Form 8-K KEMET CORP For: Nov 29
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E-mailUNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): November 29, 2016
KEMET Corporation
(Exact name of registrant as specified in its charter)
Delaware | 001-15491 | 57-0923789 | ||
(State of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||
2835 KEMET Way, Simpsonville, SC | 29681 | |
(Address of principal executive offices) | (Zip Code) | |
Registrant’s telephone number, including area code: (864) 963-6300
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 7.01 Regulation FD Disclosure
Per Loof, KEMET's Chief Executive Officer and William M. Lowe, Jr., Executive Vice President and Chief Financial Officer, of KEMET Corporation (the “Company”), are scheduled to provide certain investor information, including an investor presentation commencing on Tuesday, November 29, 2016, in Boca Raton, Florida at 2:50 pm eastern standard time. The slide package prepared by the Company for use in connection with this presentation is furnished herewith as Exhibit 99.1. All of the information in the attached slide package is presented as of November 29, 2016, and the Company does not assume any obligation to update such information in the future.
The information included in this Form 8-K, as well as the exhibit referenced herein, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended.
Item 9.01 Financial Statements and Exhibits
(a.) Not Applicable
(b.) Not Applicable
(c.) Not Applicable
(d.) Exhibits
Exhibit No. | Description of Exhibit | ||
99.1 | Slide package prepared for use by Mr. Loof and Mr. Lowe in connection with an investor presentation commencing on Tuesday November 29, 2016. | ||
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 hereunto duly authorized.
Dated: November 29, 2016 | ||
KEMET CORPORATION | ||
By: | /s/ WILLIAM M. LOWE, JR. | |
William M. Lowe, Jr. | ||
Executive Vice President and Chief Financial Officer | ||
INDEX TO EXHIBITS
Exhibit No. | Description of Exhibit | |
99.1 | Slide package prepared for use by Mr. Loof and Mr. Lowe in connection with an investor presentation commencing on Tuesday November 29, 2016. | |
1
Bank of America
Leveraged Finance Conference
November 29, 2016
Presenters: Per Loof – Chief Executive Officer
William M. Lowe, Jr.
EVP & Chief Financial Officer
2
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.
3
Company Overview
• Global manufacturer of tantalum, multilayer ceramic, solid and electrolytic, aluminum and film and paper
capacitors
• 17 manufacturing plants located in North America, Europe and Asia
• 9,185 employees worldwide (September 30, 2016)
– USA 623 Mexico 5,027
– Asia 2,003 Europe 1,532
• Recognized as the “Easy to buy from Company” (ETBF) and “Easy to design in” (E2Di)
• LTM 9/30/16 Revenues and EBITDA of $733 million and $97.8 million, respectively
Simpsonville Ciudad Victoria,
Monterrey & Matamoros,
Mexico
Evora,
Portugal
Pontecchio, Italy
Kyustendil, Bulgaria
Anting-Shanghai, China
Carson City, NV
Batam,
Indonesia
Suomussalmi, Finland Granna & Farjestaden,
Sweden
Suzhou,
China
Skopje, Macedonia
4
Product Overview
Solid Capacitor Business Group
Tantalum & Ceramics Product Lines
Film & Electrolytic Business Group
LTM Sales
(9/30/16)
$560mm (76%) $173mm (24%)
Market
Segment /
Selected
Application
Detail
• Computer – Microprocessor Decoupling
• Telecommunications – Transceiver Cards
• Mobile Phones – Audio & Battery Backup
• Gaming – Processor Decoupling
• LCD TV – Video Converter
• Automotive – Engine Control/Safety
• Military/Aerospace – Avionics/Comm
• Industrial – Motor Start & Drives
• Automotive – HID Lighting/Engine Ctrl
• Renewable Energy – Power Inverters
• Industrial – Power Factor Correction
• Consumer/Industrial – Power Supplies
Market
Demand
• Tantalum: high reliability and high
capacitance. (Tablets / laptops and high
reliability applications)
• Ceramic: smaller capacitance and smaller
sizes
– Focus on higher margin specialty industries
(defense, aerospace automobile, downhole
drilling, medical telecom)
• DC Film: Focus Household items (power supplies
/ smoke detectors / thermostats) connected to the
internet and interact with wireless handsets -
“Internet of Things”
Military & Aerospace Medical Industrial
Computer Automotive Consumer
Market Segments
Automotive Electronics
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
105 customer
meetings
7 product &
capability launches
11 interviews with
industry press
Looking Ahead
Next 10 years
Major Drivers
More Personal
Smartphone, TVs,
Medical, Consumer
Devices, PCs
Big Data
Computer,
Communication,
Medical
Infrastructure
Energy
Efficiency
Automotive,
Industrial,
Consumer
Uberization
Seamless Digital
Experience
What Comes Next?
Intelligent Assistance
5 ni.com
The Industrial Internet of Things
Image Recognition
Augmented & Virtual Reality Internet of Things
What Comes Next?
Computer Assisted Health Care Autonomous Drones
New Semiconductor Technologies
• GaN (Gallium Nitride)
• SiC (Silicon Carbide)
Autonomous Vehicles
“Uberization of KEMET”
Seamless Digital Experience
Search
Simulation Tools
Educating Engineers
Social Media
Mobile Apps
Analytics
Live
Distributor Price & Availability
Dielectric
Agnostic
Multiple Points
of Entry
Filter Driven
Live Distributor
Price &
Availability
New Innovative & Proprietary Search Engine
Designed by Engineers for Engineers
Simulation Tool
2330 Engineers @ 132 sessions in FY16
Anywhere, Anytime
Tantalum
Capacitors
New technologies drive passive
component industry volume
growth, capacity utilization, price
stabilization and increased
profitability
Ceramic
Capacitors
Film
Capacitors
Aluminum
Capacitors
EMI
Devices
Summary Financial Information
FY16 Q2 & FY17 Q2 Comparison
U.S. GAAP (Unaudited)
24
For the Quarters Ended
(Amounts in thousands, except percentages and per share data) Sep 2016 Jun 2016 Sep 2015
Net sales $ 187,308 $ 184,935 $ 186,123
Gross margin $ 46,413 $ 42,523 $ 42,806
Gross margin as a percentage of net sales 24.8 % 23.0 % 23.0 %
Selling, general and administrative $ 25,972 $ 25,914 $ 22,948
SG&A as a percentage of net sales 13.9 % 14.0 % 12.3 %
Operating income (loss) (1)(2) $ 3,050 $ 8,898 $ 13,987
Operating margin as a percentage of net sales 1.6 % 4.8 % 7.5 %
Net income (loss) from continuing operations (1)(2) $ (4,998 ) $ (12,205 ) $ 7,194
(1) Includes non-cash (gain) loss due to the change in the put option value of $(1.6) million, $12.0 million and $(2.2) million for the
quarters ended September 30, 2016, June 30, 2016 and September 30, 2015, respectively.
(2) Includes write down of long-lived assets and restructuring charges of $10.2 million for the quarter ended September 30, 2016.
FY16 Q2 & FY17 Q2 Comparison
Non-GAAP (Unaudited)
25
For the Quarters Ended
(Amounts in thousands, except percentages and per share data) Sep 2016 Jun 2016 Sep 2015
Net sales $ 187,308 $ 184,935 $ 186,123
Adjusted gross margin $ 46,833 $ 43,215 $ 43,452
Adjusted gross margin as a percentage of net sales 25.0 % 23.4 % 23.3 %
Adjusted selling, general and administrative $ 22,475 $ 21,980 $ 21,130
Adjusted SG&A as a percentage of net sales 12.0 % 11.9 % 11.4 %
Adjusted operating income (loss) $ 17,291 $ 14,362 $ 16,230
Adjusted operating income (loss) as a percentage of net sales 9.2 % 7.8 % 8.7 %
Adjusted net income (loss) $ 6,955 $ 3,306 $ 4,274
Adjusted EBITDA $ 26,912 $ 24,272 $ 24,415
Adjusted EBITDA as a percentage of net sales 14.4 % 13.1 % 13.1 %
Sales Summary - Q2 FY2017
(Unaudited)
26
Cost Rationalization Drives Margin Improvement
U.S. GAAP (Unaudited)
27
Cost Rationalization Drives Margin Improvement
U.S. GAAP (Unaudited)
28 (1) Excluding write down of long-lived assets and restructuring charges of $10.2 million for the quarter ended September 30, 2016,
operating margin would have been 5.4%.
5.4%
(1)
Cost Rationalization Drives Margin Improvement
Non-GAAP (Unaudited)
29
Quarterly Financial Summary
Non-GAAP (Unaudited)
30
Annual Financial Summary
Non-GAAP (Unaudited)
CAPEX as a
% of
Revenue
3.8% 2.7% 2.7% 3.0%
31
Financial Highlights
(Unaudited)
(1) Calculated as accounts receivable, net, plus inventories, net, less accounts payable.
(2) Current quarter's accounts receivable divided by annualized current quarter’s Net sales multiplied
by 365.
(3) Current quarter's accounts payable divided by annualized current quarter's cost of goods sold
multiplied by 365.
32
(Amounts in millions, except DSO and DPO) Sep 2016 Jun 2016 Sep 2015
Cash, cash equivalents $ 74.8 $ 52.9 $ 37.3
Capital expenditures $ 4.2 $ 6.2 $ 3.5
Short-term debt $ — $ — $ 5.0
Long-term debt 386.9 386.9 388.0
Debt premium and issuance costs (0.8 ) (0.9 ) 2.1
Total debt $ 386.1 $ 386.0 $ 395.1
Net working capital (1) $ 189.0 $ 190.2 $ 206.7
Days in receivables (DSO)(2) 43 44 46
Days in payables (DPO)(3) 41 43 45
Financial Trends
Cash and Cash Equivalents (Unaudited)
33
(in millions)
* FY2017 Q3 and 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.
NEC TOKIN 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 still remains a closing by the end of KEMET’s current fiscal
year.
NEC TOKIN Acquisition Update
• Predictable and consistent operating margins
• Profitable (excluding restructuring items)
• Reliable
• Emotional favorite of our customers
• Cash flow generation
• Anticipating announcement of NEC TOKIN acquisition early 2017.
SUMMARY
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Appendix
Adjusted Gross Margin
Non-GAAP (Unaudited)
39
For the Quarters Ended
(Amounts in thousands, except percentages) Sep 2016 Jun 2016 Sep 2015
Net Sales $ 187,308 $ 184,935 $ 186,123
Gross Margin (U.S. GAAP) $ 46,413 $ 42,523 $ 42,806
Gross margin as a percentage of net sales 24.8 % 23.0 % 23.0 %
Adjustments:
Plant start-up costs 119 308 187
Stock-based compensation expense 301 384 459
Adjusted Gross margin (non-GAAP) $ 46,833 $ 43,215 $ 43,452
Adjusted gross margin as a percentage of net sales 25.0 % 23.4 % 23.3 %
Adjusted Selling, General & Administrative Expenses
Non-GAAP (Unaudited)
40
For the Quarters Ended
(Amounts in thousands, except percentages) Sep 2016 Jun 2016 Sep 2015
Net sales $ 187,308 $ 184,935 $ 186,123
Selling, general and administrative expenses (U.S. GAAP) $ 25,972 $ 25,914 $ 22,948
Selling, general, and administrative as a percentage of net sales 13.9 % 14.0 % 12.3 %
Less adjustments:
ERP integration/IT transition costs 1,783 1,768 282
Legal expenses related to antitrust class actions 766 1,175 541
NEC TOKIN investment-related expenses 194 206 186
Stock-based compensation expense 754 785 809
Adjusted selling, general and administrative expenses
(non-GAAP) $ 22,475 $ 21,980 $ 21,130
Adjusted selling, general, and administrative as a percentage of net sales 12.0 % 11.9 % 11.4 %
Adjusted Operating Income (Loss)
Non-GAAP (Unaudited)
41
For the Quarters Ended
(Amounts in thousands) Sep 2016 Jun 2016 Sep 2015
Net sales $ 187,308 $ 184,935 $ 186,123
Operating income (loss) (U.S. GAAP) $ 3,050 $ 8,898 $ 13,987
Operating income (loss) as a percentage of net sales 1.6 % 4.8 % 7.5 %
Adjustments:
Write down of long-lived assets 6,193 — —
Restructuring charges 3,998 688 23
Stock-based compensation expense 1,104 1,228 1,328
ERP integration/IT transition costs 1,783 1,768 282
Legal expenses related to antitrust class actions 766 1,175 541
Plant start-up costs 119 308 187
NEC TOKIN investment-related expenses 194 206 186
Net (gain) loss on sales and disposals of assets 84 91 (304 )
Adjusted operating income (loss) (non-GAAP) $ 17,291 $ 14,362 $ 16,230
Adjusted operating income (loss) as a percentage of net sales 9.2 % 7.8 % 8.7 %
Adjusted Net Income (Loss)
Non-GAAP (Unaudited)
42
(1) The income tax effect of the excluded items is calculated by applying the applicable jurisdictional income tax rate, considering
the deferred tax valuation for each applicable jurisdiction.
For the Quarters Ended
(Amounts in thousands) Sep 2016 Jun 2016 Sep 2015
Net sales $ 187,308 $ 184,935 $ 186,123
Net income (loss) (U.S. GAAP) $ (4,998 ) $ (12,205 ) $ 7,194
Net income (loss) as a percentage of net sales (2.7 )% (6.6 )% 3.9 %
Adjustments:
Write down of long-lived assets 6,193 — —
Restructuring charges 3,998 688 23
ERP integration/IT transition costs 1,783 1,768 282
Change in value of NEC TOKIN option (1,600 ) 12,000 (2,200 )
Stock-based compensation expense 1,104 1,228 1,328
Legal expenses related to antitrust class actions 766 1,175 541
Net foreign exchange (gain) loss (724 ) (1,920 ) (3,171 )
NEC TOKIN investment-related expenses 194 206 186
Amortization included in interest expense 188 190 217
Equity (income) loss from NEC TOKIN (181 ) (223 ) (162 )
Plant start-up costs 119 308 187
Net (gain) loss on sales and disposals of assets 84 91 (304 )
Income tax effect of non-U.S. GAAP adjustments (1) 29 — 153
Adjusted net income (loss) (non-GAAP) $ 6,955 $ 3,306 $ 4,274
Adjusted net income (loss) as a percentage of net sales 3.7 % 1.8 % 2.3 %
Adjusted net income (loss) per share - basic $ 0.15 $ 0.07 $ 0.09
Adjusted net income (loss) per share - diluted $ 0.13 $ 0.06 $ 0.09
Weighted avg. shares - basic 46,590 46,349 45,767
Weighted avg. shares - diluted 53,834 52,097 50,004
Adjusted EBITDA Reconciliation
Non-GAAP (Unaudited)
43
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 %
44
Adjusted EBITDA Reconciliation
Non-GAAP (Unaudited)
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)
45
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)
46
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 %
47
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 %
Quarter Ended LTM
(Amounts in thousands, except percentages) Dec 2015 Mar 2016 Jun 2016 Sep 2016 Sep 2016
Net Sales $ 177,184 $ 183,926 $ 184,935 $ 187,308 $ 733,353
Net income (loss) (8,600 ) (15,173 ) (12,205 ) (4,998 ) (40,976 )
Income tax expense (benefit) 2,760 2,056 1,800 830 7,446
Interest expense, net 9,848 9,925 9,920 9,904 39,597
Depreciation and amortization 9,674 10,160 9,436 9,440 38,710
EBITDA 13,682 6,968 8,951 15,176 44,777
Excluding the following items (Non-GAAP):
Change in value of NEC TOKIN options (700 ) — 12,000 (1,600 ) 9,700
Equity (gain) loss from NEC TOKIN 6,505 11,648 (223 ) (181 ) 17,749
Restructuring charges 1,714 617 688 3,998 7,017
ERP integration costs / IT transition costs 167 859 1,768 1,783 4,577
Stock-based compensation expense 1,154 1,013 1,228 1,104 4,499
Legal expenses related to antitrust class actions 1,300 482 1,175 766 3,723
Net foreign exchange (gain) loss (1,036 ) 122 (1,920 ) (724 ) (3,558 )
NEC TOKIN investment-related expenses 225 265 206 194 890
Plant start-up costs 160 319 308 119 906
Plant shut-down costs 231 141 — — 372
Net (gain) loss on sales and disposals of assets 129 608 91 84 912
Write down of long-lived assets — — — 6,193 6,193
Adjusted EBITDA $ 23,531 $ 23,042 $ 24,272 $ 26,912 $ 97,757
Adjusted EBITDA Margin 13.3 % 12.5 % 13.1 % 14.4 % 13.3 %
Adjusted EBITDA Reconciliation
Non-GAAP (Unaudited)
Adjusted EBITDA Reconciliation
Non-GAAP (Unaudited)
49
Fiscal Year
(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 %
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. 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 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 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. Management uses 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 provides 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 GAAP.
50
Non-GAAP Financial Measures
Continued
Adjusted operating income (loss)
Adjusted operating income (loss) represents operating income (loss), excluding adjustments which are outlined in the quantitative
reconciliation provided earlier in this presentation. Management uses 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 the underlying operating performance of the Company 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 loss
or any other performance measure derived in accordance with GAAP.
Adjusted net income (loss) and Adjusted EPS
Adjusted net income (loss) and Adjusted EPS represent net income (loss) and EPS, excluding adjustments which are more
specifically outlined in the quantitative reconciliation provided earlier in this presentation. Management uses Adjusted net income
(loss) and Adjusted EPS to evaluate the Company's 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 (loss) and
Adjusted EPS are useful to investors because they provide a supplemental way to understand the underlying operating
performance of the Company and allows investors to monitor and understand changes in our ability to generate income from
ongoing business operations. Adjusted net income (loss) and Adjusted EPS should not be considered as alternatives to net
income, operating income or any other performance measures derived in accordance with GAAP.
51
Non-GAAP Financial Measures
Continued
Adjusted EBITDA
Adjusted EBITDA represents net 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.
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; 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 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.
52
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 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 GAAP results and using Adjusted
EBITDA only supplementally.
53
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