Annual report pursuant to Section 13 and 15(d)

Restructuring

v3.20.1
Restructuring
12 Months Ended
Mar. 31, 2020
Restructuring and Related Activities [Abstract]  
Restructuring Restructuring
The Company has implemented restructuring plans which include programs to increase competitiveness by removing excess capacity, relocating production to lower cost locations, and eliminating unnecessary costs throughout the Company. Significant restructuring plans, which include personnel reduction costs that occurred during fiscal year ended March 31, 2020 are summarized below:
The Solid Capacitors reportable segment streamlined its vertical integration strategy by relocating its tantalum powder facility equipment from Carson City, Nevada to its existing Matamoros, Mexico plant. Production in Carson City, Nevada ceased as of December 31, 2019 and the relocation of the tantalum powder facility equipment to Matamoros, Mexico was substantially complete as of March 31, 2020.
The Film and Electrolytic reportable segment streamlined its manufacturing operations by relocating axial electrolytic production from its plant in Granna, Sweden to its existing Evora, Portugal plant to consolidate axial electrolytic production in an effort to further improve gross margins, net income, and cash flow. The axial electrolytic equipment relocation was complete as of July 2019 and the equipment is fully operational in Evora as of September 2019.
TOKIN Japan took a reduction in force to optimize business operations by reducing fixed costs in order to improve profitability. The reduction in force is expected to be completed by September 2020.

Significant restructuring plans that occurred during the fiscal year ended March 31, 2020 are summarized in the table below (amounts in thousands):
 
 
Total expected to be incurred
 
Incurred during year ended March 31, 2020
 
Cumulative incurred to date
Restructuring Plan
Segment
Personnel Reduction Costs
Relocation & Exit Costs
 
Personnel Reduction Costs
Relocation & Exit Costs
 
Personnel Reduction Costs
Relocation & Exit Costs
Tantalum powder facility relocation (1)
Solid Capacitors
1,107

2,606

 
1,107

(777
)
 
1,107

2,580

Axial electrolytic production relocation from Granna to Evora
Film and Electrolytic
732

4,313

 
732

2,018

 
732

4,313

TOKIN Japan fixed cost reduction (2)
MSA and Corporate
5,729


 
5,021


 
5,021


All Other
Corporate, Film and Electrolytic
1,505

432

 
758

23

 
1,198

432

______________________________________________________________________________
(1) The credit to relocation and exit costs during the fiscal year ended March 31, 2020 was due to the recovery of costs related to the sale of tantalum that was recovered (“tantalum reclaim”) as part of the plant exit activities.
(2) Personnel reduction costs of 5.0 million for the fiscal year ended March 31, 2020 are comprised of $3.5 million and $1.5 million in the MSA segment and corporate respectively.
A summary of the expenses aggregated on the Consolidated Statements of Operations line item “Restructuring charges” in the fiscal years ended March 31, 2020, 2019 and 2018, is as follows (amounts in thousands):
 
 
Fiscal Years Ended March 31,
 
 
2020
 
2019
 
2018
Personnel reduction costs
 
$
7,618

 
$
2,823

 
$
12,587

Relocation and exit costs
 
1,264

 
5,956

 
2,256

Restructuring charges
 
$
8,882

 
$
8,779

 
$
14,843


Fiscal Year Ended March 31, 2020
The Company incurred $8.9 million in restructuring charges in the fiscal year ended March 31, 2020, including $7.6 million in personnel reduction costs and $1.3 million in relocation and exit costs.
The personnel reduction costs of $7.6 million were primarily due to $5.0 million in severance charges due to headcount reductions at TOKIN Japan as part of a fixed cost reduction plan, $1.1 million in severance charges resulting from the closing of the tantalum powder facility in Carson City, Nevada, $0.7 million in severance charges resulting from the closing of the Granna, Sweden manufacturing plant as axial electrolytic production was moved to the plant in Evora, Portugal, and $0.5 million in severance charges related to personnel reductions resulting from a reorganization of Film and Electrolytic's management structure.
The relocation and exit costs of $1.3 million were primarily related to $2.0 million in costs resulting from the relocation of axial electrolytic production equipment from the Company's plant in Granna, Sweden to its plant in Evora, Portugal. This expense was partially offset by a $0.8 million credit related to tantalum reclaim at the tantalum powder facility in Carson City, Nevada.
Fiscal Year Ended March 31, 2019
The Company incurred $8.8 million in restructuring charges in the fiscal year ended March 31, 2019, including $2.8 million in personnel reduction costs and $6.0 million in relocation and exit costs.
The personnel reduction costs of $2.8 million were primarily due to $0.9 million in costs related to headcount reductions in the TOKIN legacy group across various internal and operational functions, $0.3 million in severance charges related to personnel reductions in the Film and Electrolytic reportable segment resulting from a reorganization of the segment's management structure, and $1.6 million in severance charges related to headcount reductions in the Tantalum product line due to a decline in MnO2 sales.
The relocation and exit costs of $6.0 million were primarily due to $3.4 million in costs related to the Company's relocation of its tantalum powder equipment from Carson City, Nevada to its plant in Matamoros, Mexico and $2.3 million in costs related to the relocation of axial electrolytic production equipment from Granna, Sweden to its plant in Evora, Portugal.
Fiscal Year Ended March 31, 2018
The Company incurred $14.8 million in restructuring charges in the fiscal year ended March 31, 2018, including $12.6 million related to personnel reduction costs and $2.3 million of relocation and exit costs.
The personnel reduction costs of $12.6 million were due to $5.2 million in costs related to a voluntary reduction in force in the Film and Electrolytic reportable segment's Italian operations; $4.4 million related to a headcount reduction in the TOKIN legacy group across various internal and operational functions; $2.7 million in severance charges across various overhead functions in the Simpsonville, South Carolina office as these functions were relocated to the Company's new corporate headquarters in Fort Lauderdale, Florida; and $0.2 million in headcount reductions related to a European sales reorganization.
The relocation and exit costs of $2.3 million included $0.9 million in lease termination penalties related to the relocation of global marketing, finance and accounting, and information technology functions to the Company's Fort Lauderdale office, $0.8 million in expenses related to the relocation of the K-Salt operations to the existing Matamoros, Mexico plant, $0.4 million in exit costs related to the shut-down of KFM operations, and $0.1 million related to the transfer of certain tantalum production from Simpsonville, South Carolina to Victoria, Mexico.
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 Consolidated Balance Sheets were as follows (amounts in thousands):
 
 
Personnel
Reductions
 
Relocation and Exit Costs
Balance at March 31, 2017
 
$
999

 
$
406

TOKIN opening balance
 

 
312

Costs charged to expense (1)
 
12,384

 
2,256

Costs paid or settled
 
(3,901
)
 
(2,662
)
Change in foreign exchange
 
147

 
18

Balance at March 31, 2018
 
9,629

 
330

Costs charged to expense
 
2,823

 
5,956

Costs paid or settled
 
(10,329
)
 
(5,957
)
Change in foreign exchange
 
(258
)
 
(13
)
Balance at March 31, 2019
 
1,865

 
316

Costs charged to expense 
 
7,618

 
1,264

Costs paid or settled
 
(7,976
)
 
(1,264
)
Change in foreign exchange
 
3

 
7

Balance at March 31, 2020
 
$
1,510

 
$
323

______________________________________________________________________________
(1) Personnel reduction costs charged to expense include $0.2 million of relocation costs expensed as incurred, and therefore not included in accrued expenses for the fiscal year ended March 31, 2018.