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| 8-K - 8-K-INVESTOR PRESENTATION - KEMET CORP | fy2017_q2xform8kxinvestorp.htm |
Deutsche Bank
24th Annual Leveraged Finance Conference
September 27, 2016
Presenter: William M. Lowe, Jr.
EVP & Chief Financial Officer
Cautionary Statement
Certain statements included herein contain forward-looking statements within the meaning of federal securities laws about KEMET
Corporation's (the "Company") 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," variations of such words, and other similar expressions 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 the actual outcomes and results to differ materially from those expressed in, or implied by, these forward-
looking statements include, but are not necessarily limited to the following: (i) adverse economic conditions could impact our ability
to realize operating plans if the demand for our products declines, and such conditions could adversely affect our liquidity and ability
to continue to operate; (ii) continued net losses could impact our ability to realize current operating plans and could materially
adversely affect our liquidity and our ability to continue to operate; (iii) adverse economic conditions could cause the write down of
long-lived assets or goodwill; (iv) an increase in the cost or a decrease in the availability of our principal or single-sourced
purchased materials; (v) changes in the competitive environment; (vi) uncertainty of the timing of customer product qualifications in
heavily regulated industries; (vii) economic, political, or regulatory changes in the countries in which we operate; (viii) difficulties,
delays or unexpected costs in completing the restructuring plans; (ix) equity method investment in NEC TOKIN exposes us to a
variety of risks; (x) possible acquisition of NEC TOKIN may not achieve all of the anticipated results; (xi) acquisitions and other
strategic transactions expose us to a variety of risks; (xii) our business could be negatively impacted by increased regulatory
scrutiny and litigation; (xiii) inability to attract, train and retain effective employees and management; (xiv) inability to develop
innovative products to maintain customer relationships and offset potential price erosion in older products; (xv) exposure to claims
alleging product defects; (xvi) the impact of laws and regulations that apply to our business, including those relating to
environmental matters; (xvii) the impact of international laws relating to trade, export controls and foreign corrupt practices;
(xviii) volatility of financial and credit markets affecting our access to capital; (xix) the need to reduce the total costs of our products
to remain competitive; (xx) potential limitation on the use of net operating losses to offset possible future taxable income;
(xxi) restrictions in our debt agreements that limit our flexibility in operating our business; (xxii) failure of our information technology
systems to function properly or our failure to control unauthorized access to our systems may cause business disruptions;
(xxiii) additional exercise of the warrant by K Equity which could potentially result in the existence of a significant stockholder who
could seek to influence our corporate decisions; and (xxiv) fluctuation in distributor sales could adversely affect our results of
operations.
2
A global company – A historic brand
Simpsonville
Ciudad Victoria,
Monterrey (2) & Matamoros (2),
Mexico
Evora,
Portugal
Pontecchio, Italy
Landsberg, Germany
Kyustendil, Bulgaria
Anting-Shanghai, China
Carson City, NV
Batam,
Indonesia
Chicago
Suomussalmi, Finland Granna & Farjestaden,
Sweden
Suzhou,
China (2)
Skopje, Macedonia
Founded in
1919
18 Manufacturing
Plants
9,200
Employees
EASY
TO BUY
FROM
1,145
Components
shipped per
second
Weymouth, UK
Military & Aerospace Medical Industrial
Computer Automotive Consumer
Segments where we play
Military & Aerospace Medical Industrial
Computer Automotive Consumer
Segments where we play
Automotive Electronics
KEMET’s Automotive Capabilities
Automotive Electronics
Which of our parts are used?
Aluminum
Capacitors
EMI
Devices
Film
Capacitors
Ceramic
Capacitors
Tantalum
Capacitors
Where are our parts used?
Drivetrain example
Fuel Pump
Speed Sensor
Rectifier
Inverter
Motor Drive ERS
TCU
Power Steering
Throttle Sensor
O2 Sensor
Direct Injection
Traction Control
ECU
Where are our parts used?
Safety example
Power Window Backup Backup Camera
TPMS
Air Bags
Steering Torque Control
Crash Avoidance / Lane Detection
Adaptive Headlights
Where are our parts used?
Infotainment example
Infotainment Module
Cluster
CAN Controller
Body Control Module
Next 10 years
Major Drivers
“More Personal”
Smartphone, TVs,
Medical, Consumer
Devices, PCs
“Big Data”
Servers,
Communication,
Medical Infrastructure
“Energy Efficiency”
Automotive, Industrial,
Consumer
13
What Comes Next?
Intelligent Assistance
5 ni.com
The Industrial Internet of Things
Image Recognition
Augmented & Virtual Reality Internet of Things
13
14
• GaN (Gallium Nitride)
• SiC (Silicon Carbide)
Computer Assisted Health Care Autonomous Vehicles
New Semiconductor Technologies Autonomous Drones
What Comes Next?
14
15
= KEMET parts
Augmented & Virtual Reality
31% 2015-2020 CAAGR
15
= KEMET parts
Wearable Devices tied to Internet of Things
30% 2015-2020 CAAGR
16
= KEMET parts
Autonomous Drones
151% 2015-2020 CAAGR
17
Aluminum
Capacitors
EMI
Devices
Film
Capacitors
Tantalum
Capacitors
New technologies drive passive
component industry volume growth,
capacity utilization, price stabilization and
increased profitability
Ceramic
Capacitors
Summary Financial Information
FY16 Q1 & FY17 Q1 Comparison
U.S. GAAP (Unaudited)
Margin trends continue to improve
Quarter Ended
($ in millions) Jun 2015 Jun 2016
Net Sales 187.6$ 184.9$
Cost of sales 147.9 142.4
Gross Margin 39.7 42.5
% Margin 21.2% 23.0%
SG&A Expenses 30.4 25.9
Operating Income 1.2 8.9
% Margin 0.6% 4.8%
Net Income (Loss) (37.1)$ (12.2)$
20
FY16 Q1 & FY17 Q1 Comparison
Non-GAAP (Unaudited)
Quarter Ended
($ in millions) Jun 2015 Jun 2016
Net Sales 187.6$ 184.9$
Adjusted Gross Margin 40.3 43.2
% Margin 21.5% 23.4%
Adjusted SG&A Expenses 24.0 22.0
A justed Operating Income 10.1 14.4
% Margin 5.4% 7.8%
Adjusted Net Income 0.7$ 3.3$
Adjusted EBITDA 20.2$ 24.3$
% Margin 10.8% 13.1%
21
Sales Summary – FY2017 Q1
(Unaudited)
22
Cost Rationalization Drives Margin Improvement
U.S. GAAP (Unaudited)
1.9%
2.7%
3.0%
3.3% 3.3%
4.4%
5.5%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
Dec 2014 Mar 2015 Jun 2015 Sep 2015 Dec 2015 Mar 2016 Jun 2016
LTM Operating Income Margins
23
11.2% 11.1%
11.5%
11.8%
11.6%
12.4%
13.0%
10.0%
10.5%
11.0%
11.5%
12.0%
12.5%
13.0%
13.5%
Dec 2014 Mar 2015 Jun 2015 Sep 2015 Dec 2015 Mar 2016 Jun 2016
LTM Adjusted EBITDA Margins
Cost Rationalization Drives Margin Improvement
Non-GAAP (Unaudited)
24
Quarterly Financial Summary
Non-GAAP (Unaudited)
$201 $194 $188 $186 $177 $184 $185
$-
$50
$100
$150
$200
$250
Dec 2014 Mar 2015 Jun 2015 Sep 2015 Dec 2015 Mar 2016 Jun 2016
Revenue
$28
$18
$20
$24 $24 $23
$24
$-
$5
$10
$15
$20
$25
$30
Dec 2014 Mar 2015 Jun 2015 Sep 2015 Dec 2015 Mar 2016 Jun 2016
Adjusted EBITDA
25
Revenue and Adjusted EBITDA Margins Adjusted EBITDA
Capital Expenditures (Adjusted EBITDA – CapEx)
CAPEX
As a % of
Revenue
3.9% 2.7% 2.8%
Note: Amounts shown remove effects of machining business
$ In millions $ In millions
$ In millions $ In millions
$834 $823 $735
8.5%
11.1% 12.4%
$0
$200
$400
$600
$800
$1,000
FY 2014 FY 2015 FY 2016
$71
$92 $91
$0
$50
$100
$150
FY 2014 FY 2015 FY 2016
$39
$70 $71
$0
$20
$40
$60
$80
FY 2014 FY 2015 FY 2016
$32
$22
$20
$0
$5
$10
$15
$20
$25
$30
$35
FY 2014 FY 2015 FY 2016
Annual Financial Summary
Non-GAAP (Unaudited)
26
(1) Includes $1.8M of restricted cash for Jun 2015 and $0.0M for Mar 2016 and Jun 2016
(2) Calculated as accounts receivable, net, plus inventories, net, less accounts payable
(3) Current quarter’s accounts receivable divided by annualized current quarter’s net sales multiplied by 365
(4) Current quarter’s accounts payable divided by annualized current quarter’s cost of goods sold multiplied by 365
(Amounts in millions, except DSO and DPO) Jun 2015 Mar 2016 Jun 2016
Cash and cash equivalents (1) $ 32.9 $ 65.0 $ 52.9
Capital expenditures $ 5.8 $ 6.3 $ 6.2
Short-term debt $ 6.0 $ 2.0 $ -
Long-term debt 388.0 386.9 386.9
Debt premium and issuance costs (1.5) (1.1) (0.9)
Total debt $ 392.5 $ 387.8 $ 386.0
Net working capital (2) $ 202.7 $ 191.1 $ 190.2
Days in receivables (DSO) (3) 47 46 44
Days in payables (DPO) (4) 48 46 43
27
Financial Highlights
(Unaudited)
Financial Trends
Cash and Cash Equivalents (Unaudited)
(in millions)
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
Q1 Q2 Q3 Q4
FY2016 FY2017
* FY2017 Q2 through Q4 cash balances reflect the Company’s most recent estimates and exclude
any impact of additional debt repurchases authorized by the Board. Actual operating results may vary.
*
28
NEC TOKIN Acquisition Update
Since the beginning of the equity investment KEMET have had the intention of
acquiring the remaining interest for a 100% stake.
Beginning in March 2014, NT was notified that it was being investigated by
numerous government authorities for alleged antitrust violations dating back
as early as 2002. The uncertain impact of the investigations and related civil
litigation on NT’s financial results has caused a delay in KEMET’s completion of
the NT acquisition.
Recent NT settlements with regulators and class-action plaintiffs have provided
clarity and removed significant obstacles to the completion of the transaction.
Several jurisdictions have yet to provide their conclusions.
KEMET and NEC remain in discussion concerning the terms of the acquisition.
It is anticipated that the final structure and mechanics of this transaction will be
announced with the completion of a definitive agreement. It may vary from the
existing agreement between the parties. Current expectation remains a closing
by the end of KEMET’s current fiscal year.
29
Follow KEMET
Social Media
Appendix
Adjusted Gross Margin
Non-GAAP (Unaudited)
(Amounts in thousands, except percentages) Jun 2015 Jun 2016
Net Sales $ 187,590 $ 184,935
Gross margin $ 39,713 $ 42,523
Gross margin as a percentage of net sales 21.2% 23.0%
Adjustments:
Plant start-up costs 195 308
Stock-based compensation expense 413 384
Adjusted gross margin $ 40,321 $ 43,215
Adjusted gross margin as a percentage of net sales 21.5% 23.4%
Quarter Ended
32
Adjusted Selling, General, and Administrative Expenses
Non-GAAP (Unaudited)
(Amounts in thousands, except percentages) Jun 2015 Jun 2016
Net Sales $ 187,590 $ 184,935
Selling, general, and administrative expenses $ 30,430 $ 25,914
Selling, general, and administrative expenses as a percentage of net sales 16.2% 14.0%
Adjustments:
ERP integration costs / IT transition costs 4,369 1,768
Stock-based compensation expense 843 785
Legal expenses related to antitrust class actions 718 1,175
NEC TOKIN investment-related expenses 224 206
Pension plan adjustment 312 -
Adjusted selling, general, and administrative expenses $ 23,964 $ 21,980
Adjusted selling, general, and administrative expenses as a percentage of net sales 12.8% 11.9%
Quarter Ended
33 33
Adjusted Operating Income
Non-GAAP (Unaudited)
(Amounts in thousands, except percentages) Jun 2015 Jun 2016
Net Sales $ 187,590 $ 184,935
Operating income $ 1,243 $ 8,898
Operating income as a percentage of net sales 0.7% 4.8%
Adjustments:
ERP integration costs / IT transition costs 4,369 1,768
Stock-based compensation expense 1,279 1,228
Restructuring charges 1,824 688
Legal expenses related to antitrust class actions 718 1,175
NEC TOKIN investment-related expenses 224 206
Plant start-up costs 195 308
Net (gain) loss on sales and disposals of assets (58) 91
Pension plan adjustment 312 -
Adjusted operating income $ 10,106 $ 14,362
Adjusted operating income as a percentage of net sales 5.4% 7.8%
Quarter Ended
34
(Amounts in thousands, except percentages) Jun 2015 Jun 2016
Net Sales $ 187,591 $ 184,935
Net income (loss) $ (37,050) $ (12,205)
Net income (loss) as a percentage of net sales -19.8% -6.6%
Adjustments:
Change in value of NEC TOKIN options 29,200 12,000
Equity (gain) loss from NEC TOKIN (1,585) (223)
Restructuring charges 1,824 688
ERP integration costs / IT transition costs 4,369 1,768
Stock-based compensation expense 1,279 1,228
Legal expenses related to antitrust class actions 718 1,175
Net foreign exchange (gain) loss 1,049 (1,920)
NEC TOKIN investment-related expenses 224 206
Plant start-up costs 195 308
Amortization included in interest expense 220 190
Net (gain) loss on sales and disposals of assets (58) 91
Pension plan adjustment 312 -
Income tax effect of Non-GAAP adjustments (37) -
Adjusted net income $ 660 $ 3,306
Adjusted net income as a percentage of net sales 0.4% 1.8%
Adjusted net income per share - basic $ 0.01 $ 0.07
Adjusted net income per share - diluted $ 0.01 $ 0.06
Weighted avg. shares - basic 45,552 46,349
Weighted avg. shares - diluted 52,276 52,097
Quarter Ended
Adjusted Net Income
Non-GAAP (Unaudited)
35
Quarter Ended LTM
(Amounts in thousands, except percentages) Mar 2014 Jun 2014 Sep 2014 Dec 2014 Dec 2014
Net Sales $ 215,821 $ 212,881 $ 215,293 $ 201,310 $ 845,305
Net income (loss) (14,447) (3,540) 6,330 2,914 (8,743)
Income tax expense (benefit) (2,811) 1,282 2,583 1,359 2,413
Interest expense, net 10,658 10,453 10,284 9,933 41,328
Depreciation and amortization 12,175 10,797 10,177 9,720 42,869
EBITDA 5,575 18,992 29,374 23,926 77,867
Excluding the following items (Non-GAAP):
Change in value of NEC TOKIN options (1,777) (4,100) (6,600) (2,500) (14,977)
Equity (gain) loss from NEC TOKIN 4,127 1,675 (232) (1,367) 4,203
Restructuring charges 5,954 1,830 1,687 6,063 15,534
ERP integration costs / IT transition costs 837 895 409 671 2,812
Stock-based compensation expense 579 994 958 1,232 3,763
Legal expenses related to antitrust class actions - - - 409 409
Net foreign exchange (gain) loss (449) 527 (1,351) (1,257) (2,530)
NEC TOKIN investment-related expenses 618 580 487 485 2,170
Plant start-up costs 669 1,647 1,114 1,144 4,574
Plant shut-down costs 2,668 889 - - 3,557
Net (gain) loss on sales and disposals of assets (39) 365 (550) (574) (798)
(Income) loss from discontinued operations (103) (6,943) 1,400 164 (5,482)
(Gain) loss on early extinguishment of debt - - - (1,003) (1,003)
Professional fees related to financing activities - - - 1,142 1,142
Inventory revaluation - 2,676 (821) (927) 928
Write down of long-lived assets 1,118 - - - 1,118
Infrastructure tax 1,079 - - - 1,079
Adjusted EBITDA $ 20,856 $ 20,027 $ 25,875 $ 27,608 $ 94,366
Adjusted EBITDA Margin 9.7% 9.4% 12.0% 13.7% 11.2%
Adjusted EBITDA Reconciliation
Non-GAAP (Unaudited)
36
Quarter Ended LTM
(Amounts in thousands, except percentages) Sep 2014 Dec 2014 Mar 2015 Jun 2015 Jun 2015
Net Sales $ 215,293 $ 201,310 $ 193,708 $ 187,590 $ 797,901
Net income (loss) 6,330 2,914 (19,847) (37,050) (47,653)
Income tax expense (benefit) 2,583 1,359 3 (248) 3,697
Interest expense, net 10,284 9,933 10,016 10,010 40,243
Depreciation and amortization 10,177 9,720 10,074 9,917 39,888
EBITDA 29,374 23,926 246 (17,371) 36,175
Excluding the following items (Non-GAAP):
Change in value of NEC TOKIN options (6,600) (2,500) 11,100 29,200 31,200
Equity (gain) loss from NEC TOKIN (232) (1,367) 2,093 (1,585) (1,091)
Restructuring charges 1,687 6,063 3,437 1,824 13,011
ERP integration costs / IT transition costs 409 671 1,273 4,369 6,722
Stock-based compensation expense 958 1,232 1,328 1,279 4,797
Legal expenses related to antitrust class actions - 409 435 718 1,562
Net foreign exchange (gain) loss (1,351) (1,257) (2,168) 1,049 (3,727)
NEC TOKIN investment-related expenses 487 485 226 224 1,422
Plant start-up costs 1,114 1,144 651 195 3,104
Net (gain) loss on sales and disposals of assets (550) (574) 538 (58) (644)
Pension plan adjustment - - - 312 312
(Income) loss from discontinued operations 1,400 164 - - 1,564
(Gain) loss on early extinguishment of debt - (1,003) - - (1,003)
Professional fees related to financing activities - 1,142 - - 1,142
Inventory revaluation (821) (927) (928) - (2,676)
Adjusted EBITDA $ 25,875 $ 27,608 $ 18,231 $ 20,156 $ 91,870
Adjusted EBITDA Margin 12.0% 13.7% 9.4% 10.7% 11.5%
Adjusted EBITDA Reconciliation
Non-GAAP (Unaudited)
37
Quarter Ended LTM
(Amounts in thousands, except percentages) Dec 2014 Mar 2015 Jun 2015 Sep 2015 Sep 2015
Net Sales $ 201,310 $ 193,708 $ 187,590 $ 186,123 $ 768,731
Net income (loss) 2,914 (19,847) (37,050) 7,194 (46,789)
Income tax expense (benefit) 1,359 3 (248) 1,438 2,552
Interest expense, net 9,933 10,016 10,010 9,808 39,767
Depreciation and amortization 9,720 10,074 9,917 9,265 38,976
EBITDA 23,926 246 (17,371) 27,705 34,506
Excluding the following items (Non-GAAP):
Change in value of NEC TOKIN options (2,500) 11,100 29,200 (2,200) 35,600
Equity (gain) loss from NEC TOKIN (1,367) 2,093 (1,585) (162) (1,021)
Restructuring charges 6,063 3,437 1,824 23 11,347
ERP integration costs / IT transition costs 671 1,273 4,369 282 6,595
Stock-based compensation expense 1,232 1,328 1,279 1,328 5,167
Legal expenses related to antitrust class actions 409 435 718 541 2,103
Net foreign exchange (gain) loss (1,257) (2,168) 1,049 (3,171) (5,547)
NEC TOKIN investment-related expenses 485 226 224 186 1,121
Plant start-up costs 1,144 651 195 187 2,177
Net (gain) loss on sales and disposals of assets (574) 538 (58) (304) (398)
Pension plan adjustment - - 312 - 312
(Income) loss from discontinued operations 164 - - - 164
(Gain) loss on early extinguishment of debt (1,003) - - - (1,003)
Professional fees related to financing activities 1,142 - - - 1,142
Inventory revaluation (927) (928) - - (1,855)
Adjusted EBITDA $ 27,608 $ 18,231 $ 20,156 $ 24,415 $ 90,410
Adjusted EBITDA Margin 13.7% 9.4% 10.7% 13.1% 11.8%
Adjusted EBITDA Reconciliation
Non-GAAP (Unaudited)
38
Quarter Ended LTM
(Amounts in thousands, except percentages) Mar 2015 Jun 2015 Sep 2015 Dec 2015 Dec 2015
Net Sales $ 193,708 $ 187,590 $ 186,123 $ 177,184 $ 744,605
Net income (loss) (19,847) (37,050) 7,194 (8,600) (58,303)
Income tax expense (benefit) 3 (248) 1,438 2,760 3,953
Interest expense, net 10,016 10,010 9,808 9,848 39,682
Depreciation and amortization 10,074 9,917 9,265 9,674 38,930
EBITDA 246 (17,371) 27,705 13,682 24,262
Excluding the following items (Non-GAAP):
Change in value of NEC TOKIN options 11,100 29,200 (2,200) (700) 37,400
Equity (gain) loss from NEC TOKIN 2,093 (1,585) (162) 6,505 6,851
Restructuring charges 3,437 1,824 23 1,714 6,998
ERP integration costs / IT transition costs 1,273 4,369 282 167 6,091
Stock-based compensation expense 1,328 1,279 1,328 1,154 5,089
Legal expenses related to antitrust class actions 435 718 541 1,300 2,994
Net foreign exchange (gain) loss (2,168) 1,049 (3,171) (1,036) (5,326)
NEC TOKIN investment-related expenses 226 224 186 225 861
Plant start-up costs 651 195 187 160 1,193
Plant shut-down costs - - - 231 231
Net (gain) loss on sales and disposals of assets 538 (58) (304) 129 305
Pension plan adjustment - 312 - - 312
Inventory revaluation (928) - - - (928)
Adjusted EBITDA $ 18,231 $ 20,156 $ 24,415 $ 23,531 $ 86,333
Adjusted EBITDA Margin 9.4% 10.7% 13.1% 13.3% 11.6%
Adjusted EBITDA Reconciliation
Non-GAAP (Unaudited)
39
Adjusted EBITDA Reconciliation
Non-GAAP (Unaudited)
Quarter Ended LTM
(Amounts in thousands, except percentages) Sep 2015 Dec 2015 Mar 2016 Jun 2016 Jun 2016
Net Sales $ 186,123 $ 177,184 $ 183,926 $ 184,935 $ 732,168
Net income (loss) 7,194 (8,600) (15,173) (12,205) (28,784)
Income tax expense (benefit) 1,438 2,760 2,056 1,800 8,054
Interest expense, net 9,808 9,848 9,925 9,920 39,501
Depreciation and amortization 9,265 9,674 10,160 9,436 38,535
EBITDA 27,705 13,682 6,968 8,951 57,306
Excluding the following items (Non-GAAP):
Change in value of NEC TOKIN options (2,200) (700) - 12,000 9,100
Equity (gain) loss from NEC TOKIN (162) 6,505 11,648 (223) 17,768
Restructuring charges 23 1,714 617 688 3,042
ERP integration costs / IT transition costs 282 167 859 1,768 3,076
Stock-based compensation expense 1,328 1,154 1,013 1,228 4,723
Legal expenses related to antitrust class actions 541 1,300 482 1,175 3,498
Net foreign exchange (gain) loss (3,171) (1,036) 122 (1,920) (6,005)
NEC TOKIN investment-related expenses 186 225 265 206 882
Plant start-up costs 187 160 319 308 974
Plant shut-down costs - 231 141 - 372
Net (gain) loss on sales and disposals of assets (304) 129 608 91 524
Adjusted EBITDA $ 24,415 $ 23,531 $ 23,042 $ 24,272 $ 95,260
Adjusted EBITDA Margin 13.1% 13.3% 12.5% 13.1% 13.0%
40
(Amounts in thousands, except percentages) 2014 2015 2016
Net Sales $ 833,666 $ 823,192 $ 734,823
Net income (loss) (68,503) (14,143) (53,629)
Income tax expense (benefit) 1,482 5,227 6,006
Interest expense, net 40,767 40,686 39,591
Depreciation and amortization 49,527 40,768 39,016
EBITDA 23,273 72,538 30,984
Excluding the following items (Non-GAAP):
Change in value of NEC TOKIN options (3,111) (2,100) 26,300
Equity (gain) loss from NEC TOKIN 7,090 2,169 16,406
Restructuring charges 14,122 13,017 4,178
ERP integration costs / IT transition costs 3,880 3,248 5,677
Stock-based compensation expense 2,909 4,512 4,774
Legal expenses related to antitrust class actions - 844 3,041
Net foreign exchange (gain) loss (304) (4,249) (3,036)
NEC TOKIN investment-related expenses 2,299 1,778 900
Plant start-up costs 3,336 4,556 861
Plant shut-down costs 2,668 889 372
Net (gain) loss on sales and disposals of assets 32 (221) 375
Pension plan adjustment - - 312
(Income) loss from discontinued operations 3,634 (5,379) -
(Gain) loss on early extinguishment of debt - (1,003) -
Professional fees related to financing activities - 1,142 -
Write down of long-lived assets 4,476 - -
Inventory write-downs 3,886 - -
Long-term receivable write down 1,444 - -
Infrastructure tax 1,079 - -
Adjusted EBITDA $ 70,713 $ 91,741 $ 91,144
Adjusted EBITDA Margin 8.5% 11.1% 12.4%
Fiscal Year
Adjusted EBITDA Reconciliation
Non-GAAP (Unaudited)
41
Non-GAAP Financial Measures
Non-GAAP Financial Measures
Included in this presentation are certain non-GAAP financial measures designed to complement the financial information presented in accordance with
generally accepted accounting principles in the United States of America because management believes such measures are useful to investors for the
reasons 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 earlier
in this presentation. We use Adjusted gross margin to facilitate our analysis and understanding of our business operations by excluding the items
outlined in the quantitative reconciliation provided earlier in this presentation 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 U.S. GAAP.
Adjusted selling, general, and administrative expenses
Adjusted selling, general, and administrative expenses represents selling, general, and administrative expenses excluding adjustments which are
outlined in the quantitative reconciliation provided earlier in this presentation. We use Adjusted selling, general, and administrative expenses to facilitate
our analysis and understanding of our business operations by excluding the items outlined in the quantitative reconciliation provided earlier in this
presentation 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 selling, general, and administrative expenses is useful to investors because it proves a supplemental
way to understand the underlying operating performance of the Company. Adjusted selling, general, and administrative expenses should not be
considered as an alternative to selling, general, and administrative expenses or any other performance measure derived in accordance with U.S. GAAP.
Adjusted operating income
Adjusted operating income represents operating income, excluding adjustments which are outlined in the quantitative reconciliation provided earlier in
this presentation. 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 earlier in this presentation 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 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 U.S. GAAP.
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Adjusted net income and Adjusted EPS
Adjusted net income and Adjusted EPS represents net income (loss) and EPS, excluding adjustments which are more specifically outlined in the
quantitative reconciliation provided earlier in this presentation. We use Adjusted net income and Adjusted EPS to evaluate our operating
performance by excluding the items outlined in the quantitative reconciliation provided earlier in this presentation 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 net income and Adjusted EPS are useful to investors because it provides 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 net income and Adjusted EPS should not be considered as alternatives to net income (loss), EPS, operating income (loss), or any
other performance measures derived in accordance with U.S. GAAP.
Adjusted EBITDA
Adjusted EBITDA represents net income (loss) before income tax expense (benefit), interest expense, net, and depreciation and amortization
expense, excluding adjustments which are more specifically outlined in the quantitative reconciliation provided earlier in this presentation. We
present Adjusted EBITDA as a supplemental measure of our performance and ability to service debt. We also present Adjusted EBITDA
because we believe such measure is frequently used by securities analysts, investors, and other interested parties in the evaluation of
companies in our industry. Adjusted EBITDA is also used as a measure to determine incentive compensation.
We believe Adjusted 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. The other 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 in this presentation.
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 U.S. GAAP and should not be considered as an
alternative to net income (loss), operating income (loss), or any other performance measures derived in accordance with U.S. GAAP or as an
alternative to cash flow from operating activities as a measure of our liquidity.
Non-GAAP Financial Measures
Continued
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Non-GAAP Financial Measures
Continued
Our Adjusted EBITDA measure has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for
analysis of our results as reported under U.S. 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 payment
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 U.S. GAAP results and using Adjusted EBITDA as supplementary
information.
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