Attached files
| file | filename |
|---|---|
| EX-99.4 - EXHIBIT 99.4 - KEMET CORP | a018-01x30kemet_novasentis.htm |
| EX-99.3 - EXHIBIT 99.3 - KEMET CORP | a018-01x30jianghiarelease.htm |
| EX-99.1 - EXHIBIT 99.1 - KEMET CORP | fy2018_q3xex991xearningsre.htm |
| 8-K - 8-K - KEMET CORP | fy2018_q3x8kxearningsrelea.htm |
Third Quarter
Earnings Conference Call
February 1, 2018
Quarter Ended December 31, 2017
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 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 and cause a write down of long-lived assets
or goodwill; (ii) an increase in the cost or a decrease in the availability of our principal or single-sourced purchased raw materials; (iii) changes in the
competitive environment; (iv) uncertainty of the timing of customer product qualifications in heavily regulated industries; (v) economic, political, or regulatory
changes in the countries in which we operate; (vi) difficulties, delays or unexpected costs in completing the restructuring plans; (vii) acquisitions and other
strategic transactions expose us to a variety of risks; (viii) acquisition of TOKIN may not achieve all of the anticipated results; (ix) our business could be
negatively impacted by increased regulatory scrutiny and litigation; (x) difficulties associated with retaining, attracting and training effective employees and
management; (xi) the need to develop innovative products to maintain customer relationships and offset potential price erosion in older products; (xii)
exposure to claims alleging product defects; (xiii) the impact of laws and regulations that apply to our business, including those relating to environmental
matters and cyber security; (xiv) the impact of international laws relating to trade, export controls and foreign corrupt practices; (xv) changes impacting
international trade and corporate tax provisions related to the global manufacturing and sales of our products may have an adverse effect on our financial
condition and results of operations; (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 could limit our flexibility in operating our business; (xx) disruption to our information technology systems to function properly
or control unauthorized access to our systems may cause business disruptions; (xxi) fluctuation in distributor sales could adversely affect our results of
operations; and (xxii) earthquakes and other natural disasters could disrupt our operations and have a material adverse effect on our financial condition
and results of operations.
Our acquisition accounting, including the acquisition gains, are preliminary as management continues to evaluate the fair value of the net assets
acquired and consideration transferred. In addition, the allocation of the purchase price is based on estimates and assumption that are subject to
change with the measurement period.
2
Income Statement Highlights
U.S. GAAP (Unaudited)
3
For the Quarters Ended
(Amounts in thousands, except percentages and per share data) Dec 2017 Sep 2017 Dec 2016
Net sales $ 306,408 $ 301,471 $ 188,029
Gross margin (1) $ 92,461 $ 85,076 $ 47,478
Gross margin as a percentage of net sales 30.2% 28.2% 25.3%
Selling, general and administrative (1) $ 47,751 $ 42,417 $ 26,520
SG&A as a percentage of net sales 15.6% 14.1% 14.1%
Operating income (loss) (1) $ 32,077 $ 31,643 $ 14,182
Net income (loss) $ 18,641 $ 12,849 $ 12,278
Per basic and diluted share data:
Net income (loss) per basic share $ 0.33 $ 0.26 $ 0.26
Net income (loss) per diluted share 0.32 0.22 0.22
Weighted avg. shares - basic 56,778 49,819 46,606
Weighted avg. shares - diluted 58,937 58,409 55,296
(1) Quarter ended December 31, 2016 adjusted due to the adoption of Accounting Standards Update ("ASU") No. 2017-07,
Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.
Note: The Company completed its acquisition of TOKIN on April 19, 2017, and as such TOKIN’s results are included in our results for
the quarters ended December 31, 2017 and September 30, 2017. However, for the quarter ended December 31, 2016 our results only
included our 34% equity investment in TOKIN.
Income Statement Highlights
Non-GAAP (Unaudited)
4
For the Quarters Ended
(Amounts in thousands, except percentages and per share data) Dec 2017 Sep 2017 Dec 2016
Net sales $ 306,408 $ 301,471 $ 188,029
Adjusted gross margin (1) $ 92,863 $ 85,418 $ 47,786
Adjusted gross margin as a percentage of net sales 30.3% 28.3% 25.4%
Adjusted selling, general and administrative (1) $ 44,517 $ 38,900 $ 23,504
Adjusted SG&A as a percentage of net sales 14.5% 12.9% 12.5%
Adjusted operating income (loss) (1) $ 38,393 $ 36,902 $ 17,315
Adjusted net income (loss) $ 30,602 $ 26,475 $ 5,810
Adjusted EBITDA $ 49,579 $ 49,918 $ 26,841
Adjusted EBITDA margin as a percentage of net sales 16.2% 16.6% 14.3%
Per share data:
Adjusted net income (loss) - basic $ 0.54 $ 0.53 $ 0.12
Adjusted net income (loss) - diluted $ 0.52 $ 0.45 $ 0.11
Weighted avg. shares - basic 56,778 49,819 46,606
Weighted avg. shares - diluted 58,937 58,409 55,296
(1) Quarter ended December 31, 2016 adjusted due to the adoption of Accounting Standards Update ("ASU") No. 2017-07, Improving the
Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.
Financial Highlights
(Unaudited)
(1) Calculated as accounts receivable, net, plus inventories, net, less accounts payable.
(2) Current quarter's accounts receivable divided by annualized current quarter’s Net sales multiplied by 365.
(3) Current quarter's accounts payable divided by annualized current quarter's cost of goods sold multiplied by 365.
(Amounts in millions, except DSO and DPO) Dec 2017 Sep 2017 FX Impact
Cash, cash equivalents $ 284.2 $ 253.7 $ 1.4
Capital expenditures $ 13.1 $ 10.5
Short-term debt $ 20.4 $ 20.4
Long-term debt 322.1 326.4
Debt (discount)/premium and issuance costs (14.3) (15.0)
Total debt $ 328.2 $ 331.8 $ —
Equity $ 438.0 $ 416.1 $ 7.5
Net working capital (1) $ 208.0 $ 200.8 $ 3.8
Days in receivables (DSO) (2) 42 42
Days in payables (DPO) (3) 57 58
5
Financial Trends
Quarterly Sales Summary
U.S. GAAP (Unaudited)
6
KEMET
Net Sales
310
290
270
250
230
210
190
170
150
130
110
90
70
50
$
(M
illi
on
s)
Dec 2016 Mar 2017 Jun 2017 (1) Sep 2017 Dec 2017
$188 $198
$274
$301 $306
(1) Includes TOKIN revenues beginning April 19, 2017.
Financial Trends
Quarterly Sales Summary
U.S. GAAP (Unaudited)
7
KEMET
Net Sales
300
250
200
$
(M
illi
on
s)
Dec 2016 (1) Mar 2017 (1) Jun 2017 (2) Sep 2017 Dec 2017
$263
$277
$291
$301 $306
(1) The December 2016 and March 2017 quarters are shown on a proforma basis including TOKIN sales of $75 million and $79 million,
respectively.
(2) The June 2017 quarter is shown on a proforma basis including TOKIN as if owned for the entire quarter (acquisition occurred April 19,
2017).
LTM Adjusted EBITDA Margins
Non-GAAP (Unaudited)
8
16.5%
16.0%
15.5%
15.0%
14.5%
14.0%
13.5%
13.0%
Dec
2016
Mar
2017
Jun
2017
Sep
2017
Dec
2017
13.6%
13.9%
14.7%
15.3%
15.8%
LTM Operating Income Margins
U.S. GAAP (Unaudited)
9
10.0%
9.0%
8.0%
7.0%
6.0%
5.0%
4.0%
Dec
2016
Mar
2017
Jun
2017
Sep
2017
Dec
2017
4.8% 4.7%
6.4%
8.6%
9.3%
Note: LTM ended Dec 2016, Mar 2017, Jun 2017 and Sep 2017 adjusted due to the adoption of Accounting Standards Update ("ASU") No.
2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.
Financial Trends
Quarterly Cash and Cash Equivalents
U.S. GAAP (Unaudited)
10
KEMET TOKIN (1)
$300
$270
$240
$210
$180
$150
$120
$90
$60
$30
$0
$
(M
illi
on
s)
Dec 2015 Mar 2016 Jun 2016 Sep 2016 Dec 2016 Mar 2017 Jun 2017 Sep 2017 Dec 2017
$43
$65 $53
$75 $87
$110
$226
$254
$284
$92
$92 $97
$100
$107
$107
(1) TOKIN results exclude the EMD business which was sold on April 14, 2017.
Debt Trend - Q3 FY2018
(Unaudited)
LT Debt ST Debt
Total Debt
$450
$400
$350
$300
$250
$200
$150
$100
$50
$0
$
(M
ill
io
ns
)
Mar
2017
Jun
2017
Sep
2017
Dec
2017
$386
$315 $311 $308
$2
$388
$20
$335
$20
$331
$20
$328
Cash interest ~ $2.1M per month. Principal ~ $4.3M per quarter.
Revolver Facility
$450
$400
$350
$300
$250
$200
$150
$100
$50
$0
$
(M
ill
io
ns
)
Fac
ility
am
oun
t
Bo
rro
win
g B
ase
Dra
wn
$75 $65 $0
Debt Trend - Q3 FY2018
(Unaudited)
11
Leverage
Non-GAAP (Unaudited)
Leverage (Debt/Adjusted EBITDA)
FY15 FY16 FY17 6/30/17 TTM 9/30/17 TTM 12/31/17 TTM
4.2 4.3
3.7
2.7
2.3
1.9
12
Net Debt
(Unaudited)
Net Debt (Debt less Cash on hand)
$
(M
ill
io
ns
)
FY15 FY16 FY17 6/30/17 TTM 9/30/17 TTM 12/31/17 TTM
$331 $323
$278
$110
$78
$44
13
Capacity Summary
• 10% increase in overall capacity
• Anticipated CapEx spend of $20M in FY19 resulting in potential
$100M run rate revenue
– Tantalum – 23% (Polymer)
– Ceramics – 14% (High CV)
– Film – 15% (Automotive)
– Al Electrolytics – 25% (Axial Automotive)
– MSA– 12% (Sensors, Actuator & Materials)
14
Sales Summary - Q3 FY2018
(Unaudited)
15
INDUSTRY
Telecom: 13%
Computer: 20%
Consumer: 15%Ind/Light: 27%
Automotive: 16%
Def: 4%
Med: 5%
CHANNEL
Distributors: 39%
EMS: 13%
OEM: 48%
PRODUCT LINE
TA: 41%
CE: 22%
F&E: 17%
MSA: 20%
REGION
Americas: 21%
EMEA: 22%
JPKO: 16%
APAC: 41%
Adjusted Gross Margin - GAAP Reconciliation
Solid Capacitors (Unaudited)
16
For the Quarters Ended
(Amounts in thousands, except percentages) Dec 2017 Sep 2017 Dec 2016
Net sales $ 195,049 $ 191,267 $ 141,555
Gross margin (U.S. GAAP) (1) 71,241 66,408 43,207
Gross margin as a percentage of net sales 36.5 % 34.7 % 30.5 %
Adjustments:
Stock-based compensation expense 256 233 211
Adjusted gross margin (non-GAAP) $ 71,497 $ 66,641 $ 43,418
Adjusted gross margin as a percentage of net sales 36.7 % 34.8 % 30.7 %
(1) Quarter ended December 31, 2016 adjusted due to the adoption of Accounting Standards Update ("ASU") No.
2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit
Cost.
Adjusted Gross Margin - GAAP Reconciliation
Film & Electrolytics (Unaudited)
17
For the Quarters Ended
(Amounts in thousands, except percentages) Dec 2017 Sep 2017 Dec 2016
Net sales (1) $ 51,300 $ 47,901 $ 46,474
Gross margin (U.S. GAAP) (1) 4,278 3,695 4,271
Gross margin as a percentage of net sales 8.3% 7.7% 9.2%
Adjustments:
Stock-based compensation expense 146 109 97
Adjusted gross margin (non-GAAP) $ 4,424 $ 3,804 $ 4,368
Adjusted gross margin as a percentage of net sales 8.6% 7.9% 9.4%
(1) Quarter ended December 31, 2016 adjusted due to the adoption of Accounting Standards Update ("ASU")
No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement
Benefit Cost.
Gross Margin - U.S. GAAP
Electro-magnetic, Sensors & Actuators(1) (Unaudited)
18
For the Quarters Ended
(Amounts in thousands, except percentages) Dec 2017 Sep 2017 Dec 2016
Net sales $ 60,059 $ 62,303 $ —
Gross margin 16,942 14,973 —
Gross margin as a percentage of net sales 28.2% 24.0% —%
(1) Electro-magnetic, Sensors & Actuators ("MSA") is a new segment which is comprised of TOKIN's electro-magnetically compatible
materials and components, piezo materials and actuators and various types of sensors acquired in connection with the TOKIN acquisition
on April 19, 2017.
Appendix
Adjusted Gross Margin
Non-GAAP (Unaudited)
20
For the Quarters Ended
(Amounts in thousands, except percentages) Dec 2017 Sep 2017 Dec 2016
Net Sales $ 306,408 $ 301,471 $ 188,029
Gross Margin (U.S. GAAP) (1) $ 92,461 $ 85,076 $ 47,478
Gross margin as a percentage of net sales 30.2% 28.2% 25.3%
Adjustments:
Stock-based compensation expense 402 342 308
Adjusted gross margin (non-GAAP) $ 92,863 $ 85,418 $ 47,786
Adjusted gross margin as a percentage of net sales 30.3% 28.3% 25.4%
(1) Quarter ended December 31, 2016 adjusted due to the adoption of Accounting Standards Update ("ASU") No.
2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.
Adjusted Selling, General & Administrative Expenses
Non-GAAP (Unaudited)
21
For the Quarters Ended
(Amounts in thousands, except percentages) Dec 2017 Sep 2017 Dec 2016
Net sales $ 306,408 $ 301,471 $ 188,029
Selling, general and administrative expenses (U.S. GAAP) (1) $ 47,751 $ 42,417 $ 26,520
Selling, general, and administrative as a percentage of net sales 15.6% 14.1% 14.1%
Less adjustments:
ERP integration/IT transition costs — — 1,734
Stock-based compensation expense 1,752 1,142 785
Legal expenses/fines related to antitrust class actions 1,482 2,375 293
TOKIN investment-related expenses — — 204
Adjusted selling, general and administrative expenses (non-
GAAP) $ 44,517 $ 38,900 $ 23,504
Adjusted selling, general, and administrative as a percentage of net sales 14.5% 12.9% 12.5%
(1) Quarter ended December 31, 2016 adjusted due to the adoption of Accounting Standards Update ("ASU") No. 2017-07, Improving the
Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.
Adjusted Operating Income (Loss)
Non-GAAP (Unaudited)
22
For the Quarters Ended
(Amounts in thousands) Dec 2017 Sep 2017 Dec 2016
Operating income (loss) (U.S. GAAP) (1) $ 32,077 $ 31,643 $ 14,182
Adjustments:
Restructuring charges 3,530 1,393 (369)
Legal expenses related to antitrust class actions 1,482 2,375 293
Stock-based compensation expense 2,206 1,530 1,139
(Gain) loss on write-down and disposal of long-lived assets (902) (39) 132
ERP integration/IT transition costs — — 1,734
TOKIN investment-related expenses — — 204
Adjusted operating income (loss) (non-GAAP) $ 38,393 $ 36,902 $ 17,315
(1) Quarter ended December 31, 2016 adjusted due to the adoption of Accounting Standards Update ("ASU") No. 2017-07, Improving the
Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.
Adjusted Net Income (Loss)
Non-GAAP (Unaudited)
For the Quarters Ended
(Amounts in thousands, except per share data) Dec 2017 Sep 2017 Dec 2016
Net income (loss) (U.S. GAAP) $ 18,641 $ 12,849 $ 12,278
Adjustments:
Equity (income) loss from equity method investments (238) (224) 133
Acquisition Gains (310) (1,285) —
Net foreign exchange (gain) loss 2,239 1,891 (2,621)
Restructuring charges 3,530 1,393 (369)
Legal expenses related to antitrust class actions 4,073 10,327 293
Stock-based compensation expense 2,206 1,530 1,139
Amortization included in interest expense 696 664 183
Income tax effect of non-U.S. GAAP adjustments (1) 667 (631) (396)
(Gain) loss on write-down and disposal of long-lived assets (902) (39) 132
Change in value of TOKIN option — — (6,900)
ERP integration/IT transition costs — — 1,734
TOKIN investment-related expenses — — 204
Adjusted net income (loss) (non-GAAP) $ 30,602 $ 26,475 $ 5,810
Adjusted net income (loss) per share - basic $ 0.54 $ 0.53 $ 0.13
Adjusted net income (loss) per share - diluted $ 0.52 $ 0.45 $ 0.11
Adjusted EBITDA (non-GAAP) $ 49,579 $ 49,918 $ 26,841
Weighted avg. shares - basic 56,778 49,819 46,606
Weighted avg. shares - diluted 58,937 58,409 55,296
23 (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.
Adjusted EBITDA Reconciliation
Non-GAAP (Unaudited)
24
For the Quarters Ended
(Amounts in thousands) Dec 2017 Sep 2017 Dec 2016
Net income (loss) (U.S. GAAP) $ 18,641 $ 12,849 $ 12,278
Interest expense (income), net 7,155 7,270 9,913
Income tax expense (benefit) 2,060 2,880 1,810
Depreciation and amortization 11,125 13,326 9,095
EBITDA (non-GAAP) 38,981 36,325 33,096
Excluding the following items:
Equity (income) loss from equity method investments (238) (224) 133
Acquisition Gain (310) (1,285) —
Net foreign exchange (gain) loss 2,239 1,891 (2,621)
Restructuring charges 3,530 1,393 (369)
Legal expenses related to antitrust class actions 4,073 10,327 293
Stock-based compensation expense 2,206 1,530 1,139
(Gain) loss on write-down and disposal of long-lived assets (902) (39) 132
Change in value of TOKIN option — — (6,900)
TOKIN investment-related expenses — — 204
ERP integration/IT transition costs — — 1,734
Adjusted EBITDA (non-GAAP) $ 49,579 $ 49,918 $ 26,841
Quarters Ended LTM
(Amounts in thousands, except percentages) Mar 2016 Jun 2016 Sep 2016 Dec 2016 Dec 2016
Net Sales $ 183,926 $ 184,935 $ 187,308 $ 188,029 $ 744,198
Net income (loss) (15,173) (12,205) (4,998) 12,278 (20,098)
Income tax expense (benefit) 2,056 1,800 830 1,810 6,496
Interest expense, net 9,925 9,920 9,904 9,913 39,662
Depreciation and amortization 10,160 9,436 9,440 9,095 38,131
EBITDA 6,968 8,951 15,176 33,096 64,191
Excluding the following items (Non-GAAP):
Change in value of TOKIN options — 12,000 (1,600) (6,900) 3,500
Equity (income) loss from equity method investments 11,648 (223) (181) 133 11,377
Restructuring charges 617 688 3,998 (369) 4,934
ERP integration costs / IT transition costs 859 1,768 1,783 1,734 6,144
Stock-based compensation expense 1,013 1,228 1,104 1,139 4,484
Legal expenses related to antitrust class actions 482 1,175 766 293 2,716
Net foreign exchange (gain) loss 122 (1,920) (724) (2,621) (5,143)
TOKIN investment-related expenses 265 206 194 204 869
Plant start-up costs 319 308 119 — 746
Plant shut-down costs 141 — — — 141
(Gain) loss on write-down and disposal of long-lived assets 608 91 6,277 132 7,108
Adjusted EBITDA (non-GAAP) $ 23,042 $ 24,272 $ 26,912 $ 26,841 $ 101,067
Adjusted EBITDA Margin (non-GAAP) 12.5% 13.1% 14.4% 14.3% 13.6%
Adjusted EBITDA Reconciliation
Non-GAAP (Unaudited)
25
Adjusted EBITDA Reconciliation
Non-GAAP (Unaudited)
26
(Amounts in thousands, except percentages) 2015 2016 2017
Net Sales $ 823,192 $ 734,823 $ 757,791
Net income (loss) (14,143) (53,629) 47,989
Income tax expense (benefit) 5,227 6,006 4,290
Interest expense, net 40,686 39,591 39,731
Depreciation and amortization 40,768 39,016 37,338
EBITDA 72,538 30,984 129,348
Excluding the following items (Non-GAAP):
Change in value of TOKIN options (2,100) 26,300 (10,700)
Equity (income) loss from equity method investments 2,169 16,406 (41,643)
Restructuring charges 13,017 4,178 5,404
ERP integration costs / IT transition costs 3,248 5,677 7,045
Stock-based compensation expense 4,512 4,774 4,720
Legal expenses related to antitrust class actions 844 3,041 2,640
Net foreign exchange (gain) loss (4,249) (3,036) (3,758)
TOKIN investment-related expenses 1,778 900 1,101
Plant start-up costs 4,556 861 427
(Gain) loss on write-down and disposal of long-lived assets (221) 375 10,671
Plant shut-down costs 889 372 —
Pension plan adjustment — 312 —
(Income) loss from discontinued operations (5,379) — —
(Gain) loss on early extinguishment of debt (1,003) — —
Professional fees related to financing activities 1,142 — —
Adjusted EBITDA (non-GAAP) $ 91,741 $ 91,144 $ 105,255
Adjusted EBITDA Margin (non-GAAP) 11.1% 12.4% 13.9%
Total Debt as of March 31, $ 387,282 $ 387,833 $ 388,211
Leverage ratio (Debt/Adjusted EBITDA) 4.2 4.3 3.7
Quarters Ended LTM
(Amounts in thousands, except percentages) Sep 2016 Dec 2016 Mar 2017 Jun 2017 Jun 2017
Net Sales $ 187,308 $ 188,029 $ 197,519 $ 274,000 $ 846,856
Net income (loss) (4,998) 12,278 52,914 220,606 280,800
Income tax expense (benefit) 830 1,810 (150) 1,150 3,640
Interest expense, net 9,904 9,913 9,994 10,894 40,705
Depreciation and amortization 9,440 9,095 9,367 12,243 40,145
EBITDA 15,176 33,096 72,125 244,893 365,290
Excluding the following items (Non-GAAP):
Change in value of TOKIN options (1,600) (6,900) (14,200) — (22,700)
Equity (income) loss from equity method investments (181) 133 (41,372) (75,417) (116,837)
Acquisition Gain — — — (135,588) (135,588)
Restructuring charges 3,998 (369) 1,087 1,613 6,329
ERP integration costs / IT transition costs 1,783 1,734 1,760 — 5,277
Stock-based compensation expense 1,104 1,139 1,249 1,101 4,593
Legal expenses related to antitrust class actions 766 293 406 1,141 2,606
Net foreign exchange (gain) loss (724) (2,621) 1,507 5,043 3,205
TOKIN investment-related expenses 194 204 497 — 895
Plant start-up costs 119 — — — 119
(Gain) loss on write-down and disposal of long-lived assets 6,277 132 4,171 19 10,599
(Gain) loss on early extinguishment of debt — — — 486 486
Adjusted EBITDA (non-GAAP) $ 26,912 $ 26,841 $ 27,230 $ 43,291 $ 124,274
Adjusted EBITDA Margin (non-GAAP) 14.4% 14.3% 13.8% 15.8% 14.7%
Total Debt balance as of June 30, 2017 335,145
Leverage ratio (Debt/Adjusted EBITDA) 2.7
Adjusted EBITDA Reconciliation
Non-GAAP (Unaudited)
27
Quarters Ended LTM
(Amounts in thousands, except percentages) Dec 2016 Mar 2017 Jun 2017 Sep 2017 Sep 2017
Net Sales $ 188,029 $ 197,519 $ 274,000 $ 301,471 $ 961,019
Net income (loss) 12,278 52,914 220,606 12,849 298,647
Income tax expense (benefit) 1,810 (150) 1,150 7,270 10,080
Interest expense, net 9,913 9,994 10,894 2,880 33,681
Depreciation and amortization 9,095 9,367 12,243 13,326 44,031
EBITDA 33,096 72,125 244,893 36,325 386,439
Excluding the following items (Non-GAAP):
Change in value of TOKIN options (6,900) (14,200) — — (21,100)
Equity (income) loss from equity method investments 133 (41,372) (75,417) (224) (116,880)
Acquisition Gain — — (135,588) (1,285) (136,873)
Restructuring charges (369) 1,087 1,613 1,393 3,724
ERP integration costs / IT transition costs 1,734 1,760 — — 3,494
Stock-based compensation expense 1,139 1,249 1,101 1,530 5,019
Legal expenses related to antitrust class actions 293 406 1,141 10,327 12,167
Net foreign exchange (gain) loss (2,621) 1,507 5,043 1,891 5,820
TOKIN investment-related expenses 204 497 — — 701
(Gain) loss on write-down and disposal of long-lived assets 132 4,171 19 (39) 4,283
(Gain) loss on early extinguishment of debt — — 486 — 486
Adjusted EBITDA (non-GAAP) $ 26,841 $ 27,230 $ 43,291 $ 49,918 $ 147,280
Adjusted EBITDA Margin (non-GAAP) 14.3% 13.8% 15.8% 16.6% 15.3%
Total Debt balance as of September 30, 2017 331,787
Leverage ratio (Debt/Adjusted EBITDA) 2.3
Adjusted EBITDA Reconciliation
Non-GAAP (Unaudited)
28
Quarters Ended LTM
(Amounts in thousands, except percentages) Mar 2017 Jun 2017 Sep 2017 Dec 2017 Dec 2017
Net Sales $ 197,519 $ 274,000 $ 301,471 $ 306,408 $ 1,079,398
Net income (loss) 52,914 220,606 12,849 18,641 305,010
Income tax expense (benefit) (150) 1,150 7,270 2,060 10,330
Interest expense, net 9,994 10,894 2,880 7,155 30,923
Depreciation and amortization 9,367 12,243 13,326 11,125 46,061
EBITDA 72,125 244,893 36,325 38,981 392,324
Excluding the following items (Non-GAAP):
Change in value of TOKIN options (14,200) — — — (14,200)
Equity (income) loss from equity method investments (41,372) (75,417) (224) (238) (117,251)
Acquisition Gain — (135,588) (1,285) (310) (137,183)
Restructuring charges 1,087 1,613 1,393 3,530 7,623
ERP integration costs / IT transition costs 1,760 — — — 1,760
Stock-based compensation expense 1,249 1,101 1,530 2,206 6,086
Legal expenses related to antitrust class actions 406 1,141 10,327 4,073 15,947
Net foreign exchange (gain) loss 1,507 5,043 1,891 2,239 10,680
TOKIN investment-related expenses 497 — — — 497
(Gain) loss on write-down and disposal of long-lived assets 4,171 19 (39) (902) 3,249
(Gain) loss on early extinguishment of debt — 486 — — 486
Adjusted EBITDA (non-GAAP) $ 27,230 $ 43,291 $ 49,918 $ 49,579 $ 170,018
Adjusted EBITDA Margin (non-GAAP) 13.8% 15.8% 16.6% 16.2% 15.8%
Total Debt balance as of December 31, 2017 328,162
Leverage ratio (Debt/Adjusted EBITDA) 1.9
Adjusted EBITDA Reconciliation
Non-GAAP (Unaudited)
29
Non-GAAP Financial Measures
Non-GAAP Financial Measures
Included in this presentation are certain non-GAAP financial measures designed to complement the financial information presented in accordance
with generally accepted accounting principles in the United States of America because management believes such measures are useful to investors
for the reasons described below.
Adjusted gross margin
Adjusted gross margin represents net sales less cost of sales excluding adjustments which are outlined in the quantitative reconciliation provided
earlier in this presentation. Management uses Adjusted gross margin to facilitate our analysis and understanding of our business operations by
excluding the items outlined in the quantitative reconciliation provided earlier in this presentation which might otherwise make comparisons of our
ongoing business with prior periods more difficult and obscure trends in ongoing operations. The Company believes that Adjusted gross margin is
useful to investors because it provides a supplemental way to understand the underlying operating performance of the Company. Adjusted gross
margin should not be considered as an alternative to gross margin or any other performance measure derived in accordance with GAAP.
Adjusted selling, general and administrative expenses
Adjusted selling, general and administrative expenses represents selling, general and administrative expenses excluding adjustments which are
outlined in the quantitative reconciliation provided earlier in this presentation. Management uses Adjusted selling, general and administrative expenses
to facilitate our analysis and understanding of our business operations by excluding the items outlined in the quantitative reconciliation provided
earlier in this presentation which might otherwise make comparisons of our ongoing business with prior periods more difficult and obscure trends
in ongoing operations. The Company believes that Adjusted selling, general and administrative expenses is useful to investors because it provides
a supplemental way to understand the underlying operating performance of the Company. Adjusted selling, general and administrative expenses
should not be considered as an alternative to selling, general and administrative expenses or any other performance measure derived in accordance
with GAAP.
Adjusted operating income (loss)
Adjusted operating income (loss) represents operating income (loss), excluding adjustments which are outlined in the quantitative reconciliation
provided earlier in this presentation. Management uses Adjusted operating income to facilitate our analysis and understanding of our business
operations by excluding the items outlined in the quantitative reconciliation provided earlier in this presentation which might otherwise make
comparisons of our ongoing business with prior periods more difficult and obscure trends in ongoing operations. The Company believes that Adjusted
operating income is useful to investors to provide a supplemental way to understand the underlying operating performance of the Company and
monitor and understand changes in our ability to generate income from ongoing business operations. Adjusted operating income should not be
considered as an alternative to operating loss or any other performance measure derived in accordance with GAAP.30
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 by excluding the items outlined in the quantitative reconciliation
provided earlier in this presentation which might otherwise make comparisons of our ongoing business with prior periods more difficult
and obscure trends in ongoing operations. The Company believes that Adjusted net income (loss) and Adjusted EPS are useful to
investors because they provide a supplemental way to understand the underlying operating performance of the Company and allows
investors to monitor and understand changes in our ability to generate income from ongoing business operations. Adjusted net income
(loss) and Adjusted EPS should not be considered as alternatives to net income, operating income or any other performance measures
derived in accordance with GAAP.
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.
31
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.
32