three months ended June 30, 2000, the Company's
indebtedness did not change. As of June 30, 2000, the Company
had unused availability under its revolving credit facility and
swingline loan of approximately $150.0 million and $10.0
million, respectively.
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.
From time to time, information provided by the Company,
including but not limited to statements in this report, or other
statements made by or on behalf of the Company, may contain
"forward-looking" information within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities
and Exchange Act of 1934. Such statements involve a number of
risks and uncertainties. The Company's actual results could
differ materially from those discussed in the forward-looking
statements. The cautionary statements set forth in the
Company's 2000 Annual Report under the heading Safe Harbor
Statement identify important factors that could cause actual
results to differ materially from those in any forward-looking
statements made by or on behalf of the Company.
Item 3. Market Risk
Market risk disclosure included in the Company's fiscal year
ending March 31, 2000, Form 10-K, Part II, Item 7
A, is still applicable as of June 30, 2000. We have updated the
disclosure concerning our Mexican peso forward exchange
contracts, which is included in Note 3 in this Form 10-Q.
Part II - OTHER INFORMATION
Item 1. Legal Proceedings.
Other than as reported above and in the Company's fiscal year
ending March 31, 2000, 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 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.
(a) The Company held its Annual Meeting of Stockholders on July
26, 2000.
(b) Proxies for the meeting were solicited pursuant to
Regulation 14A of the Securities Exchange Act of 1934, as
amended. There was no solicitation in opposition to
management's nominees for directors as listed in the definitive
proxy statement of the Company dated as of June 26, 2000, and
such nominees were elected.
c) Briefly described below is each matter voted upon at the
Annual Meeting of Stockholders.
(i) Election of Directors of the Company.
All proxy nominees for directors as listed in the proxy
statement were elected (Messrs. Volpe and Schorr to serve three
year terms and Mr. Culbertson to serve a two year term) with the
following vote:
Nominee In Favor Against Abstained
------- ---------- --------- ---------
Charles M. Culbertson II 58,692,615 - 344,945
Charles E. Volpe 58,781,750 - 255,810
Paul C. Schorr IV 58,782,702 - 254,858
(ii) Amendment of the Corporation's Restated Certificate of
Incorporation:
In Favor Against Abstained
---------- --------- ---------
52,684,764 6,138,752 214,044
(iii) The ratification of the appointment of KPMG LLP as
independent public accountants for the year ending March 31,
2001:
In Favor Against Abstained
---------- --------- ---------
58,924,580 12,376 100,604
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
10.1 Seventh Amendment to Credit Agreement between KEMET
Corporation, Wachovia Bank, N.A. as Agent, and the Banks named
in the Credit Agreement dated as of June 30, 2000.
(b) Reports on Form 8-K.
None.
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: November 14, 2000
KEMET Corporation
/S/ D. R. Cash
D. R. Cash
Senior Vice President and
Chief Financial Officer
