Annual report pursuant to Section 13 and 15(d)

Restructuring

v3.19.1
Restructuring
12 Months Ended
Mar. 31, 2019
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, relocating corporate functions to the new headquarters, and eliminating unnecessary costs throughout the Company. Significant restructuring plans which include personnel reduction costs that occurred during fiscal year ended March 31, 2019 are summarized below:
Within the TOKIN legacy group, KEMET took a reduction in force across various operational and overhead functions. The reduction in force was substantially complete as of March 31, 2019.
The Solid Capacitors reportable segment is streamlining its vertical integration strategy by relocating its tantalum powder facility equipment from Carson City, Nevada to its existing Matamoros, Mexico plant. Severance charges and equipment relocation costs. The relocation is expected to be completed by December 31, 2019. The Solid Capacitors reportable segment is also reorganizing due to a decline of MnO2 products. The efforts are expected to be completed by June 30, 2019.
The Film and Electrolytic reportable segment is streamlining its manufacturing operations by relocating axial electrolytic production from its plant in Granna, Sweden and 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 relocation is expected to be completed by June 30, 2019.

Significant restructuring plans in progress or recently completed as of March 31, 2019 are summarized in the table below (amounts in thousands):
 
 
Total expected to be incurred
 
Incurred during year ended March 31, 2019 (4)
 
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
TOKIN operational & overhead function reduction in force
MSA, Corporate, & Solid
Capacitors (1)
5,339


 
942


 
5,339


Tantalum powder facility relocation(2) (3)
Solid Capacitors
850

2,468

 

3,355

 

3,355

Axial electrolytic production relocation from Granna to Evora
Film and Electrolytic
879

3,232

 

2,296

 

2,296

Reorganization due to decline of MnO2 Products
Solid Capacitors
1,798


 
1,585


 
1,585


___________________________________________
(1) Cumulative personnel reduction costs incurred to date are comprised of $3.8 million, $1.4 million, and $0.1 million within the MSA, Corporate, and Solid Capacitor reportable segments, respectively.
(2) $0.9 million in tantalum reclaim is expected to be recovered as part of this restructuring activity, which will reduce total costs in subsequent periods.
(3) The Company expects to recover approximately $0.9 million related to tantalum reclaim, which would decrease the cumulative expenses incurred to date for relocation and exit costs upon the completion of reclaim activities.
(4) The Company incurred $0.6 million in restructuring charges for minor projects not included in the table above during fiscal year ended March 31, 2019, consisting of $0.3 million each in personal reduction costs and relocation and exit costs.
A summary of the expenses aggregated on the Consolidated Statements of Operations line item “Restructuring charges” in the fiscal years ended March 31, 2019, 2018 and 2017, is as follows (amounts in thousands):
 
 
Fiscal Years Ended March 31,
 
 
2019
 
2018
 
2017
Personnel reduction costs
 
$
2,823

 
$
12,587

 
$
2,214

Relocation and exit costs
 
5,956

 
2,256

 
3,190

Restructuring charges
 
$
8,779

 
$
14,843

 
$
5,404


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 costs related to reorganization in the Solid Capacitors reportable segment due to a permanent structural change driven by a decline of MnO2 products.
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 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 operations for KFM, and $0.1 million related to the transfer of certain Tantalum production from Simpsonville, South Carolina to Victoria, Mexico.
Fiscal Year Ended March 31, 2017
The Company incurred $5.4 million in restructuring charges in the fiscal year ended March 31, 2017, including $2.2 million related to personnel reduction costs and $3.2 million of relocation and exit costs.
The personnel reduction costs of $2.2 million corresponded with the following: $0.3 million related to the consolidation of certain Solid Capacitor manufacturing in Matamoros, Mexico; $0.4 million for headcount reductions related to the shut-down of operations for KFM; $0.3 million related to headcount reductions in Europe (primarily Italy and Landsberg, Germany) corresponding with the relocation of certain production lines and laboratories to lower cost regions; $0.3 million for overhead reductions in Sweden; $0.3 million in U.S. headcount reductions related to the relocation of global marketing functions to the Company’s Fort Lauderdale, Florida office; $0.3 million in headcount reductions related to the transfer of certain Tantalum production from Simpsonville, South Carolina to Victoria, Mexico; $0.2 million in overhead reductions for the relocation of research and development operations from Weymouth, England to Evora, Portugal; and $0.1 million in manufacturing headcount reductions related to the relocation of the K-Salt operations to the existing Matamoros, Mexico plant.
The relocation and exit costs of $3.2 million included $1.9 million in expenses related to contract termination costs related to the shut-down of operations for KFM; $0.6 million in expenses related to the relocation of the K-Salt operations to the existing Matamoros, Mexico plant; $0.6 million for transfers of Film and Electrolytic production lines and R&D functions to lower cost regions; 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, 2016
 
$
976

 
$

Costs charged to expense
 
2,214

 
3,190

Costs paid or settled
 
(2,130
)
 
(2,784
)
Change in foreign exchange
 
(61
)
 

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

_________________________________________
(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.