Kemet Announces Cost Saving Initiatives
Greenville, South Carolina (December 22, 2008) - KEMET Corporation (NYSE:
KEM) announced today that it is taking several initiatives to minimize the
impact of the downturn in the world economy. The Company currently
expects that net sales, excluding the wet tantalum assets which were sold in September 2008, will decline approximately fourteen to seventeen percent in the third fiscal quarter ending December 31, 2008, as compared to the second fiscal quarter ended September 30, 2008. Accounting for currency exchange rates, primarily the Euro, the decline is approximately nine to twelve percent. Previously, the Company indicated an anticipated decline of approximately seven percent.
The Company is eliminating approximately 1,500 manufacturing jobs
representing approximately 14% of the Company's total workforce. The
job reductions will begin immediately and be completed by mid-January 2009.
The total cost savings from these actions will be approximately $4.0 million per quarter or $16.0. million annually. There will be a one time implementation charge of approximately $2.0 million which will be accounted for in the current fiscal quarter, ending December 31. As sales volume returns to more normal levels, these manufacturing positions will be re-staffed, where prudent, with contract labor.
Additionally, to adjust inventories to match reduced customer demand and to maximize available cash, the Company will extend its normal holiday plant shut-down schedules at many of its manufacturing facilities between December 23, and January 5, 2009. The Company will continue to ship product from existing inventories during this period.
"It is imperative that in this time of worldwide economic slowdown we match our costs to the reality of our current market environment," said Per Loof, KEMET's Chief Executive Officer. "We are taking immediate actions to maximize cash flow by continuing to reduce costs, working capital, and capital expenditures. We took aggressive actions to reduce costs earlier this year, and started realizing benefits in our second quarter as well as early within this current quarter. Regardless of these encouraging results, we cannot ignore the reduction in our sales volume that we are experiencing due to the current economic environment. We must and we will keep our costs in line with our revenue. Our goal remains steadfast to bringing KEMET back to profitability as quickly as possible," continued Loof.
The Company also announced, where possible, that it will impose a ten percent reduction in pay for all salaried employees effective January 1, 2009, excluding those on a commission based salary. To implement this action, negotiations are underway with all labor unions where employees are represented by collective bargaining agreements. In the U.S., the Company will also temporarily suspend its 401(k) matching percentage, reducing it
from six to zero. Permanent reductions will also be made in several
retiree benefit programs. Salary reductions for affected employees are expected to be restored when the financial performance of the company returns to acceptable levels. There is no implementation cost associated with the salary and benefits reductions. Savings from these initiatives will be approximately $1.0 million per month.
Total cash savings to the Company from all of these initiatives will be approximately $7.0 million per quarter commencing in February 2009, after severance expenses are paid in January 2009.
For more information on the Company and these initiatives please see the message to KEMET Stakeholders from Per Loof on Kemet.com.
KEMET Corporation (KEM) applies world-class service and quality to deliver industry-leading, high-performance capacitance solutions to its customers around the world. KEMET offers the world's most complete line of surface-mount and through-hole capacitor technologies across tantalum, ceramic, film, aluminum, electrolytic, and paper dielectrics. KEMET's common stock is listed on The New York Stock Exchange under the symbol KEM.
Additional information about KEMET can be found at www.kemet.com .
Contact:
William M. Lowe, Jr.
Executive Vice President and
Chief Financial Officer
864-963-6484
billlowe@kemet.com
Dean W. Dimke
Director of Corporate and
Investor Communications
954-766-2806
deandimke@kemet.com
