KEMET Reports Financial Results for Quarter Ending September 30, 2005

GREENVILLE, S.C., Oct. 26 /PRNewswire-FirstCall/ -- KEMET Corporation today reported financial results for the quarter ended September 30, 2005. Net sales for the quarter were $116.6 million and net loss was $1.9 million or $0.02 per share. Before special charges, the net income was $1.3 million, or $0.02 per share. KEMET reports results before special charges because the results offer an alternative depiction of normal operations. Comparisons to prior periods are as follows:

Quarter Ended Sep 2005 Jun 2005 Sep 2004 (In Millions, Except Per Share Data) Net sales $116.6 $114.1 $106.0 Before special charges (non-GAAP) Net income/(loss) $1.3 $(0.3) $(16.7) Net income/(loss) per diluted share $0.02 $(0.00) $(0.19) After special charges (GAAP) Net income/(loss) $(1.9) $3.0 $(7.5) Net income/(loss) per diluted share $(0.02) $0.03 $(0.09)

"I am pleased with the results for the quarter as net income before special charges was $1.3 million or $0.02 per share," stated Mr. Per Loof, Chief Executive Officer. "The improvement in our results was a combination of higher sales volumes and our recent cost reduction actions. This quarter, while profitable, still does not get us to the level of profitability that we desire. We will continue to drive down our costs and continue to find opportunities to improve our profitability.

"We did experience some improvements in pricing in some product lines during the quarter, however, mix adjusted average selling prices decreased 3% to 4% in the aggregate from the previous quarter. Capacity utilization, however, remains at approximately 85%, with the ceramics utilization rate running slightly higher than tantalum. I am also pleased to report that we have begun shipping commercial volumes of our tantalum polymer capacitors from our second facility in Suzhou, China in September. The new facility was necessary due to increasing demand for this product particularly in Asia.

"As you can see from our recent news releases, exciting things are happening at KEMET. Our recently announced strategic alliance with Taiyo Yuden has been well received by our customers, and I am pleased with our continued progress. We are in advanced discussions with EPCOS to purchase their Tantalum Capacitor Business, as we announced last week. If completed, this would significantly enhance our global tantalum position in the market.

"I have now been with KEMET for six months. I have been impressed with the team and their commitment to succeed. The positive results are a testimony to this fact. However, this turnaround journey has just begun. We will continue to strive for excellence and to provide to our customers the best products in the industry. I am confident that the KEMET team will be able to capitalize on opportunities presented in the quarters to come."

As of September 30, 2005, KEMET had $213.0 million in cash and short and long-term investments in marketable securities, $100.0 million in debt, and $518.9 million in stockholders' equity.

The Company will hold a conference call at 9:00 am ET Wednesday, October 26, 2005, to discuss the earnings release. The call will last approximately one hour, and after an initial presentation, questions will be taken as time permits. To access the call, participants in the United States should dial 1- 800-416-8033, and participants outside the United States should dial 1-706- 643-0979. Participants should reference "KEMET Corporation" and the Conference ID #: 1416997. In conjunction with the conference call, there will be a simultaneous live broadcast over the Internet, which can be accessed at http://www.kemet.com/IR. A replay of the conference call will be available, until midnight November 9, 2005, at the same link.

KEMET's common stock is listed on The New York Stock Exchange under the symbol KEM. At the Investor Relations portion of the Company's web site at http://www.kemet.com/IR, users can subscribe to KEMET news releases and can find additional Company information.

OUR BUSINESS

The following statements are based on current expectations. These statements may contain forward-looking information, and consequentially actual results may differ materially. Current global economic conditions make it particularly difficult at present to predict product demand and other related matters.

- Sales of surface-mount capacitors were 83.6% of net sales, and sales of leaded parts were 16.4% of net sales for the September 2005 quarter. - By region, 42.7% of net sales for the September 2005 quarter were to customers in North America, 40.8% were to Asia, and 16.5% were to Europe. - By channel, 55.8% of net sales for the September 2005 quarter were to distribution customers, 23.4% were to Electronic Manufacturing Services customers, and 20.8% were to Original Equipment Manufacturing customers. Average selling prices for the September 2005 quarter, adjusted for changes in product mix, decreased approximately 3% to 4% from average selling prices for the June 2005 quarter. - In July 2003, KEMET announced the reorganization of its operations around the world, resulting in the location of virtually all of its production in low cost regions and to be completed in 2005. KEMET estimates it will incur special charges of approximately $42 million ($39 million disclosed previously) over the period of the reorganization related to movement of manufacturing operations. The increase is due to additional reorganization activities that were not part of the original plan as the Company initiated more aggressive reductions to improve profitability.

Completed portions of KEMET's announced move of production have occurred in accordance with the anticipated time line. Charges related to movement of manufacturing operations in the September 2005 quarter were $3.2 million bringing the total manufacturing relocation charges to approximately $39.6 million to date. The Company has substantially completed its relocation of production to low cost regions of the world.

Summary of special charges in the September 2005 quarter, net of tax: (In Millions) Manufacturing relocation (Restructuring charges) $3.2 Special after tax charges $3.2 - For fiscal 2006, KEMET anticipates maintaining our investments in key customer relationships through our direct sales and customer service professionals, as well as our investments in research and development, to maintain our competitive position in the capacitor industry. We are continuing to enhance research and development, focused on organic polymer tantalum and high-capacitance ceramic capacitor technologies. Fiscal Year Fiscal Quarter Ended Dec Mar Jun Sep 2003 2004 2005 2004 2005 2005 2005 (In Millions) SG&A $54.4 $51.2 $51.7 $12.0 $13.8 $12.2 $12.1 R&D $25.3 $24.4 $26.6 $7.5 $6.2 $6.2 $6.0 - Capital expenditures for the September 2005 quarter were $7.3 million. Fiscal Year Ended Fiscal Quarter Ended Dec Mar Jun Sep 2003 2004 2005 2004 2005 2005 2005 (In Millions) Additions to property, plant and equipment $22.2 $25.8 $39.6 $10.8 $12.0 $6.4 $7.3 - Depreciation and amortization expense in the quarter were $8.1 million. - During the September 2005 quarter, inventories decreased $1.7 million to $124.0 million from $125.7 million at June 30, 2005. Raw materials and supplies increased $1.0 million in the September 2005 quarter, and work in process and finished goods decreased $2.7 million. Fiscal Year Ended Fiscal Quarter Ended Mar Mar Mar Dec Mar Jun Sep 2003 2004 2005 2004 2005 2005 2005 (In Millions) Raw materials and supplies $91.3 $59.8 $47.5 $56.7 $47.5 $46.4 $47.4 Work in process and finished goods 92.7 69.2 86.4 91.6 86.4 79.3 76.6 $184.0 $129.0 $133.9 $148.3 $133.9 $125.7 $124.0 - Cash and short and long-term investments in marketable securities during the September 2005 quarter decreased $5.6 million to $213.0 million from $218.6 million at June 30, 2005. This decrease is due to capital expenditures, reduction in force payouts, and manufacturing relocation expenditures, partially offset by cash from operations. QUIET PERIOD

Beginning January 1, 2006, KEMET will observe a Quiet Period during which the information provided in this news release and the Company's quarterly report on Form 10-Q will no longer constitute the Company's current expectations. During the Quiet Period, this information should be considered to be historical, applying prior to the Quiet Period only and not subject to update by the Company. The Quiet Period will extend until the day when KEMET's next quarterly earnings release is published.

This release contains certain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. We intend that these forward-looking statements be subject to the safe harbor created by that provision. These forward-looking statements involve risks and uncertainties and include, but are not limited to, statements regarding future events and our plans, goals, and objectives. Our actual results may differ materially from these statements. These risks, trends, and uncertainties, which in some instances are beyond our control, include: risks associated with the cyclical nature of the electronics industry, the requirement to continue to reduce the cost of our products, the competitiveness of our industry, an increase in the cost of our raw materials, the location of several of our plants in Mexico and China, and the possible loss of key employees. Although we believe that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove to be inaccurate. Therefore, we can give no assurance that the results contemplated in these forward-looking statements will be realized. The inclusion of this forward-looking information should not be regarded as a representation by our Company or any person that the future events, plans, or expectations contemplated by our Company will be achieved. Furthermore, past performance in operations and share price is not necessarily predictive of future performance.

KEMET CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in Thousands Except Per Share Data) Unaudited Three months ended Six months ending September 30, September 30, 2005 2004 2005 2004 Income Statement Data: Net sales $116,608 $106,022 $230,712 $228,405 Cost of goods sold 97,463 102,773 192,453 202,896 Gain on long-term supply contract - (11,139) - (11,139) Selling, general and administrative expenses 12,067 13,062 24,293 25,500 Research and development 6,008 6,637 12,225 13,375 Pension settlement charges - 218 - 218 Restructuring charges 3,154 1,649 11,327 4,199 Operating loss (2,084) (7,178) (9,586) (6,644) Interest expense 1,639 1,579 3,307 3,202 Interest income (1,402) (1,455) (2,727) (3,365) Other (income)/expense (57) 11 1,007 2,296 Income tax (benefit)/expense (354) 152 (12,298) 539 Net (loss)/income $(1,910) $(7,465) $1,125 $(9,316) (Loss)/Income Per Share Data: Net (loss)/income per share: Basic $(0.02) $(0.09) 0.01 $(0.11) Diluted $(0.02) $(0.09) 0.01 $(0.11) Weighted-average shares outstanding: Basic 86,653,831 86,506,738 86,633,143 86,500,694 Diluted 86,653,831 86,506,738 86,696,023 86,500,694 KEMET CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in Thousands) Unaudited September 30, 2005 March 31, 2005 ASSETS Cash and cash equivalents $36,135 $26,898 Short-term investments in marketable securities 55,077 34,992 Accounts receivable, net 67,351 59,228 Inventories 123,988 133,935 Prepaid expenses and other current assets 12,286 9,571 Deferred income taxes 5,107 5,945 Total current assets 299,944 270,569 Property, plant and equipment, net 275,245 279,626 Property held for sale 4,683 2,326 Long-term investments in marketable securities 121,750 157,576 Investments in affiliates 590 682 Goodwill 30,471 30,471 Intangible assets, net 13,010 13,512 Other assets 3,383 3,335 Total assets $749,076 $758,097 LIABILITIES AND STOCKHOLDERS' EQUITY Current portion of long-term debt $20,000 $- Accounts payable, trade 36,128 38,943 Accrued expenses 29,151 34,617 Income taxes payable 10,424 12,430 Total current liabilities 95,703 85,990 Long-term debt 80,000 100,000 Other non-current obligations 47,252 48,951 Deferred income taxes 7,174 7,953 Total liabilities 230,129 242,894 Common stock 881 880 Additional paid-in capital 317,246 317,728 Retained earnings 221,971 220,846 Accumulated other comprehensive income 4,428 2,669 Treasury stock, at cost (25,579) (26,920) Total stockholders' equity 518,947 515,203 Total liabilities and stockholders' equity $749,076 $758,097