KEMET CEO Discusses F2Q2011 Results – Earnings Call Transcript

KEMET CEO Discusses F2Q2011 Results â¿¿ Earnings Call Transcript
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KEMET Corporation (

KEM

)

F2Q2011 (Qtr 09/30/10) Earnings Conference Call

October 28, 2010 9:00 AM ET

Executives

Dean Dimke – Director of Corporate and Investor Communications

Per Loof – CEO

Bill Lowe – EVP and CFO

Analysts

Hamed Khorsand – BWS Financial

Ana Goshko – Bank of America

Michael Ramondo [ph] – Private Investor

Omar Samalot – Independent Analyst

Presentation

Operator

Compare to:
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Good morning, I’ll be your conference operator today. At this time I would like to welcome everyone to KEMET second quarter earnings results conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session.

(Operator Instructions)

Thank you. I would now like to turn the call over to Mr. Dean Dimke. Please go ahead, sir.

Dean Dimke

Thank you. This is Dean Dimke, Director of Corporate and Investor Communications. Good morning and welcome to KEMET’s conference call to discuss our financial results for the second quarter ending September 30th, fiscal year 2011.

On the call with me today is Per Loof, our Chief Executive Officer; and Bill Lowe, our Executive Vice President and CFO. As a reminder to you, our presentation is available on our website that should help you follow along with the financial portion of our presentation this morning. Please go to kemet.com and click on the Investor Relations tab in the top right portion of our front page. Once there, please click on the second quarter conference call link. That will bring up a few slides that we will call to your attention when we are covering those topics.

Before we begin, we would like to advise you that all statements that address expectations or projections about the future are forward-looking statements. Some of these statements include words such as expects, anticipates, plans, intends, projects and indicates. Although they reflect our current expectations, these statements are not guarantees of future performance, but involve a number of risks, uncertainties and assumptions. Please refer to our 10-K 10-Qs and recent registration statement filings for additional information on risks and uncertainties.

And now I will turn the call over to Per.

Per Loof

Thank you Dean and good morning everyone. We have the pleasure of conducting this call from our Suzhou, China, operations, so I will say good evening and thank you to our employees that are assisting us tonight with the logistics of this call.

Our second quarter ending September 30 was an extremely strong quarter. As Bill will review with you shortly, we continue to increase our margins and are now reaching a consolidated gross margin of 28%. EBITDA was $53.4 million for the quarter and demand remained strong exceeding expectations. During the summer months we typically reflect a slowdown in particular from our European holiday period, that did not happen this year.

Our success of these financial results are the culmination of efforts by many within our organization over an extended period of time. We’ve been able to improve operating inefficiencies, maintain cost controls and re-establish the strong balance sheet. It’s been an ongoing effort for well over two years now since we began taking aggressive actions to counter the effects of the worldwide recession. These actions continue to pay substantial dividend but we are not done as yet.

We were pleased to have our stock listed on the New York Stock AMEX Exchange last quarter and continue to receive a positive feedback from the investment community. We believe that this greater awareness of our company is key to increasing our stock value and we are interested in creating even higher level of opportunity for investors to learn about our company.

To expand on investor opportunities, we did announce this month a special meeting of stockholders for the approval of our reverse stock split. The special meeting will be held on November 3, 2010. The company’s stockholders on record at the close of business on October 8, 2010 are entitled to vote at the special meeting.

We are proposing a reverse stock split because we believe this action will ultimately increase shareholder value by broadening the universal investors that will consider purchasing shares in the company.

After careful review, we have concluded that the reverse stock split may allow broader range of institutions to invest in the company’s stock and thus increase analyst and broker interest in KEMET. Other information concerning the proposed reserve stock split including a description of the potential effects of the split, you can find in the definite proxy statement.

Last week we also announced the filing of the resale shelf registration statement on Form S-3 with the Securities and Exchange Commission covering 30 million shares of KEMET common stock. The resale shelf registration statements relates to potential secondary offering by selling stockholder, K Equity,

an affiliate of Platinum Equity and as most of you know, K Equity holds a warrant to purchase approximately 80.5 million shares of the company’s stock.

The Platinum warranty is immediately exercisable partially or in full at a price of $0.35 per share. After the resale shelf registration statement has been declared effective by the SEC after 30 million shares of the company’s common stock may be offered to the public by K Equity. The specific amounts, prices and manner of distribution will be described in the subsequent filing made with the SEC at the time of each offering. Any offer to sell or solicitation on an offer to buy will be presented in a prospectus that will be issued with respect to any offering.

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