EX-99.1 2 fy2015_q4x10kxex99d1.htm EXHIBIT 99.1 FY2015_Q4_10K_Ex99d1
        

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
 
williamlowe@kemet.com
richardvatinelle@kemet.com
 
864-963-6484
954-766-2800
 
KEMET REPORTS PRELIMINARY FOURTH QUARTER AND FISCAL YEAR 2015 RESULTS
 
 
Greenville, South Carolina (May 5, 2015) - KEMET Corporation (the “Company”) (NYSE: KEM), a leading global supplier of electronic components, today reported preliminary results for the fourth quarter and fiscal year ended March 31, 2015.
 
Net sales of $193.7 million for the quarter ended March 31, 2015 decreased 3.8% from net sales of $201.3 million for the prior quarter ended December 31, 2014, and decreased 10.2% compared to net sales of $215.8 million for the quarter ended March 31, 2014. For the fiscal year ended March 31, 2015 net sales were $823.2 million compared to $833.7 million for the fiscal year ended March 31, 2014.

The U.S. GAAP net loss for the quarter ended March 31, 2015 was $19.8 million, or $0.44 loss per basic and diluted share, compared to a net loss for the quarter ended March 31, 2014 of $14.4 million or $0.32 loss per basic and diluted share. For the fiscal year ended March 31, 2015, the net loss was $14.1 million, or $0.31 loss per diluted share compared to a net loss of $68.5 million, or $1.52 loss per diluted share for the fiscal year ended March 31, 2014.
 
The non-U.S. GAAP Adjusted net loss for the quarter ended March 31, 2015 was $1.6 million or $0.04 loss per basic and diluted share, compared to a non-U.S. GAAP Adjusted net income of $1.7 million or $0.03 per diluted share for the quarter ended March 31, 2014. For the fiscal year ended March 31, 2015, the non-U.S. GAAP net income was $7.0 million, or $0.13 per diluted share compared to a net loss of $17.5 million, or $0.39 loss per basic and diluted share for the fiscal year ended March 31, 2014.
 
“We entered this fiscal year focused on improving Adjusted operating income and cash flow and we are pleased that our Adjusted operating income improved over $30.5 million compared to our prior fiscal year even with some currency headwinds in the last two quarters,” stated Per Loof, KEMET’s Chief Executive Officer. “As we adjust to the reality of a strong U.S. dollar we believe we have positioned our cost structure to allow us to continue a trend of improving our Adjusted operating income for our next fiscal year as well,” continued Loof.

The net income (loss) for the quarters ended March 31, 2015 and 2014 include various items affecting comparability as denoted in the U.S. GAAP to Non-U.S. GAAP reconciliation table included hereafter.






About KEMET
 
The Company’s 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 world’s 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 July 1, 2015, we will observe a quiet period during which the information provided in this news release and annual report on Form 10-K 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 Company’s 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; and (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.




2


KEMET CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(Amounts in thousands, except per share data)
(Unaudited)
 
Quarters Ended March 31,
 
Fiscal Year Ended
 
2015
 
2014
 
2015
 
2014
Net sales
$
193,708

 
$
215,821

 
$
823,192

 
$
833,666

Operating costs and expenses:
 
 
 
 
 
 
 
Cost of sales
157,379

 
182,203

 
663,683

 
712,925

Selling, general and administrative expenses
24,870

 
25,030

 
98,533

 
95,856

Research and development
6,572

 
6,762

 
25,802

 
24,466

Restructuring charges
3,437

 
5,954

 
13,017

 
14,122

Write down of long-lived assets
—

 
1,118

 
—

 
4,476

Net (gain) loss on sales and disposals of assets
538

 
(39
)
 
(221
)
 
32

Total operating costs and expenses
192,796

 
221,028

 
800,814

 
851,877

Operating income (loss)
912

 
(5,207
)
 
22,378

 
(18,211
)
Other (income) expense:
 
 
 
 
 

 
 

Interest income
(4
)
 
(13
)
 
(15
)
 
(195
)
Interest expense
10,020

 
10,671

 
40,701

 
40,962

Other income (expense), net
8,647

 
(2,632
)
 
(6,182
)
 
(2,681
)
Income (loss) from continuing operations before income taxes and equity loss from NEC TOKIN
(17,751
)
 
(13,233
)
 
(12,126
)
 
(56,297
)
Income tax expense (benefit)
3

 
(2,811
)
 
5,227

 
1,482

Income (loss) from continuing operations before equity loss from NEC TOKIN
(17,754
)
 
(10,422
)
 
(17,353
)
 
(57,779
)
Equity income (loss) from NEC TOKIN
(2,093
)
 
(4,128
)
 
(2,169
)
 
(7,090
)
Income (loss) from continuing operations
(19,847
)

(14,550
)
 
(19,522
)
 
(64,869
)
Income (loss) from discontinued operations
—

 
103

 
5,379

 
(3,634
)
Net income (loss)
$
(19,847
)
 
$
(14,447
)
 
$
(14,143
)
 
$
(68,503
)
Net loss per basic and diluted share:
 

 
 

 
 

 
 

Income (loss) from continuing operations
$
(0.44
)
 
$
(0.32
)
 
$
(0.43
)
 
$
(1.44
)
Income (loss) from discontinued operations
$
—

 
$
—

 
$
0.12

 
$
(0.08
)
Net income (loss)
$
(0.44
)
 
$
(0.32
)
 
$
(0.31
)
 
$
(1.52
)
 
 
 
 
 
 
 
 
Weighted-average shares outstanding:
 

 
 

 
 

 
 

Basic and diluted
45,443

 
45,174

 
45,381

 
45,102



3


KEMET CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(Amounts in thousands, except per share data)
(Unaudited)
 
 
March 31, 2015
 
March 31, 2014
ASSETS
 

 
 

Current assets:
 

 
 

Cash and cash equivalents
$
56,362

 
$
57,929

Accounts receivable, net
90,857

 
98,947

Inventories, net
171,843

 
187,974

Prepaid expenses and other
41,650

 
36,871

Deferred income taxes
11,012

 
6,695

Current assets of discontinued operations
—

 
12,160

Total current assets
371,724

 
400,576

Property and equipment
249,641

 
292,648

Goodwill
35,584

 
35,584

Intangible assets, net
33,282

 
37,184

Investment in NEC TOKIN
45,016

 
46,419

Restricted cash
1,775

 
13,512

Deferred income taxes
8,053

 
6,778

Other assets
11,056

 
10,130

Noncurrent assets of discontinued operations
—

 
836

Total assets
$
756,131

 
$
843,667

LIABILITIES AND STOCKHOLDERS’ EQUITY
 

 
 

Current liabilities:
 

 
 

Current portion of long-term debt
$
462

 
$
7,297

Accounts payable
69,785

 
74,818

Accrued expenses
60,456

 
76,468

Income taxes payable and deferred income taxes
337

 
980

Current liabilities of discontinued operations
—

 
7,269

Total current liabilities
131,040

 
166,832

Long-term debt, less current portion
390,909

 
391,292

Other non-current obligations
57,131

 
55,864

Deferred income taxes
9,427

 
5,203

Noncurrent liabilities of discontinued operations
—

 
2,592

Commitments and contingencies
 
 
 
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 March 31, 2015 and 2014
465

 
465

Additional paid-in capital
461,192

 
465,027

Retained deficit
(245,881
)
 
(231,738
)
Accumulated other comprehensive income
(25,855
)
 
18,184

Treasury stock, at cost (1,057 and 1,301 shares at March 31, 2015 and 2014, respectively)
(22,297
)
 
(30,054
)
Total stockholders’ equity
167,624

 
221,884

Total liabilities and stockholders’ equity
$
756,131

 
$
843,667



4


KEMET CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Amounts in thousands)
(Unaudited)
 
 
Fiscal Years Ended March 31,
 
 
2015
 
2014
Net income (loss)
 
$
(14,143
)
 
$
(68,503
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
 
 

 
 

Gain on sale of discontinued operations
 
(5,644
)
 
—

Net cash provided by (used in) operating activities of discontinued operations
 
(679
)
 
336

Depreciation and amortization
 
40,768

 
49,527

Amortization of debt discount and debt issuance costs
 
2,032

 
3,596

Gain on early extinguishment of debt
 
(1,003
)
 
—

Equity loss from NEC TOKIN
 
2,169

 
7,090

Change in value of NEC TOKIN options
 
(2,100
)
 
(3,111
)
Net (gain) loss on sales and disposals of assets
 
(221
)
 
32

Stock-based compensation expense
 
4,512

 
2,909

Pension and other post-retirement benefits
 
(13,283
)
 
(78
)
Deferred income tax expense (benefit)
 
(1,257
)
 
(6,369
)
Write down of long-lived assets
 
—

 
4,476

Write down of receivables
 
52

 
1,484

Other, net
 
(7
)
 
(521
)
Changes in assets and liabilities:
 
 
 
 
Accounts receivable
 
8,220

 
(4,618
)
Inventories
 
8,559

 
14,891

Prepaid expenses and other current assets
 
(8,550
)
 
3,748

Accounts payable
 
(2,879
)
 
(2,070
)
Accrued income taxes
 
4,155

 
172

Other operating liabilities
 
3,701

 
(9,737
)
Net cash provided by (used in) operating activities
 
24,402

 
(6,746
)
Investing activities:
 
 

 
 

Capital expenditures
 
(22,232
)
 
(32,147
)
Change in restricted cash
 
11,509

 
4,047

Proceeds from sale of discontinued operations
 
9,564

 
—

Proceeds from sale of assets
 
4,788

 
2,847

Net cash provided by (used in) investing activities
 
3,629

 
(25,253
)
Financing activities:
 
 

 
 

Proceeds from revolving line of credit
 
42,340

 
21,000

Payment of revolving line of credit
 
(27,342
)
 
(2,551
)
Deferred acquisition payments
 
(19,527
)
 
(21,977
)
Payments of long-term debt
 
(21,733
)
 
(3,599
)
Proceeds from exercise of stock options
 
24

 
250

Purchase of treasury stock
 
(630
)
 
—

Net cash provided by (used in) financing activities
 
(26,868
)
 
(6,877
)
Net increase (decrease) in cash and cash equivalents
 
1,163

 
(38,876
)
Effect of foreign currency fluctuations on cash
 
(2,730
)
 
827

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

 
95,978

Cash and cash equivalents at end of fiscal period
 
$
56,362

 
$
57,929


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 operating income", “Adjusted net income (loss)”, “Adjusted net income (loss) per share” and “Adjusted EBITDA”.  Management believes that investors may find it useful to review the Company’s 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 a reconciliation from U.S. GAAP Gross margin to Non-U.S. GAAP Adjusted gross margin (amounts in thousands):
 
 
Quarters Ended
 
Fiscal Years Ended
 
March 31, 2015
 
December 31, 2014
 
March 31, 2014
 
March 31, 2015
 
March 31, 2014
 
 
 
(Unaudited)
 
 
 
 
Net sales
$
193,708

 
$
201,310

 
$
215,821

 
$
823,192

 
$
833,666

Gross Margin
36,329

 
44,468

 
33,618

 
159,509

 
120,741

Non-U.S. GAAP-adjustments:
 
 
 
 
 
 
 
 
 
Inventory Revaluation
(927
)
 
(927
)
 
—

 
—

 
—

Plant shut-down costs
—

 
—

 
2,668

 
889

 
2,668

Plant start-up costs
651

 
1,144

 
669

 
4,556

 
3,336

Stock-based compensation expense
465

 
424

 
186

 
1,577

 
1,008

Inventory write downs
—

 
—

 
—

 
—

 
3,886

Infrastructure tax
—

 
—

 
1,079

 
—

 
1,079

Adjusted gross margin
$
36,518

 
$
45,109

 
$
38,220

 
$
166,531

 
$
132,718

 
18.9
%
 
22.4
%
 
17.7
%
 
20.2
%
 
15.9
%
 

6


Adjusted Operating Income

Adjusted operating income represents operating income (loss), excluding adjustments which are outlined in the quantitative reconciliation provided below. We use Adjusted operating income to facilitate our analysis and understanding of our business operations and believe that Adjusted operating income is useful to investors because it provides a supplemental way to understand our underlying operating performance. 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.

Adjusted operating income is calculated as follows (amounts in thousands):
 
 
Quarters Ended
 
Fiscal Year Ended
 
 
March 31, 2015
 
December 31, 2014 (1)
 
March 31, 2014
 
March 31, 2015
 
March 31, 2014
 
 
(Unaudited)
Operating income (loss)
 
$
912

 
$
9,302

 
$
(5,207
)
 
22,378

 
(18,211
)
Adjustments:
 
 

 
 

 
 

 
 
 
 
Restructuring charges
 
3,437

 
6,063

 
5,954

 
13,017

 
14,122

Plant shut-down costs
 
—

 
—

 
2,668

 
889

 
2,668

Write down of long-lived assets
 
—

 
—

 
1,118

 
—

 
4,476

ERP integration costs
 
1,273

 
671

 
837

 
3,248

 
3,880

Plant start-up costs
 
651

 
1,144

 
669

 
4,556

 
3,336

NEC TOKIN investment related expenses
 
226

 
485

 
618

 
1,778

 
2,299

Stock-based compensation expense
 
1,328

 
1,232

 
579

 
4,512

 
2,909

Inventory Revaluation
 
(927
)
 
(927
)
 
—

 
—

 
—

Inventory write downs
 
—

 
—

 
—

 
—

 
3,886

Infrastructure tax
 
—

 
—

 
1,079

 
—

 
1,079

Net (gain) loss on sales and disposals of assets
 
538

 
(574
)
 
(39
)
 
(221
)
 
32

Legal expenses related to antitrust class actions
 
435

 
409

 
—

 
844

 
—

Adjusted operating income (loss)
 
$
7,873

 
$
17,805

 
$
8,276

 
51,001

 
20,476


(1) We have revised the quarter ended December 31, 2014 Non-GAAP presentation to conform with the quarter ended March 31, 2015.

 
Adjusted Net Income (Loss) and Adjusted Net Income (Loss) Per Share
 
“Adjusted net income (loss)” and “Adjusted net income (loss) per share” represent net income (loss) and net income (loss) per 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
 
Fiscal Year Ended
 
 
March 31, 2015
 
December 31, 2014 (1)
 
March 31, 2014
 
March 31, 2015
 
March 31, 2014
 
 
(Unaudited, Amounts in thousands, except per share data)
U.S. GAAP
 
 

 
 

 
 

 
 
 
 
Net sales
 
$
193,708

 
$
201,310

 
$
215,821

 
$
823,192

 
$
833,666

Net income (loss)
 
$
(19,847
)
 
$
2,914

 
$
(14,447
)
 
$
(14,143
)
 
$
(68,503
)
Net income (loss) - basic eps
 
$
(0.44
)
 
$
0.06

 
$
(0.32
)
 
$
(0.31
)
 
$
(1.52
)
Net income (loss) - diluted eps
 
$
(0.44
)
 
$
0.06

 
$
(0.32
)
 
$
(0.31
)
 
$
(1.52
)
Non-U.S. GAAP
 
 

 
 

 
 

 
 

 
 
Net income (loss)
 
(19,847
)
 
2,914

 
(14,447
)
 
(14,143
)
 
(68,503
)
Adjustments:
 
 
 
 
 
 
 
 
 
 
Restructuring charges
 
3,437

 
6,063

 
5,954

 
13,017

 
14,122

Equity (gain) loss from NEC TOKIN
 
2,093

 
(1,367
)
 
4,127

 
2,169

 
7,090

Write down of long-lived assets
 
—

 
—

 
1,118

 
—

 
4,476

Inventory write downs
 
—

 
—

 
—

 
—

 
3,886

ERP integration costs
 
1,273

 
671

 
837

 
3,248

 
3,880

Amortization included in interest expense
 
244

 
322

 
780

 
1,814

 
3,596

Plant start-up costs
 
651

 
1,144

 
669

 
4,556

 
3,336

Stock-based compensation
 
1,328

 
1,232

 
579

 
4,512

 
2,909

Plant shut-down costs
 
—

 
—

 
2,668

 
889

 
2,668

NEC TOKIN investment related expenses
 
226

 
485

 
618

 
1,778

 
2,299

(Gain) loss on early extinguishment of debt
 
—

 
(1,003
)
 
—

 
(1,003
)
 
—

Professional fees related to financing activities
 
—

 
1,142

 
—

 
1,142

 
—

Long-term receivable write down
 
—

 
—

 
—

 
—

 
1,444

(Gain) loss on sales and disposals of assets
 
538

 
(574
)
 
(39
)
 
(221
)
 
32

(Income) loss from discontinued operations
 
—

 
164

 
(103
)
 
(5,379
)
 
3,634

Inventory Revaluation
 
(927
)
 
(927
)
 
—

 
—

 
—

Income tax effect of non-GAAP adjustments (2)
 
20

 
37

 
100

 
84

 
(27
)
Net foreign exchange (gain) loss
 
(2,168
)
 
(1,257
)
 
(449
)
 
(4,249
)
 
(304
)
Infrastructure tax
 
—

 
—

 
1,079

 
—

 
1,079

Change in value of NEC TOKIN options
 
11,100

 
(2,500
)
 
(1,777
)
 
(2,100
)
 
(3,111
)
Legal expenses related to antitrust class actions
 
435

 
409

 
—

 
844

 
—

Adjusted net income (loss)
 
$
(1,597
)
 
$
6,955

 
$
1,714

 
$
6,958

 
$
(17,494
)
Adjusted net income (loss) per basic share
 
$
(0.04
)
 
$
0.15

 
$
0.04

 
$
0.15

 
$
(0.39
)
Adjusted net income (loss) per diluted share
 
$
(0.04
)
 
$
0.13

 
$
0.03

 
$
0.13

 
$
(0.39
)
Weighted average shares outstanding:
 
 
 
 
 
 
 
 
 
 
Basic
 
45,443

 
45,407

 
45,174

 
45,381

 
45,102

Diluted
 
45,443

 
52,228

 
52,523

 
52,588

 
45,102

 (1) We have revised the quarter ended December 31, 2014 Non-GAAP presentation to conform with the quarter ended March 31, 2015.

(2)         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 represents net income (loss) 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 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 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 adjustments to arrive at 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 noted below.  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, 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 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 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 only supplementally.



















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

 
Fiscal Year 2015
 
Q1
Q2
Q3 (1)
Q4
Total
Net income (loss)
$
(3,540
)
$
6,330

$
2,914

$
(19,847
)
$
(14,143
)
 
 
 
 
 
 
Adjustments:
 
 
 
 
 
Income tax expense
1,282

2,583

1,359

3

5,227

Interest expense, net
10,453

10,284

9,933

10,017

40,687

Depreciation and amortization
10,797

10,177

9,720

10,074

40,768

Restructuring charges
1,830

1,687

6,063

3,437

13,017

(Income) loss from discontinued operations
(6,943
)
1,400

164

—

(5,379
)
ERP integration costs
895

409

671

1,273

3,248

Plant start-up costs
1,647

1,114

1,144

651

4,556

Plant shut-down costs
889

—

—

—

889

NEC TOKIN investment related expenses
580

487

485

226

1,778

Stock-based compensation
994

958

1,232

1,328

4,512

(Gain) loss on sales and disposals of assets
365

(550
)
(574
)
538

(221
)
Change in value of NEC TOKIN options
(4,100
)
(6,600
)
(2,500
)
11,100

(2,100
)
Inventory revaluation
2,676

(822
)
(927
)
(927
)
—

Equity (gain) loss from NEC TOKIN
1,675

(232
)
(1,367
)
2,093

2,169

Net foreign exchange (gain) loss
527

(1,351
)
(1,257
)
(2,168
)
(4,249
)
(Gain) loss on early extinguishment of debt
—

—

(1,003
)
—

(1,003
)
Professional fees related to financing activities
—

—

1,142

—

1,142

Legal expenses related to antitrust class actions
—

—

409

435

844

Adjusted EBITDA
$
20,027

$
25,874

$
27,608

$
18,233

$
91,742

 
 
 
 
 
 
 (1) We have revised the quarter ended December 31, 2014 Non-GAAP presentation to conform with the quarter ended March 31, 2015.
 
Fiscal Year 2014
 
Q1
Q2
Q3
Q4
Total
Net income (loss)
$
(35,140
)
$
(13,096
)
$
(5,820
)
$
(14,447
)
$
(68,503
)
 
 
 
 
 
 
Adjustments:
 
 
 
 
 
Income tax expense
1,816

1,444

1,033

(2,811
)
1,482

Interest expense, net
9,870

9,897

10,342

10,658

40,767

Depreciation and amortization
13,639

11,951

11,762

12,175

49,527

(Income) loss from discontinued operations
1,510

1,151

1,076

(103
)
3,634

Restructuring charges
4,610

1,364

2,194

5,954

14,122

Write down of long-lived assets
—

—

3,358

1,118

4,476

ERP integration costs
978

1,071

994

837

3,880

Plant start-up costs
1,132

1,050

485

669

3,336

Plant shut-down costs
—

—

—

2,668

2,668

NEC TOKIN investment related expenses
1,308

124

249

618

2,299

Stock-based compensation
969

659

702

579

2,909

(Gain) loss on sales and disposals of assets
—

42

29

(39
)
32

Change in value of NEC TOKIN options
—

382

(1,716
)
(1,777
)
(3,111
)
Inventory write downs
3,886

—

—

—

3,886

Long-term receivable write down
1,444

—

—

—

1,444

Equity (gain) loss from NEC TOKIN
3,377

1,243

(1,657
)
4,127

7,090

Net foreign exchange (gain) loss
(577
)
515

207

(449
)
(304
)
Infrastructure Tax
—

—

—

1,079

1,079

Adjusted EBITDA
$
8,822

$
17,797

$
23,238

$
20,856

$
70,713


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