XNYS:KEM Kemet Corp Quarterly Report 10-Q Filing - 6/30/2012

Effective Date 6/30/2012

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Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

x      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2012

 

o         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File Number: 001-15491

 

KEMET CORPORATION

(Exact name of registrant as specified in its charter)

 

DELAWARE

 

57-0923789

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

2835 KEMET WAY, SIMPSONVILLE, SOUTH CAROLINA 29681

(Address of principal executive offices, zip code)

 

(864) 963-6300

(Registrant’s telephone number, including area code)

 

Former name, former address and former fiscal year, if changed since last report: N/A

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  YES x  NO o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  YES x NO o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer o

 

Accelerated filer x

 

 

 

Non-accelerated filer o

 

Smaller reporting company o

(Do not check if a smaller reporting company)

 

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o YES  x NO

 

The number of shares outstanding of the registrant’s common stock, par value $0.01 per share, as of July 31, 2012 was 44,907,420.

 

 

 



Table of Contents

 

KEMET CORPORATION AND SUBSIDIARIES

Form 10-Q for the Quarter Ended June 30, 2012

 

INDEX

 

 

Page

PART I FINANCIAL INFORMATION

 

 

 

Item 1. Financial Statements

 

 

 

Condensed Consolidated Balance Sheets at June 30, 2012 and March 31, 2012

2

 

 

Condensed Consolidated Statements of Operations for the Quarters Ended June 30, 2012 and June 30, 2011

3

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss) for the Quarters Ended June 30, 2012 and June 30, 2011

4

 

 

Condensed Consolidated Statements of Cash Flows for the Quarters Ended June 30, 2012 and June 30, 2011

5

 

 

Notes to the Condensed Consolidated Financial Statements

6

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

23

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

37

 

 

Item 4. Controls and Procedures

37

 

 

PART II OTHER INFORMATION

 

 

 

Item 1. Legal Proceedings

38

 

 

Item 1A. Risk Factors

38

 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

38

 

 

Item 3. Defaults Upon Senior Securities

38

 

 

Item 4. Mine Safety Disclosures

38

 

 

Item 5. Other Information

38

 

 

Item 6. Exhibits

38

 

 

Exhibit 31.1

 

Exhibit 31.2

 

Exhibit 32.1

 

Exhibit 32.2

 

Exhibit 101

 

 



Table of Contents

 

PART I - FINANCIAL INFORMATION

Item 1 - Financial Statements

 

KEMET CORPORATION AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Amounts in thousands, except per share data)

 

 

 

June 30,
2012

 

March 31, 2012

 

 

 

(Unaudited)

 

 

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

187,846

 

$

210,521

 

Accounts receivable, net

 

106,168

 

104,950

 

Inventories, net

 

216,303

 

212,234

 

Prepaid expenses and other

 

34,460

 

32,259

 

Deferred income taxes

 

6,958

 

6,370

 

Total current assets

 

551,735

 

566,334

 

Property and equipment, net of accumulated depreciation of $765,629 and $761,522 as of June 30, 2012 and March 31, 2012, respectively

 

310,586

 

315,848

 

Goodwill

 

36,676

 

36,676

 

Intangible assets, net

 

40,402

 

41,527

 

Other assets

 

17,371

 

15,167

 

Total assets

 

$

956,770

 

$

975,552

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Current portion of long-term debt

 

$

1,535

 

$

1,951

 

Accounts payable

 

86,556

 

74,404

 

Accrued expenses

 

69,834

 

89,079

 

Income taxes payable

 

2,186

 

2,256

 

Total current liabilities

 

160,111

 

167,690

 

Long-term debt, less current portion

 

359,751

 

345,380

 

Other non-current obligations

 

96,890

 

101,229

 

Deferred income taxes

 

5,448

 

2,257

 

 

 

 

 

 

 

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 June 30, 2012 and March 31, 2012

 

465

 

465

 

Additional paid-in capital

 

465,685

 

470,059

 

Retained deficit

 

(98,806

)

(81,053

)

Accumulated other comprehensive income

 

4,227

 

12,020

 

Treasury stock, at cost (1,601 and 1,839 shares at June 30, 2012 and March 31, 2012, respectively)

 

(37,001

)

(42,495

)

Total stockholders’ equity

 

334,570

 

358,996

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

956,770

 

$

975,552

 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

2



Table of Contents

 

KEMET CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(Amounts in thousands, except per share data)

(Unaudited)

 

 

 

Quarters Ended June 30,

 

 

 

2012

 

2011

 

Net sales

 

$

223,632

 

$

289,856

 

 

 

 

 

 

 

Operating costs and expenses:

 

 

 

 

 

Cost of sales

 

191,321

 

210,504

 

Selling, general and administrative expenses

 

27,255

 

30,276

 

Research and development

 

7,733

 

7,086

 

Restructuring charges

 

1,264

 

1,025

 

Net loss on sales and disposals of assets

 

104

 

123

 

Total operating costs and expenses

 

227,677

 

249,014

 

 

 

 

 

 

 

Operating income (loss)

 

(4,045

)

40,842

 

 

 

 

 

 

 

Other (income) expense:

 

 

 

 

 

Interest income

 

(31

)

(43

)

Interest expense

 

10,457

 

7,400

 

Other (income) expense, net

 

1,511

 

(95

)

 

 

 

 

 

 

Income (loss) before income taxes

 

(15,982

)

33,580

 

 

 

 

 

 

 

Income tax expense

 

1,771

 

1,731

 

 

 

 

 

 

 

Net income (loss)

 

$

(17,753

)

$

31,849

 

 

 

 

 

 

 

Net income (loss) per share:

 

 

 

 

 

Basic

 

$

(0.40

)

$

0.81

 

Diluted

 

$

(0.40

)

$

0.61

 

 

 

 

 

 

 

Weighted-average shares outstanding:

 

 

 

 

 

Basic

 

44,808

 

39,452

 

Diluted

 

44,808

 

52,338

 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

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Table of Contents

 

KEMET CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Amounts in thousands)

(Unaudited)

 

 

 

Quarters Ended June 30,

 

 

 

2012

 

2011

 

Net income (loss)

 

$

(17,753

)

$

31,849

 

 

 

 

 

 

 

Other compreshensive income (loss):

 

 

 

 

 

Foreign currency translation gains (losses)

 

(7,966

)

3,105

 

Defined benefit pension plans, net of tax impact

 

102

 

115

 

Defined benefit post-retirement plan adjustments

 

71

 

(71

)

Other comprehensive income (loss)

 

(7,793

)

3,149

 

 

 

 

 

 

 

Total comprehensive income (loss)

 

$

(25,546

)

$

34,998

 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

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Table of Contents

 

KEMET CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Amounts in thousands)

(Unaudited)

 

 

 

Quarters Ended

 

 

 

June 30, 2012

 

June 30, 2011

 

Net income (loss)

 

$

(17,753

)

$

31,849

 

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

 

 

 

 

 

Depreciation and amortization

 

11,656

 

11,159

 

Amortization of debt discount and debt issuance costs

 

971

 

1,044

 

Net loss on sales and disposals of assets

 

104

 

123

 

Stock-based compensation expense

 

1,264

 

1,191

 

Change in deferred income taxes

 

122

 

270

 

Change in operating assets

 

(12,029

)

(21,298

)

Change in operating liabilities

 

(5,490

)

(19,193

)

Other

 

(52

)

183

 

Net cash provided by (used in) operating activities

 

(21,207

)

5,328

 

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

Capital expenditures

 

(13,101

)

(5,738

)

Acquisition, net of cash received

 

(1,439

)

(11,584

)

Net cash used in investing activities

 

(14,540

)

(17,322

)

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

Proceeds from issuance of debt

 

15,825

 

 

Payments of long-term debt

 

(1,576

)

(3,015

)

Net borrowings (payments) under other credit facilities

 

 

(3,081

)

Proceeds from exercise of stock options

 

41

 

16

 

Debt issuance costs

 

(275

)

(29

)

Net cash provided by (used in) financing activities

 

14,015

 

(6,109

)

Net decrease in cash and cash equivalents

 

(21,732

)

(18,103

)

Effect of foreign currency fluctuations on cash

 

(943

)

50

 

Cash and cash equivalents at beginning of fiscal period

 

210,521

 

152,051

 

Cash and cash equivalents at end of fiscal period

 

$

187,846

 

$

133,998

 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

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Table of Contents

 

Notes to Condensed Consolidated Financial Statements

 

Note 1. Basis of Financial Statement Presentation

 

The condensed consolidated financial statements contained herein are unaudited and have been prepared from the books and records of KEMET Corporation and its subsidiaries (“KEMET” or the “Company”). In the opinion of management, the condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods. The condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q, and therefore, do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, and cash flows in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”). Although the Company believes that the disclosures are adequate to make the information presented not misleading, it is suggested that these condensed consolidated financial statements be read in conjunction with the audited financial statements and notes thereto included in the Company’s Form 10-K for the fiscal year ended March 31, 2012 (the “Company’s 2012 Annual Report”).

 

Net sales and operating results for the three months ended June 30, 2012 are not necessarily indicative of the results to be expected for the full year.  The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. In consolidation, all significant intercompany amounts and transactions have been eliminated.  Certain prior year amounts have been reclassified to conform to current year presentation.

 

The significant accounting policies followed by the Company are presented in the Company’s 2012 Annual Report.

 

Recently Issued Accounting Pronouncements

 

New accounting standards adopted

 

In September 2011, the FASB issued ASU 2011-08, Guidance on Testing Goodwill for Impairment.  ASU 2011-08 gives entities testing goodwill for impairment the option of performing a qualitative assessment before calculating the fair value of a reporting unit in Step 1 of the goodwill impairment test.  If entities determine, on the basis of qualitative factors, that it is more likely than not that the fair value of a reporting unit is less than the carrying amount, the two-step impairment test would be required.  Otherwise, further testing would not be needed.  ASU 2011-08 was effective for the Company on April 1, 2012 and did not have a material effect on the Company’s financial position.

 

In December 2011, the FASB issued ASU 2011-12, Comprehensive Income.  ASU 2011-12 defers the requirement in ASU 2011-05 that companies present reclassification adjustments for each component of AOCI in both OCI and net income on the face of the financial statements.  ASU 2011-12 requires companies to continue to present amounts reclassified out of AOCI on the face of the financial statements or disclosed in the notes to the financial statements.  ASU 2011-12 also defers the requirement to report reclassification adjustments in interim periods and requires companies to present only total comprehensive income in either a single continuous statement or two consecutive statements in interim periods.  ASU 2011-05 and ASU 2011-12 was effective for the Company on April 1, 2012 and did not have a material effect on the Company’s financial position.

 

There are currently no other accounting standards that have been issued that will have a significant impact on the Company’s financial position, results of operations or cash flows upon adoption.

 

Restricted Cash

 

A guarantee was issued by a European bank on behalf of the Company in August 2006 in conjunction with the establishment of a Value-Added Tax (“VAT”) registration in The Netherlands.  The bank guarantee is in the amount of EUR 1.5 million ($1.9 million). A deposit was placed with a European bank for EUR 1.7 million ($2.1 million). The deposit is in KEMET’s name, and KEMET receives any interest earned by this deposit. However, the deposit is pledged to the European bank, and the bank can use the money if a valid claim against the bank guarantee is made. The bank guarantee will remain valid until it is discharged by the beneficiary.

 

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Fair Value Measurement

 

The Company utilizes three levels of inputs to measure the fair value of (a) nonfinancial assets and liabilities that are recognized or disclosed at fair value in the Company’s consolidated financial statements on a recurring basis (at least annually) and (b) all financial assets and liabilities. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.

 

The first two inputs are considered observable and the last is considered unobservable. The levels of inputs are as follows:

 

·                  Level 1—Quoted prices in active markets for identical assets or liabilities.

 

·                  Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

 

·                  Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

 

Assets and liabilities measured at fair value on a recurring basis as of June 30, 2012 and March 31, 2012 are as follows (amounts in thousands):

 

 

 

Carrying
Value June

 

Fair Value
June 30,

 

Fair Value Measurement Using

 

Carrying
Value
March 31,

 

Fair Value
March 31,

 

Fair Value Measurement Using

 

 

 

30, 2012

 

2012

 

Level 1

 

Level 2 (2)

 

Level 3

 

2012

 

2012

 

Level 1

 

Level 2 (2)

 

Level 3

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money markets (1)

 

$

26,227

 

$

26,227

 

$

26,227

 

$

 

$

 

$

26,215

 

$

26,215

 

$

26,215

 

$

 

$

 

Long-term debt

 

361,286

 

369,349

 

367,425

 

1,924

 

 

347,331

 

362,086

 

358,700

 

3,386

 

 

 


(1)       Included in the line item “Cash and cash equivalents” on the Condensed Consolidated Balance Sheets.

(2)       The valuation approach used to calculate fair value was a discounted cash flow for each respective debt facility.

 

Revenue Recognition

 

A portion of sales is related to products designed to meet customer specific requirements. These products typically have stricter tolerances making them useful to the specific customer requesting the product and to customers with similar or less stringent requirements. The Company recognizes revenue when title to the products transfers to the customer.

 

A portion of sales is made to distributors under agreements allowing certain rights of return and price protection on unsold merchandise held by distributors. The Company’s distributor policy includes inventory price protection and “ship-from-stock and debit” (“SFSD”) programs common in the industry.

 

The SFSD program provides a mechanism for the distributor to meet a competitive price after obtaining authorization from the Company’s local sales office. This program allows the distributor to ship its higher-priced inventory and debit the Company for the difference between KEMET’s list price and the lower authorized price for that specific transaction. Management analyzes historical SFSD activity to determine the SFSD exposure on the global distributor inventory at the balance sheet date.  The establishment of these reserves is recognized as a component of the line item “Net sales” on the Condensed Consolidated Statements of Operations, while the associated reserves are included in the line item “Accounts receivable, net” on the Condensed Consolidated Balance Sheets.

 

The Company provides a limited warranty to customers that the Company’s products meet certain specifications. The warranty period is generally limited to one year, and the Company’s liability under the warranty is generally limited to a replacement of the product or refund of the purchase price of the product. Warranty costs as a percentage of net sales were less than 1% for the quarters ended June 30, 2012 and 2011. The Company recognizes warranty costs when they are both probable and reasonably estimable.

 

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Table of Contents

 

Use of Estimates and Assumptions

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, assumptions, and judgments. Estimates and assumptions are based on historical data and other assumptions that management believes are reasonable.  These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements. In addition, they affect the reported amounts of revenues and expenses during the reporting period.

 

The Company’s judgments are based on management’s assessment as to the effect certain estimates, assumptions, or future trends or events may have on the financial condition and results of operations reported in the unaudited condensed consolidated financial statements. It is important that readers of these unaudited financial statements understand that actual results could differ from these estimates, assumptions, and judgments.

 

Inventories

 

Inventories are stated at the lower of cost or market.  The components of inventories are as follows (amounts in thousands):

 

 

 

June 30,
2012

 

March 31,
2012

 

Raw materials and supplies

 

$

86,673

 

$

86,845

 

Work in process

 

82,513

 

72,411

 

Finished goods

 

64,343

 

70,122

 

 

 

233,529

 

229,378

 

Inventory reserves

 

(17,226

)

(17,144

)

 

 

$

216,303

 

$

212,234

 

 

Note 2. Debt

 

A summary of debt is as follows (amounts in thousands):

 

 

 

June 30,
2012

 

March 31,
2012

 

10.5% Senior Notes, net of premium of $4,210 and $3,539 as of June 30, 2012 and March 31, 2012, respectively

 

$

359,210

 

$

343,539

 

Other

 

2,076

 

3,792

 

Total debt

 

361,286

 

347,331

 

Current maturities

 

(1,535

)

(1,951

)

Total long-term debt

 

$

359,751

 

$

345,380

 

 

The line item “Interest expense” on the Condensed Consolidated Statements of Operations for the quarters ended June 30, 2012 and 2011, is as follows (amounts in thousands):

 

 

 

Quarters Ended June 30,

 

 

 

2012

 

2011

 

Contractual interest expense

 

$

9,486

 

$

6,356

 

Amortization of debt issuance costs

 

426

 

276

 

Amortization of debt (premium) discount

 

(153

)

656

 

Imputed interest on acquisition related obligations

 

698

 

112

 

 

 

$

10,457

 

$

7,400

 

 

10.5% Senior Notes

 

On May 5, 2010, the Company completed a private placement of $230.0 million in aggregate principal amount of the Company’s 10.5% Senior Notes due 2018 (the “10.5% Senior Notes”).  On March 27, 2012 and April 3, 2012, the Company completed the sale of $110.0 million and $15.0 million aggregate principal amount of its 10.5% Senior Notes due 2018, respectively,  at an issue price of 105.5% of the principal amount plus accrued interest from November 1, 2011. The Senior Notes were issued as

 

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Table of Contents

 

additional notes under the indenture, dated May 5, 2010, among the Company, the guarantors party thereto and Wilmington Trust Company, as trustee. Debt issuance costs related to the 10.5% Senior Notes, net of amortization, were $7.7 million as of June 30, 2012; these costs are being amortized over the term of the 10.5% Senior Notes.  Debt premium related to the 10.5% Senior Notes as of June 30, 2012 were $4.2 million which will be amortized over the term of the 10.5% Senior Notes.

 

The Company had interest payable related to the 10.5% Senior Notes included in the line item “Accrued expenses” on its Condensed Consolidated Balance Sheets of $6.2 million and $14.7 million at June 30, 2012 and March 31, 2012, respectively.

 

Revolving Line of Credit

 

On September 30, 2010, KEMET Electronics Corporation (“KEC”) and KEMET Electronics Marketing (S) Pte Ltd. (“KEMET Singapore”) (each a “Borrower” and, collectively, the “Borrowers”) entered into a Loan and Security Agreement (the “Loan and Security Agreement”), with Bank of America, N.A, as the administrative agent and the initial lender. The Loan and Security Agreement provides a $50 million revolving line of credit, which is bifurcated into a U.S. facility (for which KEC is the Borrower) and a Singapore facility (for which KEMET Singapore is the Borrower).  The size of the U.S. facility and Singapore facility can fluctuate as long as the Singapore facility does not exceed $30 million and the total facility does not exceed $50 million.  A portion of the U.S. facility and of the Singapore facility can be used to issue letters of credit.  The facilities expire on September 30, 2014.

 

Debt issuance costs related to the Loan and Security Agreement, net of amortization, were $0.9 million as of June 30, 2012 and March 31, 2012.  These costs are being amortized over the term of the Loan and Security Agreement.  There were no borrowings against the Loan and Security Agreement as of June 30, 2012 and March 31, 2012.

 

Note 3. Restructuring Charges

 

A summary of the expenses aggregated on the Condensed Consolidated Statements of Operations line item “Restructuring charges” in the quarters ended June 30, 2012 and 2011, is as follows (amounts in thousands):

 

 

 

Quarters Ended June 30,

 

 

 

2012

 

2011

 

Cost of relocating manufacturing equipment

 

$

146

 

$

747

 

Personnel reduction costs

 

1,118

 

278

 

 

 

$

1,264

 

$

1,025

 

 

Quarter Ended June 30, 2012

 

In fiscal year 2010, the Company initiated the first phase of a plan to restructure the Film and Electrolytic Business Group (“Film and Electrolytic”) and to reduce overhead within the Company as a whole.  The restructuring plan includes implementing programs to make the Company more competitive, removing excess capacity, moving production to lower cost locations and eliminating unnecessary costs throughout the Company.  Restructuring charges in the quarter ended June 30, 2012 relate to this plan and are primarily comprised of termination benefits associated with converting the Weymouth, United Kingdom manufacturing facility into a technology center.  The total termination benefits expected for this conversion are $2.6 million and are expected to be completed in the third quarter of fiscal year 2014. In addition to these personnel reduction costs, the Company incurred manufacturing relocation costs of $0.2 million for relocation of equipment to China and Macedonia.

 

Quarter Ended June 30, 2011

 

Restructuring charges in the quarter ended June 30, 2011 were primarily comprised of manufacturing relocation costs of $0.7 million for relocation of equipment from Italy to Mexico and China. In addition, the Company incurred $0.3 million in personnel reduction costs due primarily to headcount reductions related to the Company’s initiative to reduce overhead within the Company as a whole.

 

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Table of Contents

 

Reconciliation of restructuring liability

 

A reconciliation of the beginning and ending liability balances for restructuring charges included in the line items “Accrued expenses” and “Other non-current obligations” on the Condensed Consolidated Balance Sheets are as follows (amounts in thousands):

 

 

 

Quarter Ended June 30, 2012

 

Quarter Ended June 30, 2011

 

 

 

Personnel

 

Manufacturing

 

Personnel

 

Manufacturing

 

 

 

Reductions

 

Relocations

 

Reductions

 

Relocations

 

Beginning of period

 

$

11,474

 

$

 

$

1,827

 

$

 

Costs charged to expense

 

1,118

 

146

 

278

 

747

 

Costs paid or settled

 

(803

)

(146

)

(377

)

(747

)

Change in foreign exchange

 

(605

)

 

23

 

 

End of period

 

$

11,184

 

$

 

$

1,751

 

$

 

 

Note 4. Comprehensive Income (Loss) and Accumulated Other Comprehensive Income (Loss)

 

Comprehensive income (loss) for the quarters ended June 30, 2012 and 2011 includes the following components (amounts in thousands):

 

 

 

Quarter Ended June 30,

 

 

 

2012

 

2011

 

Net income (loss)

 

$

(17,753

)

$

31,849

 

 

 

 

 

 

 

 

 

Currency translation gain (loss)(1)

 

(7,966

)

3,105

 

Amortization of defined benefit pension plans

 

102

 

115

 

Amortization of postretirement benefit plan

 

71

 

(71

)

 

 

$

(25,546

)

$

34,998

 

 


(1) Due primarily to the Company’s permanent re-investment assertion relating to foreign earnings, there was no significant deferred tax effect associated with the cumulative currency translation gains and losses during the quarters ended June 30, 2012 and 2011.

 

The components of “Accumulated other comprehensive income” on the Condensed Consolidated Balance Sheets are as follows (amounts in thousands):

 

 

 

June 30, 2012

 

March 31, 2012

 

Foreign currency translation gain

 

$

10,141

 

$

18,107

 

Defined benefit postretirement plan adjustments

 

2,066

 

1,995

 

Defined benefit pension plans

 

(7,980

)

(8,082

)

 

 

$

4,227

 

$

12,020

 

 

Note 5. Acquisitions

 

Cornell Dubilier Foil, LLC

 

On June 13, 2011, the Company completed its acquisition of Cornell Dubilier Foil, LLC (whose name was subsequently changed to KEMET Foil Manufacturing, LLC (“KEMET Foil”)), a Tennessee based manufacturer of etched foils utilized as a core component in the manufacture of aluminum electrolytic capacitors. The purchase price was $15 million plus a $0.5 million working capital adjustment, of which $11.6 million (net of cash received) was paid at closing and $1.0 million was paid on the first anniversary of the closing date and $1.0 million is to be paid on each of the next two anniversaries of the closing date. The Company recorded goodwill of $1.1 million and amortizable intangibles of $1.6 million. The allocation of the purchase price to specific assets and liabilities was based on the relative fair value of all assets and liabilities. Factors contributing to the purchase price which resulted in the goodwill (which is tax deductible) include the trained workforce. Pro forma results are not presented because the acquisition was not material to the consolidated financial statements. KEMET Foil is included within Film and Electrolytic.

 

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Table of Contents

 

The total discounted purchase price for KEMET Foil was $15.3 million and is comprised of (amounts in thousands):

 

Cash at closing

 

$

12,000

 

Deferred payments (discounted)

 

2,815

 

Working capital adjustment

 

526

 

 

 

$

15,341

 

 

The purchase price was determined through arms-length negotiations between representatives of the Company and Cornell Dubilier Marketing, Inc.

 

The following table presents the final allocations of the aggregate purchase price based on the assets and liabilities estimated fair values (amounts in thousands): 

 

 

 

Fair Value

 

Cash

 

$

416

 

Accounts receivable

 

2,577

 

Inventories

 

3,382

 

Other current assets

 

84

 

Property, plant and equipment

 

9,534

 

Goodwill

 

1,092

 

Intangible assets

 

1,660

 

Current liabilities

 

(3,404

)

Total net assets acquired

 

$

15,341

 

 

Niotan Incorporated

 

On February 21, 2012, KEMET acquired all of the outstanding shares of Niotan Incorporated, whose name was subsequently changed to KEMET Blue Powder Corporation (“Blue Powder”), a leading manufacturer of tantalum powders, from an affiliate of Denham Capital Management LP. Blue Powder has its headquarters and principal operating location in Carson City, Nevada. KEMET paid an initial purchase price of $30.5 million (net of cash received) at the closing of the transaction. Additional deferred payments of $45 million are payable over a thirty-month period after the closing and a working capital adjustment of $0.4 million which was paid in April 2012. KEMET will also be required to make quarterly royalty payments for tantalum powder produced by Blue Powder, in an aggregate amount equal to $10 million by December 31, 2014. The Company determined that the royalty payments should be treated as part of the consideration for Blue Powder instead of a separate transaction as it is paid to the selling shareholder who is not continuing with Blue Powder, was based solely on the negotiation process and now KEMET owns the technology. The Company recorded goodwill of $35.6 million and amortizable intangibles of $22.4 million. The allocation of the purchase price to specific assets and liabilities was based on the relative fair value of all assets and liabilities. Factors contributing to the purchase price which resulted in the goodwill (which is not tax deductible) include: market recognition of the world class quality of Niotan’s tantalum powder, the Company’s cost savings due to vertical integration and it provides a constant and reliable supply of tantalum powder. Pro forma results are not presented because the acquisition was not material to the consolidated financial statements. Blue Powder is included within the Tantalum Business Group (“Tantalum”).

 

The total discounted purchase price for Blue Powder was $82.0 million which includes (amounts in thousands):

 

Cash at closing

 

$

30,656

 

Deferred payments (discounted)

 

41,938

 

Royalty payments (discounted)

 

8,975

 

Working capital adjustment

 

421

 

 

 

$

81,990

 

 

The purchase price was determined through arms-length negotiations between representatives of the Company and Denham Capital Management LP.

 

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Table of Contents

 

The following table presents the preliminary allocations of the aggregate purchase price based on the assets and liabilities estimated fair values (amounts in thousands):

 

 

 

Fair Value

 

Cash

 

$

153

 

Accounts receivable

 

479

 

Prepaid expenses

 

186

 

Inventories

 

7,305

 

Property, plant and equipment

 

15,122

 

Goodwill

 

35,584

 

Intangible assets

 

22,420

 

Deferred income taxes

 

311

 

Other noncurrent assets

 

1,303

 

Current liabilities

 

(873

)

Total net assets acquired

 

$

81,990

 

 

The allocation of the purchase price is preliminary as the Company is still evaluating the inventory valuation and tax attributes of the transaction.

 

The following table presents the amounts assigned to intangible assets (amounts in thousands except useful life data):

 

 

 

Fair

 

Useful

 

 

 

Value

 

Life (years)

 

Developed technology

 

$

22,300

 

18

 

Software

 

120

 

4

 

 

 

$

22,420

 

 

 

 

The useful life for developed technology is 18 years which is based on the history of the underlying chemical processes and an estimate of the future. The Company also considered that the technology was completed approximately 4 years ago and considered functional obsolescence. The useful life for software is based upon its completion in 2011 and taking into consideration functional obsolescence.

 

Note 6. Goodwill and Intangible Assets

 

The following table highlights the Company’s goodwill and intangible assets (amounts in thousands):

 

 

 

June 30, 2012

 

March 31, 2012

 

 

 

Carrying

 

Accumulated

 

Carrying

 

Accumulated

 

 

 

Amount

 

Amortization

 

Amount

 

Amortization

 

Indefinite Lived Intangible Assets:

 

 

 

 

 

 

 

 

 

Goodwill

 

$

36,676

 

$

 

$

36,676

 

$

 

Trademarks

 

7,644

 

 

7,644

 

 

Unamortized intangible assets

 

44,320

 

 

44,320

 

 

 

 

 

 

 

 

 

 

 

 

Amortized Intangibles:

 

 

 

 

 

 

 

 

 

Customer relationships, patents and other (3-18 years)

 

42,702

 

9,944

 

43,813

 

9,930

 

 

 

$

87,022

 

$

9,944

 

$

88,133

 

$

9,930

 

 

The Company has initiated its annual impairment test on indefinite lived intangible assets.  The annual testing date is May 31st and the Company expects to complete the testing during the second quarter of fiscal year 2013.  The Company does not anticipate that the testing will result in any impairment charges.

 

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Table of Contents

 

Note 7. Segment and Geographic Information

 

The Company is organized into three business groups: Tantalum, the Ceramic Business Group (“Ceramic”), and Film and Electrolytic. Each business group is responsible for the operations of certain manufacturing sites as well as all related research and development efforts. The sales and marketing functions are shared by the business groups and are allocated to each business group based on the business group’s respective budgeted net sales. In addition, all corporate costs are allocated to the business groups based on the business group’s respective budgeted net sales.

 

Tantalum

 

Tantalum operates in seven manufacturing sites in the United States, Mexico, China and Portugal. This business group produces tantalum and aluminum polymer capacitors and produces tantalum powder used in the production of tantalum capacitors. Tantalum shares with Ceramic the Company’s product innovation center in the United States.  Tantalum products are sold in all regions of the world.

 

Ceramic

 

Ceramic operates in two manufacturing sites in Mexico and a manufacturing site in China. This business group produces ceramic capacitors. The business group shares with Tantalum the Company’s product innovation center in the United States. In addition, Ceramic maintains a design and manufacturing plant for electrical transformers, inductors, chokes, coils and filters in the United States. Ceramic products are sold in all regions of the world.

 

Film and Electrolytic

 

Film and Electrolytic operates in fourteen manufacturing sites in Europe, Asia and North America. This business group produces film, paper, and electrolytic capacitors. Film and Electrolytic also operates a machinery division located in Sasso Marconi, Italy that provides automation solutions for the manufacture, processing and assembly of metalized films, film/foil and electrolytic capacitors; and designs, assembles and installs automation solutions for the production of energy storage devices. In addition, the business group has a product innovation center in Sweden. Film and Electrolytic products are sold in all regions of the world.

 

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Table of Contents

 

The following table reflects each business group’s net sales, operating income (loss), depreciation and amortization expenses and sales by region for the quarters ended June 30, 2012 and 2011 (amounts in thousands):

 

 

 

Quarters Ended June 30,

 

 

 

2012

 

2011

 

Net sales:

 

 

 

 

 

Tantalum

 

$

109,199

 

$

122,443

 

Ceramic

 

51,545

 

59,378

 

Film and Electrolytic

 

62,888

 

108,035

 

 

 

$

223,632

 

$

289,856

 

 

 

 

 

 

 

Operating income (loss) (1):

 

 

 

 

 

Tantalum

 

$

2,483

 

$

17,414

 

Ceramic

 

6,597

 

10,860

 

Film and Electrolytic

 

(13,125

)

12,568

 

 

 

$

(4,045

)

$

40,842

 

 

 

 

 

 

 

Depreciation and amortization expenses:

 

 

 

 

 

Tantalum

 

$

5,812

 

$

6,208

 

Ceramic

 

2,065

 

1,803

 

Film and Electrolytic

 

3,779

 

3,148

 

 

 

$

11,656

 

$

11,159

 

 

 

 

 

 

 

Sales by region:

 

 

 

 

 

North and South America (“Americas”)

 

$

60,485

 

$

72,759

 

Europe, Middle East, Africa (“EMEA”)

 

79,385

 

102,712

 

Asia and Pacific Rim (“APAC”)

 

83,762

 

114,385

 

 

 

$

223,632

 

$

289,856

 

 


(1)   Restructuring charges included in Operating income (loss) are as follows (amounts in thousands):

 

 

 

Quarters Ended June 30,

 

 

 

2012

 

2011

 

Total restructuring:

 

 

 

 

 

Tantalum

 

$

44

 

$

35

 

Ceramic

 

98

 

38

 

Film and Electrolytic

 

1,122

 

952

 

 

 

$

1,264

 

$

1,025

 

 

The following table reflects each business group’s total assets as of June 30, 2012 and March 31, 2012 (amounts in thousands):

 

 

 

June 30, 2012

 

March 31, 2012

 

Total assets:

 

 

 

 

 

Tantalum

 

$

535,099

 

$

511,193

 

Ceramic

 

191,742

 

201,971

 

Film and Electrolytic

 

229,929

 

262,388

 

 

 

$

956,770

 

$

975,552

 

 

Note 8.  Defined Benefit Pension and Other Postretirement Benefit Plans

 

The Company sponsors defined benefit pension plans which include seven plans in Europe, one plan in Singapore and two plans in Mexico and a postretirement plan in the United States.  Costs recognized for these benefit plans are recorded using estimated amounts, which may change as actual costs for the fiscal year are determined.

 

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Table of Contents

 

The components of net periodic benefit costs relating to the Company’s pension and other postretirement benefit plans are as follows for the quarters ended June 30, 2012 and 2011 (amounts in thousands):

 

 

 

Pension

 

Postretirement Benefit Plans

 

 

 

Quarters Ended June 30,

 

Quarters Ended June 30,

 

 

 

2012

 

2011

 

2012

 

2011

 

Net service cost

 

$

414

 

$

331

 

$

 

$

 

Interest cost

 

494

 

533

 

9

 

14

 

Expected return on net assets

 

(172

)

(175

)

 

 

Amortization:

 

 

 

 

 

 

 

 

 

Actuarial (gain) loss

 

130

 

96

 

(72

)

(71

)

Prior service cost

 

6

 

6

 

 

 

 

 

 

 

 

 

 

 

 

 

Total net periodic benefit (income) costs

 

$

872

 

$

791

 

$

(63

)

$

(57

)

 

In fiscal year 2013, the Company expects to contribute up to $2.4 million to the pension plans of which the Company has contributed $0.5 million as of June 30, 2012.  The Company’s policy is to pay benefits as costs are incurred for the postretirement benefit plans.

 

Note 9. Stock-based Compensation

 

Stock Options

 

At June 30, 2012, the Company had four stock option plans that reserved shares of common stock for issuance to executives and key employees: the 1992 Key Employee Stock Option Plan, the 1995 Executive Stock Option Plan, the 2004 Long-Term Equity Incentive Plan (collectively, the “Prior Plans”) and the 2011 Omnibus Equity Incentive Plan (the “2011 Incentive Plan”). All of these plans were approved by the Company’s stockholders. The 2011 Incentive Plan has authorized the grant of up to 4.8 million shares of the Company’s common stock, which is comprised of 4.0 million shares under the new plan and 0.8 million shares which remained under the Prior Plans. The 2011 Incentive Plan authorizes the Company to provide equity-based compensation in the form of (1) stock options, including incentive stock options, entitling the optionee to favorable tax treatment under Section 422 of the Code; (2) stock appreciation rights; (3) restricted stock and restricted stock units; (4) other share-based awards; and (5) performance awards.  Options issued under these plans vest within one to three years and expire ten years from the grant date.  Stock options granted to the Company’s Chief Executive Officer on January 27, 2010 vest 50% on June 30, 2014 and 50% on June 30, 2015.  If available, the Company issues shares of Common Stock from treasury stock upon exercise of stock options and vesting of restricted stock units.

 

Restricted Stock

 

The Company grants shares of its common stock as restricted stock to members of the Board of Directors, the Chief Executive Officer and a group of 15 executives. Restricted stock and restricted stock units granted to the Board of Directors vest within one year. Restricted stock granted to the Chief Executive Officer on January 27, 2010 vests 50% on June 30, 2014 and 50% on June 30, 2015 while restricted stock granted on March 28, 2012 vests on June 30, 2017.  Once vested, restricted shares cannot be sold until 90 days after the Chief Executive Officer, the executive or the member of the Board of Directors resigns from his or her position.  Restricted stock granted to the group of 15 executives vests 25% per year over four years. In the third quarter of fiscal year 2012, 50 thousand shares of restricted stock units were granted to the non-management members of the Board of Directors.  As of June 30, 2012, there was $2.7 million in unrecognized compensation costs related to the unvested restricted stock based compensation arrangements granted.

 

Long Term Incentive Plans

 

The Company has various long term incentive plans (“LTIP”), the 2013/2014 Plan is 60% based upon the achievement of an Adjusted EBITDA target over a two year period.  For the performance portion of the 2013/2014 LTIP, participants will receive 50% in cash, which, if earned, will be distributed after the end of the two-year measurement period, and 50% in restricted stock units which, if earned, will be distributed 50% after the end of the two-year measurement period and 50% one year after the end of the two-year measurement period.   The remaining 40% of the award is in the form of time-based restricted stock units which will vest one-third per calender year 2013, 2014 and 2015.  The Company assesses the likelihood of meeting the Adjusted EBITDA financial metric on a quarterly basis.  In the quarters ended June 30, 2012 and June 30, 2011, the Company recorded an expense of $0.3 million and $0.8 million, respectively.  The Company will continue to monitor the likelihood of whether the Adjusted EBITDA financial metric will be realized and will adjust compensation expense to match expectations.

 

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Table of Contents

 

The compensation expense associated with stock-based compensation for the quarters ended June 30, 2012 and 2011 are recorded on the Condensed Consolidated Statements of Operations as follows (amounts in thousands):

 

 

 

Quarter Ended June 30, 2012

 

Quarter Ended June 30, 2011

 

 

 

Stock
Options

 

Restricted
Stock

 

LTIPs

 

Stock
Options

 

Restricted
Stock

 

LTIPs

 

Cost of sales

 

$

212

 

$

121

 

$

68

 

$

84

 

$

 

$

165

 

Selling, general and administrative expenses

 

254

 

398

 

173

 

147

 

135

 

660

 

Research and development

 

18

 

 

20

 

 

 

 

 

 

$

484

 

$

519

 

$

261

 

$

231

 

$

135

 

$

825

 

 

In the “Operating activities” section of the Condensed Consolidated Statements of Cash Flows, stock-based compensation expense was treated as an adjustment to Net income (loss) for the quarters ended June 30, 2012 and 2011. Approximately 21 thousand and 9 thousand stock options were exercised in the quarters ended June 30, 2012 and 2011, respectively.

 

Note 10. Income Taxes

 

During the first quarter of fiscal year 2013, the Company incurred $1.8 million of income tax expense which is comprised of $1.7 million related to income taxes for foreign operations and $0.1 million of state income tax expense.  There is no U.S. federal income tax benefit from the first quarter of fiscal year 2013 loss due to a valuation allowance on deferred tax assets.

 

During the first quarter of fiscal year 2012, the Company incurred $1.7 million of income tax expense which was comprised of $2.5 million of income tax expense from foreign operations, $0.1 million of state income tax expense, and a $(0.9) million U.S. federal income tax benefit related to a prior year settlement. There was no U.S. federal income tax expense related to the first quarter of fiscal year 2012 earnings due to the utilization of net operating loss carryforward deductions and a valuation allowance on net deferred tax assets.

 

Note 11. Reconciliation of Basic and Diluted Net Income (Loss) Per Common Share

 

The following table presents a reconciliation of basic EPS to diluted EPS (amounts in thousands, except per share data):

 

 

 

Quarters Ended June 30,

 

 

 

2012

 

2011

 

Numerator:

 

 

 

 

 

Net income (loss)

 

$

(17,753

)

$

31,849

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

Weighted-average shares outstanding:

 

 

 

 

 

Basic

 

44,808

 

39,452

 

Assumed conversion of employee stock options

 

 

365

 

Assumed conversion of warrants

 

 

12,521

 

Diluted

 

44,808

 

52,338

 

 

 

 

 

 

 

Net income (loss) per share:

 

 

 

 

 

Basic

 

$

(0.40

)

$

0.81

 

Diluted

 

$

(0.40

)

$

0.61

 

 

Common stock equivalents that could potentially dilute net income (loss) per basic share in the future, but were not included in the computation of diluted earnings per share because the impact would have been antidilutive, are as follows (amounts in thousands):

 

 

 

Quarters Ended June 30,

 

 

 

2012

 

2011

 

Assumed conversion of employee stock options

 

1,469

 

704

 

Assumed conversion of warrants

 

7,160

 

 

 

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Table of Contents

 

Note 12.  Stockholders’ Equity

 

Concurrent with the consummation of a tender offer in May 2009, the Company issued K Financing, LLC (“K Financing”) a warrant (the “Platinum Warrant”) to purchase up to 26,848,484 shares of the Company’s common stock, subject to certain adjustments, representing approximately 49.9% of the Company’s outstanding common stock at the time of issuance on a post-exercise basis. The Platinum Warrant was subsequently transferred to K Equity, LLC (“K Equity”). The Platinum Warrant may be exercised in exchange for cash, by cashless exercise to the extent of appreciation in the value of the Company’s common stock above the exercise price of the Platinum Warrant, or by combination of the preceding alternatives.

 

On December 20, 2010, K Equity sold a portion of the Platinum Warrant equal to 10,893,608 shares which was exercised on a net exercise basis and the resulting 10,000,000 shares of which were sold by underwriters. On May 31, 2011, K Equity sold a portion of the Platinum Warrant equal to 7,538,061 shares which was exercised on a net exercise basis and the resulting 7,000,000 shares of which were sold by underwriters, leaving a remainder of 8,416,815 shares subject to the Platinum Warrant.

 

Note 13. Concentrations of Risks

 

Sales and Credit Risks

 

The Company sells to customers globally.  Credit evaluations of the Company’s customers’ financial condition are performed periodically, and the Company generally does not require collateral from its customers.  One customer, TTI, Inc., accounted for over 10% of the Company’s net sales in the quarters ended June 30, 2012 and 2011.  There were no customers’ accounts receivable balances exceeding 10% of gross accounts receivable at June 30, 2012 or March 31, 2012.

 

Electronics distributors are an important distribution channel in the electronics industry and accounted for 46% and 45% of the Company’s net sales in the quarters ended June 30, 2012 and 2011, respectively.  As a result of the Company’s concentration of sales to electronics distributors, the Company may experience fluctuations in the Company’s operating results as electronics distributors experience fluctuations in end-market demand or adjust their inventory stocking levels.

 

Employee Risks

 

As of June 30, 2012, KEMET had approximately 10,200 employees in the following locations:

 

Mexico

 

5,000

 

Asia

 

2,600

 

Europe

 

2,000

 

United States

 

600

 

 

The number of employees represented by labor organizations at KEMET locations in each of the following countries is:

 

Mexico

 

3,300

 

Italy

 

350

 

Bulgaria

 

250

 

Indonesia

 

250

 

China

 

200

 

Finland

 

200

 

Portugal

 

100

 

Sweden

 

100

 

 

For fiscal year 2012 and the current fiscal year to date, the Company has not experienced any major work stoppages. The Company’s labor costs in Mexico, Asia and various locations in Europe are denominated in local currencies, and a significant depreciation or appreciation of the United States dollar against the local currencies would increase or decrease labor costs.

 

Note 14. Condensed Consolidating Financial Statements

 

The 10.5% Senior Notes are fully and unconditionally guaranteed, jointly and severally, on a senior basis by certain of the Company’s 100% owned domestic subsidiaries (“Guarantor Subsidiaries”) and secured by a first priority lien on 51% of the capital

 

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Table of Contents

 

stock of certain of our foreign restricted subsidiaries (“Non-Guarantor Subsidiaries”).  The Company’s Guarantor Subsidiaries and Non-Guarantor Subsidiaries are not consistent with the Company’s business groups or geographic operations; accordingly this basis of presentation is not intended to present the Company’s financial condition, results of operations or cash flows for any purpose other than to comply with the specific requirements for subsidiary guarantor reporting. We are required to present condensed consolidating financial information in order for the subsidiary guarantors of the Company’s public debt to be exempt from reporting under the Securities Exchange Act of 1934, as amended.

 

Condensed consolidating financial statements for the Company’s Guarantor Subsidiaries and Non-Guarantor Subsidiaries are presented in the following tables (amounts in thousands):

 

Condensed Consolidating Balance Sheet

June 30, 2012

 

 

 

Parent

 

Guarantor
Subsidiaries

 

Non-Guarantor
Subsidiaries

 

Reclassifications
and Eliminations

 

Consolidated

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

8,432

 

$

158,239

 

$

21,175

 

$

 

$

187,846

 

Accounts receivable, net

 

 

43,194

 

62,974

 

 

106,168

 

Intercompany receivable

 

267,797

 

168,956

 

194,111

 

(630,864

)

 

Inventories, net

 

 

127,285

 

89,018

 

 

216,303

 

Prepaid expenses and other

 

276

 

13,346

 

20,838

 

 

34,460

 

Deferred income taxes

 

 

1,889

 

5,069

 

 

6,958

 

Total current assets

 

276,505

 

512,909

 

393,185

 

(630,864

)

551,735

 

Property and equipment, net

 

17

 

113,699

 

196,870

 

 

310,586

 

Investments in subsidiaries

 

444,952

 

440,424

 

(5,324

)

(880,052

)

 

Goodwill

 

 

36,676

 

 

 

36,676

 

Intangible assets, net

 

 

31,264

 

9,138

 

 

40,402

 

Other assets

 

7,735

 

6,173

 

3,463

 

 

17,371

 

Long-term intercompany receivable

 

74,644

 

58,666

 

2,879

 

(136,189

)

 

Total assets

 

$

803,853

 

$

1,199,811

 

$

600,211

 

$

(1,647,105

)

$

956,770

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

$

 

$

25

 

$

1,510

 

$

 

$

1,535

 

Accounts payable, trade

 

 

42,882

 

43,674

 

 

86,556

 

Intercompany payable

 

54,732

 

433,125

 

143,007

 

(630,864

)

 

Accrued expenses

 

22,222

 

14,090

 

33,522

 

 

69,834

 

Income taxes payable

 

(2,962

)

3,050

 

2,098

 

 

2,186

 

Total current liabilities

 

73,992

 

493,172

 

223,811

 

(630,864

)

160,111

 

Long-term debt, less current portion

 

359,211

 

 

540

 

 

359,751

 

Other non-current obligations

 

36,080

 

4,347

 

56,463

 

 

96,890

 

Deferred income taxes

 

 

1,997

 

3,451

 

 

5,448

 

Long-term intercompany payable

 

 

74,644

 

61,545

 

(136,189

)

 

Stockholders’ equity

 

334,570

 

625,651

 

254,401

 

(880,052

)

334,570

 

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

803,853

 

$

1,199,811

 

$

600,211

 

$

(1,647,105

)

$

956,770

 

 

18



Table of Contents

 

Condensed Consolidating Balance Sheet

March 31, 2012

 

 

 

Parent

 

Guarantor
Subsidiaries

 

Non-Guarantor
Subsidiaries

 

Reclassifications
and Eliminations

 

Consolidated

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

7,933

 

$

178,205

 

$

24,383

 

$

 

$

210,521

 

Accounts receivable, net

 

 

42,706

 

62,244

 

 

104,950

 

Intercompany receivable

 

251,970

 

28,002

 

171,921

 

(451,893

)

 

Inventories, net

 

 

121,611

 

90,623

 

 

212,234

 

Prepaid expenses and other

 

306

 

13,537

 

18,416

 

 

32,259

 

Deferred income taxes

 

 

192

 

6,178

 

 

6,370

 

Total current assets

 

260,209

 

384,253

 

373,765

 

(451,893

)

566,334

 

Property and equipment, net

 

20

 

114,615

 

201,213

 

 

315,848

 

Investments in subsidiaries

 

454,517

 

435,970

 

(4,622

)

(885,865

)

 

Goodwill

 

 

36,676

 

 

 

36,676

 

Intangible assets, net

 

 

31,630

 

9,897

 

 

41,527

 

Other assets

 

7,796

 

6,160

 

1,211

 

 

15,167

 

Long-term intercompany receivable

 

79,185

 

62,235

 

1,065

 

(142,485

)

 

Total assets

 

$

801,727

 

$

1,071,539

 

$

582,529

 

$

(1,480,243

)

$

975,552

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

$

 

$

25

 

$

1,926

 

$

 

$

1,951

 

Accounts payable, trade

 

460

 

35,206

 

39,490

 

(752

)

74,404

 

Intercompany payable

 

34,830

 

315,906

 

122,799

 

(473,535

)

 

Accrued expenses

 

30,747

 

23,007

 

35,325

 

 

89,079

 

Income taxes payable

 

(2,778

)

3,031

 

2,003

 

 

2,256

 

Total current liabilities

 

63,259

 

377,175

 

201,543

 

(474,287

)

167,690

 

Long-term debt, less current portion

 

343,539

 

 

1,841

 

 

345,380

 

Other non-current obligations

 

35,933

 

5,400

 

59,896

 

 

101,229

 

Deferred income taxes

 

 

272

 

1,985

 

 

2,257

 

Long-term intercompany payable

 

 

79,185

 

63,300

 

(142,485

)

 

Stockholders’ equity

 

358,996

 

609,507

 

253,964

 

(863,471

)

358,996

 

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

801,727

 

$

1,071,539

 

$

582,529

 

$

(1,480,243

)

$

975,552

 

 

19



Table of Contents

 

Condensed Consolidating Statement of Operations

For the Quarter Ended June 30, 2012

 

 

 

Parent

 

Guarantor
Subsidiaries

 

Non-Guarantor
Subsidiaries

 

Reclassifications
and Eliminations

 

Consolidated

 

Net sales

 

$

 

$

240,944

 

$

228,715

 

$

(246,027

)

$

223,632

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

418

 

218,318

 

207,577

 

(234,992

)

191,321

 

Selling, general and administrative expenses

 

1,605

 

20,743

 

15,942

 

(11,035

)

27,255

 

Research and development

 

41

 

5,288

 

2,404

 

 

7,733

 

Restructuring charges

 

 

163

 

1,101

 

 

1,264

 

Net (gain) loss on sales and disposals of assets

 

 

33

 

71

 

 

104

 

Total operating costs and expenses

 

2,064

 

244,545

 

227,095

 

(246,027

)

227,677

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

(2,064

)

(3,601

)

1,620

 

 

(4,045

)

 

 

 

 

 

 

 

 

 

 

 

 

Other (income) expense, net

 

10,187

 

3,159

 

(1,409

)

 

11,937

 

Equity in losses of subsidiaries

 

5,502

 

 

 

(5,502

)

 

Income before income taxes

 

(17,753

)

(6,760

)

3,029

 

5,502

 

(15,982

)

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

 

60

 

1,711

 

 

1,771

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(17,753

)

$

(6,820

)

$

1,318

 

$

5,502

 

$

(17,753

)

 

20



Table of Contents

 

Condensed Consolidating Statement of Operations

For the Quarter Ended June 30, 2011

 

 

 

Parent

 

Guarantor
Subsidiaries

 

Non-Guarantor
Subsidiaries

 

Reclassifications
and Eliminations

 

Consolidated

 

Net sales

 

$

 

$

269,687

 

$

280,022

 

$

(259,853

)

$

289,856

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

162

 

226,408

 

234,568

 

(250,634

)

210,504

 

Selling, general and administrative expenses

 

11,449

 

15,715

 

12,094

 

(8,982

)

30,276

 

Research and development

 

 

5,027

 

2,059

 

 

7,086

 

Restructuring charges

 

 

481

 

544

 

 

1,025

 

Net (gain) loss on sales and disposals of assets

 

3

 

19

 

101

 

 

123

 

Total operating costs and expenses

 

11,614

 

247,650

 

249,366

 

(259,616

)

249,014

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

(11,614

)

22,037

 

30,656

 

(237

)

40,842

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

(4

)

(17

)

(22

)

 

(43

)

Interest expense

 

7,103

 

74

 

223

 

 

7,400

 

Other (income) expense, net

 

(11,544

)

7,987

 

3,393

 

69

 

(95

)

Equity in earnings of subsidiaries

 

(38,080

)

 

 

38,080

 

 

Income before income taxes

 

30,911

 

13,993

 

27,062

 

(38,386

)

33,580

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

(938