Form 8-K KEMET CORP For: Oct 30

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October 30, 2014 8:00 AM EDT


UNITED 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): October�30, 2014
�
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)
�
Registrants 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�2.02 Results of Operations and Financial Condition
�
On October�30, 2014, KEMET Corporation (the Company) issued a News Release announcing the preliminary consolidated results for the second fiscal quarter ended September�30, 2014.
�
A copy of this News Release is furnished as Exhibit�99.1 to this Form�8-K.
�
Item�7.01 Regulation FD Disclosure
�
On October�30, 2014, the Company will host a conference call to discuss financial results for its second fiscal quarter ended September�30, 2014.� The slide package prepared for use by executive management for this presentation is attached hereto as Exhibit�99.2.� All of the information in the presentation is presented as of October�30, 2014, 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 exhibits 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

�
News Release, dated October 30, 2014 issued by the Company.
�
�
�
99.2

�
Slide Package prepared for use in connection with the Companys second fiscal quarter earnings conference call to be held on October 30, 2014.





Signatures
�
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
�
�
Date: October 30, 2014
KEMET Corporation
�
�
�
�
By:
/s/ WILLIAM M. LOWE, JR.
�
William M. Lowe,�Jr.
�
Executive Vice President and
�
Chief Financial Officer



��������

Exhibit 99.1
�
News�Release
�
�
FOR IMMEDIATE RELEASE
�
Contact:
William M. Lowe,�Jr.
Richard J. Vatinelle
�
Executive Vice President and
Vice President and
�
Chief Financial Officer
Treasurer
�
�
864-963-6484
954-766-2838
�
KEMET REPORTS PRELIMINARY FISCAL 2015 SECOND QUARTER RESULTS
�
�
Greenville, South Carolina (October�30, 2014) - KEMET Corporation (the Company) (NYSE: KEM), a leading global supplier of electronic components, today reported preliminary results for our second quarter ended September�30, 2014.
�
Net sales of $215.3 million for the quarter ended September�30, 2014 increased 3.3% compared to net sales of $208.4 million for the quarter ended September�30, 2013. The U.S. GAAP net income from continuing operations was $7.7 million, or $0.15 per diluted share for the quarter ended September�30, 2014, compared to a net loss from continuing operations of $11.9 million or $0.26 loss per basic and diluted share for the quarter ended September�30, 2013.

Non-U.S. GAAP Adjusted net income improved to $3.5 million or $0.07 per diluted share for the quarter ended September�30, 2014, compared to a non-U.S. GAAP Adjusted net loss of $4.6 million or $0.10 loss per basic and diluted share for the period ended September�30, 2013.
�
We are extremely pleased that the financial results for the quarter exceeded our expectations.� Operating margins, influenced by our cost improvement actions and favorable product mix, improved 340 basis points compared to the prior quarter ended June 30, 2014, surpassing our forecast, stated Per Loof, KEMETs Chief Executive Officer.� Operating margins will continue to be our primary focus for the company.� Our expectation for our December 2014 quarter is an operating margin generally at or near the same level as this quarter, continued Loof.

The net income (loss) for the quarters ended September�30, 2014 and 2013 include various items affecting comparability as denoted in the U.S. GAAP to Non-U.S. GAAP reconciliation table included hereafter. Prior period financial results included in this earnings release have been adjusted to reflect discontinued operations as the Film and Electrolytic business group completed the sale of its machinery division on April 30, 2014.






About KEMET
�
The Companys common stock is listed on the NYSE under the ticker symbol KEM (NYSE: KEM).� At the Investor Relations section of our web site at http://www.kemet.com/IR, users may subscribe to KEMET news releases and find additional information about our Company.� KEMET applies world class service and quality to deliver industry leading, high performance capacitance solutions to its customers around the world and offers the worlds most complete line of surface mount and through hole capacitor technologies across tantalum, ceramic, film, aluminum, electrolytic, and paper dielectrics. Additional information about KEMET can be found at http://www.kemet.com.

QUIET PERIOD
�
Beginning January�1, 2015, we will observe a quiet period during which the information provided in this news release and quarterly report on Form�10-Q will no longer constitute our current expectations. During the quiet period, this information should be considered to be historical, applying prior to the quiet period only and not subject to update by management. The quiet period will extend until the day when our next quarterly earnings release is published.
�
CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
�
Certain statements included herein contain forward-looking statements within the meaning of federal securities laws about the Companys financial condition and results of operations that are based on managements current expectations, estimates and projections about the markets, in which the Company operates, as well as managements 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 managements judgment only as of the date hereof. The Company undertakes no obligation to update publicly any of these forward-looking statements to reflect new information, future events or otherwise.
�
Factors that may cause actual outcome 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 restructuring plans; (ix) equity method investment in NEC TOKIN expose us to a variety of risks; (x) acquisitions and other strategic transactions expose us to a variety of risks; (xi) inability to attract, train and retain effective employees and management; (xii) inability to develop innovative products to maintain customer relationships and offset potential price erosion in older products; (xiii) exposure to claims alleging product defects; (xiv) the impact of laws and regulations that apply to our business, including those relating to environmental matters; (xv) the impact of international laws relating to trade, export controls and foreign corrupt practices; (xvi) volatility of financial and credit markets affecting our access to capital; (xvii) the need to reduce the total costs of our products to remain competitive; (xviii) potential limitation on the use of net operating losses to offset possible future taxable income; (xix) restrictions in our debt agreements that limit our flexibility in operating our business; and (xx) 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.

2


KEMET CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(Amounts in thousands, except per share data)
(Unaudited)
�
Quarters Ended September�30,
�
2014
�
2013
Net sales
$
215,293

�
$
208,449

Operating costs and expenses:
�

�
�

Cost of sales
169,538

�
177,532

Selling, general and administrative expenses
25,510

�
22,315

Research and development
6,338

�
5,611

Restructuring charges
1,687

�
1,364

Net (gain) loss on sales and disposals of assets
(550
)
�
42

Total operating costs and expenses
202,523

�
206,864

Operating income (loss)
12,770

�
1,585

Non-operating (income) expense:
�

�
�

Interest income
(3
)
�
(11
)
Interest expense
10,287

�
9,908

Other (income) expense, net
(7,595
)
�
946

Income (loss) from continuing operations before income taxes and equity income (loss) from NEC TOKIN
10,081

�
(9,258
)
Income tax expense
2,583

�
1,444

Income (loss) from continuing operations before equity income (loss) from NEC TOKIN
7,498

�
(10,702
)
Equity income (loss) from NEC TOKIN
232

�
(1,243
)
Income (loss) from continuing operations
7,730

�
(11,945
)
Income (loss) from discontinued operations, net of income tax expense (benefit) of $1,017, $(124), $1,935 and $(360), respectively
(1,400
)
�
(1,151
)
Net income (loss)
$
6,330

�
$
(13,096
)
Net income (loss) per basic share:
�

�
�

Net income (loss) from continuing operations
$
0.17

�
$
(0.26
)
Net income (loss) from discontinued operations
$
(0.03
)
�
$
(0.03
)
Net income (loss)
$
0.14

�
$
(0.29
)
�
�
�
�
Net income (loss) per diluted share:
�

�
�

Net income (loss) from continuing operations
$
0.15

�
$
(0.26
)
Net income (loss) from discontinued operations
$
(0.03
)
�
$
(0.03
)
Net income (loss)
$
0.12

�
$
(0.29
)
�
�
�
�
Weighted-average shares outstanding:
�

�
�

Basic
45,400

�
45,092

Diluted
52,521

�
45,092



3


KEMET CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(Amounts in thousands, except per share data)
(Unaudited)
�
�
September 30, 2014
�
March 31, 2014
ASSETS
�

�
�

Current assets:
�

�
�

Cash and cash equivalents
$
51,576

�
$
57,929

Accounts receivable, net
95,581

�
98,947

Inventories, net
188,833

�
187,974

Prepaid expenses and other
40,229

�
36,871

Deferred income taxes
6,569

�
6,695

Current assets of discontinued operations


�
12,160

Total current assets
382,788

�
400,576

Property, plant and equipment, net of accumulated depreciation of $810,224 and $805,687 as of September 30, 2014 and March�31, 2014, respectively
275,498

�
292,648

Goodwill
35,584

�
35,584

Intangible assets, net
35,377

�
37,184

Investment in NEC TOKIN
48,449

�
46,419

Restricted cash
12,955

�
13,512

Deferred income taxes
6,423

�
6,778

Other assets
20,153

�
10,130

Noncurrent assets of discontinued operations


�
836

Total assets
$
817,227

�
$
843,667

LIABILITIES AND STOCKHOLDERS EQUITY
�

�
�

Current liabilities:
�

�
�

Current portion of long-term debt
$
25,826

�
$
7,297

Accounts payable
72,629

�
74,818

Accrued expenses
66,400

�
76,468

Income taxes payable and deferred income taxes
345

�
980

Current liabilities of discontinued operations


�
7,269

Total current liabilities
165,200

�
166,832

Long-term debt, less current portion
376,256

�
391,292

Other non-current obligations
52,246

�
55,864

Deferred income taxes
8,687

�
5,203

Noncurrent liabilities of discontinued operations


�
2,592

Stockholders equity:
�

�
�

Preferred stock, par value $0.01, authorized 10,000 shares, none issued


�


Common stock, par value $0.01, authorized 175,000 shares, issued 46,508 shares at September 30, 2014 and March�31, 2014
465

�
465

Additional paid-in capital
461,478

�
465,027

Retained deficit
(228,948
)
�
(231,738
)
Accumulated other comprehensive income
6,935

�
18,184

Treasury stock, at cost (1,103 and 1,301 shares at September 30, 2014 and March�31, 2014, respectively)
(25,092
)
�
(30,054
)
Total stockholders equity
214,838

�
221,884

Total liabilities and stockholders equity
$
817,227

�
$
843,667



4


KEMET CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Amounts in thousands)
(Unaudited)
�
Six Month Periods Ended September 30,
�
2014
�
2013
Net income (loss)
2,790

�
$
(48,236
)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
�

�
�

Gain on sale of discontinued operations
(5,809
)
�


Net cash provided by (used in) operating activities of discontinued operations
(1,357
)
�
933

Depreciation and amortization
20,974

�
25,590

Equity (income) loss from NEC TOKIN
1,443

�
4,620

Non-cash interest expense
1,332

�
1,959

Stock-based compensation expense
1,952

�
1,628

Long-term receivable write down
59

�
1,444

Change in value of NEC TOKIN options
(10,700
)
�
382

Net loss on sales and disposals of assets
(185
)
�
42

Pension and other post-retirement benefits
37

�
27

Change in deferred income taxes
2,142

�
(957
)
Change in operating assets
(4,268
)
�
(8,261
)
Change in operating liabilities
(6,341
)
�
(10,932
)
Other
(475
)
�
155

Net cash provided by (used in) operating activities
1,594

�
(31,606
)
Investing activities:
�

�
�

Capital expenditures
(11,975
)
�
(18,337
)
Proceeds from sale of assets
2,451

�


Change in restricted cash
558

�
2,874

Proceeds from sale of discontinued operations
10,125

�


Net cash provided by (used in) investing activities
1,159

�
(15,463
)
Financing activities:
�

�
�

Proceeds from revolving line of credit
14,300

�
21,000

Payments of revolving line of credit
(7,500
)
�


Deferred acquisition payments
(11,597
)
�
(11,452
)
Payments of long-term debt
(3,135
)
�
(1,422
)
Proceeds from exercise of stock options
25

�
57

Net cash provided by (used in) financing activities
(7,907
)
�
8,183

Net increase (decrease) in cash and cash equivalents
(5,154
)
�
(38,886
)
Effect of foreign currency fluctuations on cash
(1,199
)
�
608

Cash and cash equivalents at beginning of fiscal period
57,929

�
95,978

Cash and cash equivalents at end of fiscal period
51,576

�
57,700


5


Non-U.S. GAAP Financial Measures
�
In this news release, the Company makes reference to certain Non-U.S. GAAP financial measures, including "Adjusted gross margin", Adjusted net loss, Adjusted net loss per share and Adjusted EBITDA.� Management believes that investors may find it useful to review the Companys financial results as adjusted to exclude items as determined by management.
�
Adjusted gross margin
�
Adjusted gross margin represents net sales less cost of sales excluding adjustments which are outlined in the quantitative reconciliation provided below.� Management uses Adjusted gross margin to facilitate our analysis and understanding of our business operations and 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.
�
The following table provides reconciliation from U.S. GAAP Gross margin to Non-U.S. GAAP Adjusted gross margin (amounts in thousands):
�
�
Quarters�Ended
�
(Unaudited)
�
September 30, 2014
�
June 30, 2014
�
September 30, 2013
Net sales
$
215,293

�
$
212,881

�
$
208,449

Gross margin
45,755

�
32,957

�
30,917

Non-U.S. GAAP-adjustments:
�
�
�
�
�
Plant start-up costs
1,114

�
1,647

�
1,050

Stock-based compensation expense
341

�
346

�
229

Plant shut-down costs


�
889

�


Inventory revaluation
(821
)
�
2,676

�


Adjusted gross margin
$
46,389

�
$
38,515

�
$
32,196

�
21.5
%
�
18.1
%
�
15.4
%
�
Adjusted Operating Income (Loss)

Adjusted operating income (loss) represents operating income (loss), excluding adjustments which are outlined in the quantitative reconciliation provided above. We use Adjusted operating income (loss) to facilitate our analysis and understanding of our business operations and believe that Adjusted operating income (loss) is useful to investors because it provides a supplemental way to understand our underlying operating performance. Adjusted operating loss should not be considered as an alternative to operating income (loss) or any other performance measure derived in accordance with U.S.�GAAP.


6


Adjusted operating income (loss) is calculated as follows (amounts in thousands):
�
Quarters�Ended
�
(Unaudited)
�
September 30, 2014
�
June 30, 2014
�
September 30, 2013
Operating income (loss)
$
12,770

�
$
(606
)
�
$
1,585

Adjustments:
�

�
�

�
�

Restructuring charges
1,687

�
1,830

�
1,364

Stock-based compensation expense
958

�
994

�
659

ERP integration costs
409

�
895

�
1,071

Plant start-up costs
1,114

�
1,647

�
1,050

Plant shut-down costs


�
889

�


NEC TOKIN investment-related expenses
487

�
580

�
124

Net (gain) loss on sales and disposals of assets
(550
)
�
365

�
42

Inventory revaluation
(821
)
�
2,676

�


Adjusted operating income (loss)
$
16,054

�
$
9,270

�
$
5,895


�
Adjusted Net Income (Loss) and Adjusted Net Income (Loss) Per Share
�
Adjusted net income (loss) and Adjusted net income (loss) per basic and diluted share represent net income (loss) and net income (loss) per basic and diluted share excluding adjustments which are outlined in the quantitative reconciliation provided below.� Management believes that these Non-U.S. GAAP financial measures are useful to investors because they provide a supplemental way to understand the underlying operating performance of the Company.� Management uses these Non-U.S. GAAP financial measures to evaluate operating performance.� Non-U.S. GAAP financial measures should not be considered as an alternative to net income, operating income or any other performance measures derived in accordance with U.S. GAAP.

7


The following table provides reconciliation from U.S. GAAP net income (loss) to Non-U.S. GAAP adjusted net income (loss):

U.S. GAAP to Non- U.S. GAAP Reconciliation
�
Quarters�Ended
�
September 30, 2014
�
June 30, 2014
�
September 30, 2013
�
(Unaudited)
U.S. GAAP
�

�
�

�
�

Net sales
$
215,293

�
$
212,881

�
$
208,449

Net loss from continuing operations
7,730

�
(10,483
)
�
(11,945
)
Income (loss) from discontinued operations
(1,400
)
�
6,943

�
(1,151
)
Net income (loss)
$
6,330

�
$
(3,540
)
�
$
(13,096
)
Net income (loss) from continuing operations - basic
0.17

�
(0.23
)
�
(0.26
)
Income (loss) from discontinued operations - basic
(0.03
)
�
0.15

�
(0.03
)
Net income (loss) - basic
0.14

�
(0.08
)
�
(0.29
)
Net income (loss) from continuing operations - diluted
0.15

�
(0.23
)
�
(0.26
)
Income (loss) from discontinued operations - diluted
(0.03
)
�
0.15

�
(0.03
)
Net income (loss) - diluted
0.12

�
(0.08
)
�
(0.29
)
Non-U.S. GAAP
�

�
�

�
�

Net income (loss)
$
6,330

�
$
(3,540
)
�
$
(13,096
)
Adjustments:
�
�
�
�
�
Restructuring charges
1,687

�
1,830

�
1,364

Equity (income) loss from NEC TOKIN
(232
)
�
1,675

�
1,243

Inventory revaluation
(821
)
�
2,676

�


Net (gain) loss on sales and disposals of assets
(550
)
�
365

�
42

Stock-based compensation expense
958

�
994

�
659

ERP integration costs
409

�
895

�
1,071

Change in value of NEC TOKIN options
(6,600
)
�
(4,100
)
�
382

Plant start-up costs
1,114

�
1,647

�
1,050

Plant shut-down costs


�
889

�


Net foreign exchange (gain) loss
(1,351
)
�
527

�
515

NEC TOKIN investment-related expenses
487

�
580

�
124

(Income) loss from discontinued operations
1,400

�
(6,943
)
�
1,151

Amortization included in interest expense
583

�
665

�
945

Income tax effect of non-GAAP adjustments (1)
51

�
(24
)
�
(19
)
Adjusted net income (loss)
$
3,465

�
$
(1,864
)
�
$
(4,569
)
Adjusted net income (loss) per basic share
$
0.08

�
$
(0.04
)
�
$
(0.10
)
Adjusted net income (loss) per diluted share
$
0.07

�
$
(0.04
)
�
$
(0.10
)
Weighted average shares outstanding:
�
�
�
�
�
Basic
45,400

�
45,274

�
45,092

Diluted
52,521

�
45,274

�
45,092

�
(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.

8


Adjusted EBITDA
�
Adjusted EBITDA from continuing operations represents net income (loss) from continuing operations before net interest expense, income tax expense, and depreciation and amortization expense, adjusted to exclude certain item which are outlined in the quantitative reconciliation provided below.� We use Adjusted EBITDA from continuing operations to monitor and evaluate our operating performance and to facilitate internal and external comparisons of the historical operating performance of our business.� We present Adjusted EBITDA from continuing operations as a supplemental measure of our performance and ability to service debt.� We also present Adjusted EBITDA from continuing operations 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 from continuing operations 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 adjustments to arrive at Adjusted EBITDA from continuing operations are excluded in order to better reflect our continuing operations.
�
In evaluating Adjusted EBITDA from continuing operations, you should be aware that in the future we may incur expenses similar to the adjustments noted below.� Our presentation of Adjusted EBITDA from continuing operations should not be construed as an inference that our future results will be unaffected by these types of adjustments.� Adjusted EBITDA from continuing operations is not a measurement of our financial performance under U.S. GAAP and should not be considered as an alternative to net income, operating income 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.
�
Our Adjusted EBITDA from continuing operations measure has limitations as an analytical tool, and should not be considered in isolation or as a substitute for analysis of our results as reported under 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 from continuing operations 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 from continuing operations 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 from continuing operations as supplementary information.







9


The following table provides a reconciliation from U.S. GAAP net income (loss) to Adjusted EBITDA from continuing operations (amounts in thousands):

�
For the Quarters Ended
(Amounts in thousands)
September 30, 2014
�
June 30, 2014
�
September 30, 2013
U.S. GAAP
�
�
�
�
�
Net income (loss)
$
6,330

�
$
(3,540
)
�
$
(13,096
)
Interest expense, net
10,284

�
10,453

�
9,897

Income tax expense (benefit)
2,583

�
1,282

�
1,444

Depreciation and amortization
10,177

�
10,797

�
11,951

EBITDA
29,374

�
18,992

�
10,196

Excluding the following items (non-GAAP):
�
�
�
�
�
Restructuring charges
1,687

�
1,830

�
1,364

Equity (income) loss from NEC TOKIN
(232
)
�
1,675

�
1,243

Inventory revaluation
(821
)
�
2,676

�


Net (gain) loss on sales and disposals of assets
(550
)
�
365

�
42

Stock-based compensation expense
958

�
994

�
659

ERP integration costs
409

�
895

�
1,071

Change in value of NEC TOKIN options
(6,600
)
�
(4,100
)
�
382

Plant start-up costs
1,114

�
1,647

�
1,050

Plant shut-down costs


�
889

�


Net foreign exchange (gain) loss
(1,351
)
�
527

�
515

NEC TOKIN investment-related expenses
487

�
580

�
124

(Income) loss from discontinued operations
1,400

�
(6,943
)
�
1,151

Adjusted EBITDA
$
25,875

�
$
20,027

�
$
17,797

�
�
�
�
�
�

10
Earnings Conference Call October 30, 2014 Quarter Ended September 30, 2014

�
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 actual outcome 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 restructuring plans; (ix) equity method investment in NEC TOKIN expose us to a variety of risks; (x) acquisitions and other strategic transactions expose us to a variety of risks; (xi) inability to attract, train and retain effective employees and management; (xii) inability to develop innovative products to maintain customer relationships and offset potential price erosion in older products; (xiii) exposure to claims alleging product defects; (xiv) the impact of laws and regulations that apply to our business, including those relating to environmental matters; (xv) the impact of international laws relating to trade, export controls and foreign corrupt practices; (xvi) volatility of financial and credit markets affecting our access to capital; (xvii) the need to reduce the total costs of our products to remain competitive; (xviii) potential limitation on the use of net operating losses to offset possible future taxable income; (xix) restrictions in our debt agreements that limit our flexibility in operating our business; and (xx) 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. 2

�
Income Statement Highlights U.S. GAAP 3 For the Quarters Ended (Amounts in thousands, except percentages and per share data) Sep 2014 Jun 2014 Sep 2013 Net sales $ 215,293 $ 212,881 $ 208,449 Gross margin $ 45,755 $ 32,957 $ 30,917 Gross margin as a percentage of net sales 21.3 % 15.5 % 14.8 % Selling, general and administrative $ 25,510 $ 24,779 $ 22,315 SG&A as a percentage of net sales 11.8 % 11.6 % 10.7 % Operating income (loss) $ 12,770 $ (606 ) $ 1,585 Net income (loss) from continuing operations $ 7,730 $ (10,483 ) $ (11,945 ) Net income (Ioss) from discontinued operations (1,400 ) 6,943 (1,151 ) Net income (loss) $ 6,330 $ (3,540 ) $ (13,096 ) Per share data: Net income (loss) from continuing operations - basic $ 0.17 $ (0.23 ) $ (0.26 ) Net income (loss) from discontinued operations - basic (0.03 ) 0.15 (0.03 ) Net income (loss) - basic 0.14 (0.08 ) (0.29 ) Net income (loss) from continuing operations - diluted 0.15 (0.23 ) (0.26 ) Net income (loss) from discontinued operations - diluted (0.03 ) 0.15 (0.03 ) Net income (loss) - diluted 0.12 (0.08 ) (0.29 ) Weighted avg. shares - basic 45,400 45,274 45,092 Weighted avg. shares - diluted 52,521 45,274 45,092

�
Income Statement Highlights Non-GAAP 4 For the Quarters Ended (Amounts in thousands, except percentages and per share data) Sep 2014 Jun 2014 Sep 2013 Net sales $ 215,293 $ 212,881 $ 208,449 Adjusted gross margin $ 46,389 $ 38,515 $ 32,196 Gross margin as a percentage of net sales 21.5 % 18.1 % 15.4 % Adjusted selling, general and administrative $ 24,119 $ 22,722 $ 20,743 SG&A as a percentage of net sales 11.2 % 10.7 % 10.0 % Adjusted operating income (loss) $ 16,054 $ 9,270 $ 5,895 Adjusted net income (loss) from continuing operations $ 3,465 $ (1,864 ) $ (4,569 ) Adjusted EBITDA 25,875 20,027 17,797 Per share data: Adjusted net income (loss) from continuing operations - basic $ 0.08 $ (0.04 ) $ (0.10 ) Adjusted net income (loss) from continuing operations - diluted $ 0.07 $ (0.04 ) $ (0.10 ) Weighted avg. shares - basic 45,400 45,274 45,092 Weighted avg. shares - diluted 52,521 45,274 45,092

�
Adjusted Gross Margin & Operating Income (Loss)-Non-GAAP Solid Capacitors 5 For the Quarters Ended (Amounts in thousands) Sep 2014 Jun 2014 Sep 2013 Net sales $ 163,019 $ 159,790 $ 157,714 Adjusted gross margin 44,125 37,178 30,143 Adjusted gross margin percentage 27.1 % 23.3 % 19.1 % Adjusted operating income (loss) $ 39,222 $ 32,227 $ 25,604

�
Adjusted Gross Margin & Operating Income (Loss) -Non-GAAP Film & Electrolytics 6 For the Quarters Ended (Amounts in thousands) Sep 2014 Jun 2014 Sep 2013 Net sales $ 52,274 $ 53,091 $ 50,735 Adjusted gross margin 2,264 1,337 2,053 Adjusted gross margin percentage 4.3 % 2.5 % 4.0 % Adjusted operating income (loss) $ 1 $ (933 ) $ 98

�
Financial Highlights (1) Calculated as accounts receivable, net, plus inventories, net, less accounts payable (2)Calculated by annualizing the current quarters Net sales and Cost of sales 7 (Amounts in millions, except DSO and DPO) Sep 2014 Jun 2014 FX Impact Cash, cash equivalents and restricted cash $ 64.5 $ 71.6 $ (1.1 ) Capital expenditures $ 6.8 $ 5.2 Short-term debt $ 25.8 $ 27.4 Long-term debt 373.6 373.7 Debt premium 2.7 2.7 Total debt $ 402.1 $ 403.8 $  Equity $ 214.8 $ 218.3 $ 13.7 Net working capital (1) $ 211.8 $ 206.3 $ (4.6 ) Days in receivables (DSO)(2) 41 42 Days in payables (DPO)(2) 39 37

�
Sales Summary - Q2 FY2015 8

�
Appendix

�
Adjusted Gross Margin Non-GAAP 10 For the Quarters Ended (Amounts in thousands, except percentages) Sep 2014 Jun 2014 Sep 2013 Net Sales $ 215,293 $ 212,881 $ 208,449 Gross Margin $ 45,755 $ 32,957 $ 30,917 Adjustments: Plant start-up costs 1,114 1,647 1,050 Stock-based compensation expense 341 346 229 Plant shut-down costs  889  Inventory revaluation (821 ) 2,676  Adjusted Gross margin $ 46,389 $ 38,515 $ 32,196 Adjusted gross margin as a percentage of net sales 21.5 % 18.1 % 15.4 %

�
Adjusted Selling, General & Administrative Expenses Non-GAAP 11 For the Quarters Ended (Amounts in thousands, except percentages) Sep 2014 Jun 2014 Sep 2013 Net sales $ 215,293 $ 212,881 $ 208,449 Selling, general and administrative expenses $ 25,510 $ 24,779 $ 22,315 Adjustments: ERP integration costs 409 895 1,071 NEC TOKIN investment-related expenses 487 580 124 Stock-based compensation expense 495 582 377 Adjusted selling, general and administrative expenses $ 24,119 $ 22,722 $ 20,743 Adjusted selling, general, and administrative as a percentage of net sales 11.2 % 10.7 % 10.0 %

�
Adjusted Operating Income (Loss) Non-GAAP 12 For the Quarters Ended (Amounts in thousands) Sep 2014 Jun 2014 Sep 2013 Operating income (loss) $ 12,770 $ (606 ) $ 1,585 Adjustments: Restructuring charges 1,687 1,830 1,364 Stock-based compensation expense 958 994 659 ERP integration costs 409 895 1,071 Plant start-up costs 1,114 1,647 1,050 Plant shut-down costs  889  NEC TOKIN investment-related expenses 487 580 124 Net (gain) loss on sales and disposals of assets (550 ) 365 42 Inventory revaluation (821 ) 2,676  Adjusted operating income (loss) $ 16,054 $ 9,270 $ 5,895

�
Adjusted Net Income (Loss) From Continuing Operations and Adjusted EBITDA Non-GAAP For the Quarters Ended (Amounts in thousands) Sep 2014 Jun 2014 Sep 2013 Net income (loss) $ 6,330 $ (3,540 ) $ (13,096 ) Adjustments: Restructuring charges 1,687 1,830 1,364 Equity (income) loss from NEC TOKIN (232 ) 1,675 1,243 Inventory revaluation (821 ) 2,676  Net (gain) loss on sales and disposals of assets (550 ) 365 42 Stock-based compensation expense 958 994 659 ERP integration costs 409 895 1,071 Change in value of NEC TOKIN options (6,600 ) (4,100 ) 382 Plant start-up costs 1,114 1,647 1,050 Plant shut-down costs  889  Net foreign exchange (gain) loss (1,351 ) 527 515 NEC TOKIN investment-related expenses 487 580 124 (Income) loss from discontinued operations 1,400 (6,943 ) 1,151 Amortization included in interest expense 583 665 945 Income tax effect of non-GAAP adjustments (1) 51 (24 ) (19 ) Adjusted net income (loss) $ 3,465 $ (1,864 ) $ (4,569 ) Adjusted net income (loss) per share from continuing operations - basic $ 0.08 $ (0.04 ) $ (0.10 ) Adjusted net income (loss) per share from continuing operations - diluted $ 0.07 $ (0.04 ) $ (0.10 ) Adjusted EBITDA $ 25,875 $ 20,027 $ 17,797 Weighted avg. shares - basic 45,400 45,274 45,092 Weighted avg. shares - diluted 52,521 45,274 45,092 13

�
Adjusted EBITDA Reconciliation Non-GAAP 14 For the Quarters Ended (Amounts in thousands) Sep 2014 Jun 2014 Sep 2013 U.S. GAAP Net income (loss) $ 6,330 $ (3,540 ) $ (13,096 ) Interest expense, net 10,284 10,453 9,897 Income tax expense 2,583 1,282 1,444 Depreciation and amortization 10,177 10,797 11,951 EBITDA 29,374 18,992 10,196 Excluding the following items (non-GAAP): Restructuring charges 1,687 1,830 1,364 Equity (income) loss from NEC TOKIN (232 ) 1,675 1,243 Inventory revaluation (821 ) 2,676  Net (gain) loss on sales and disposals of assets (550 ) 365 42 Stock-based compensation expense 958 994 659 ERP integration costs 409 895 1,071 Change in value of NEC TOKIN options (6,600 ) (4,100 ) 382 Plant start-up costs 1,114 1,647 1,050 Plant shut-down costs  889  Net foreign exchange (gain) loss (1,351 ) 527 515 NEC TOKIN investment-related expenses 487 580 124 (Income) loss from discontinued operations 1,400 (6,943 ) 1,151 Adjusted EBITDA $ 25,875 $ 20,027 $ 17,797

�
Adjusted Gross Margin-Non-GAAP Solid Capacitors 15 For the Quarters Ended (Amounts in thousands) Sep 2014 Jun 2014 Sep 2013 Net sales $ 163,019 $ 159,790 $ 157,714 Gross margin 43,460 36,020 30,104 Gross margin percentage 26.7 % 22.5 % 19.1 % Adjustments: Inventory revaluation (238 ) 715  Stock-based compensation expense 190 166 39 Plant start-up costs 713 277  Adjusted gross margin $ 44,125 $ 37,178 $ 30,143 Adjusted gross margin percentage 27.1 % 23.3 % 19.1 %

�
Adjusted Gross Margin-Non-GAAP Film & Electrolytics 16 For the Quarters Ended (Amounts in thousands) Sep 2014 Jun 2014 Sep 2013 Net sales $ 52,274 $ 53,091 $ 50,735 Gross margin 2,295 (3,063 ) 813 Gross margin percentage 4.4 % (5.8 )% 1.6 % Adjustments: Inventory revaluation (583 ) 1,961  Stock-based compensation expense 151 180 190 Plant start-up costs 401 1,370 1,050 Plant shut-down costs  889  Adjusted gross margin $ 2,264 $ 1,337 $ 2,053 Adjusted gross margin percentage 4.3 % 2.5 % 4.0 %

�
Adjusted Operating Income (Loss)-Non-GAAP Solid Capacitors 17 For the Quarters Ended (Amounts in thousands) Sep 2014 Jun 2014 Sep 2013 Net sales $ 163,019 $ 159,790 $ 157,714 Operating income (loss) 38,386 29,734 25,386 Adjustments: Inventory revaluation (238 ) 715  Restructuring charges 169 1,230 99 Stock-based compensation expense 190 166 39 Plant start-up costs 713 277  ERP integration expenses   18 (Gain) loss on sales and disposals of assets 4 105 60 Adjusted operating income (loss) $ 39,224 $ 32,227 $ 25,602

�
Adjusted Operating Income (Loss)-Non-GAAP Film & Electrolytics 18 For the Quarters Ended (Amounts in thousands) Sep 2014 Jun 2014 Sep 2013 Net sales $ 52,274 $ 53,091 $ 50,735 Operating income (loss) (917 ) (6,076 ) (2,211 ) Adjustments: Inventory revaluation (583 ) 1,961  Restructuring charges 1,500 489 1,062 Stock-based compensation expense 151 180 190 Plant start-up costs 401 1,370 1,050 Plant shut-down costs  889  ERP integration expenses   74 (Gain) loss on sales and disposals of assets (551 ) 254 (66 ) Adjusted operating income (loss) $ 1 $ (933 ) $ 99

�
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. 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 and 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 and 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. 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 and believes that Adjusted operating income is useful to investors because it provides a supplemental way to understand the underlying operating performance of the Company. Adjusted operating income should not be considered as an alternative to operating loss or any other performance measure derived in accordance with GAAP. 19

�
Non-GAAP Financial Measures Continued 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 and believes that Adjusted net income (loss) and Adjusted EPS are useful to investors because they provide a supplemental way to possibly better understand the underlying operating performance of the Company. 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. 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. 20

�
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. 21

�

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