Annual report pursuant to Section 13 and 15(d)

Acquisitions (Tables)

v3.19.1
Acquisitions (Tables)
12 Months Ended
Mar. 31, 2019
Business Combinations [Abstract]  
Schedule of contingent consideration in business combination
The following table shows the components of the acquisition price (amounts in thousands):
Upfront cash consideration (1)
$
148,614

Excess cash payment (2)
3,144

Indemnity asset (3)
8,500

Less: Put option (4)
(9,900
)
Net consideration transferred
$
150,358

_______________________________________________
(1) The upfront cash payment was comprised of JPY 6.0 billion plus one half of Excess Cash in an amount of approximately JPY 10.2 billion, approximately $55.0 million and $93.6 million (using the April 19, 2017 exchange rate of 109.007 Japanese Yen to 1.00 U.S. Dollar), respectively.
(2) The additional amount paid to NEC Corporation upon the settlement of the adjusted purchase price for the EMD sale.
(3) Pursuant to the Stock Purchase Agreement between KEMET and NEC, NEC was required to indemnify TOKIN and/or KEC for any breaches by TOKIN or NEC of certain representations, warranties and covenants in the Stock Purchase Agreement. NEC’s aggregate liability for indemnification claims was limited to $25.0 million. Prior to the acquisition, KEMET's equity method investment balance included an $8.5 million indemnification asset pursuant to this indemnification arrangement. In connection with the TOKIN Acquisition, NEC was released from its indemnification obligations to KEMET without an exchange of consideration; as such, this amount of released obligation was included as purchase consideration by KEMET.
(4) Pursuant to the option agreement, dated as of March 12, 2012, by and among NEC and KEMET (the “Option Agreement”), from April 1, 2015 through May 31, 2018, NEC had the right to require KEC to purchase all outstanding capital stock of TOKIN (the “Put Option”). The fair value of the Put Option of $9.9 million was reflected as a liability on KEMET’s balance sheet prior to KEMET’s acquisition of the remaining 66% economic interest in TOKIN. The Put Option was canceled, pursuant to the terms of the TOKIN Purchase Agreement with no exchange of consideration between NEC and KEMET. Accordingly, the fair value of the Put Option reduced the amount of consideration paid to acquire NEC’s equity in TOKIN.
Schedule of allocations of the aggregate purchase price based on the assets and liabilities estimated fair values
The following table presents the allocations of the aggregate purchase price based on the estimated fair values of the assets and liabilities (amounts in thousands):
 
Fair Value
Cash
$
315,743

Accounts Receivable
79,295

Inventory
35,310

Other current assets
20,902

Property, Plant and equipment
154,744

Intangible assets (1)
32,996

Equity method investments
11,128

Other assets
6,512

Current portion of long-term debt
(3,225
)
Accounts payable
(81,642
)
Accrued expenses
(44,542
)
Other non-current obligations
(105,140
)
Deferred income taxes
(5,452
)
Total net assets acquired
$
416,629

________________________________________________
(1) Includes trade name for $8.0 million and products and relationships of $25.0 million. TOKIN’s technology, products, and relationships were valued as a grouped, composite intangible asset due to the Company’s products being dependent on the existing technology, which enabled a product portfolio that customers found appealing in selecting and designing electronic devices for purchase. The trade name was valued based on the relief from royalty method and has an indefinite remaining useful life. The products and relationships were valued on the excess earnings method and are amortized over 10 years.
Schedule of pro forma information
The following table summarizes, on a pro forma basis, the combined results of operations of the Company and TOKIN as though the acquisition and the Sale of EMD had occurred as of April 1, 2016. The pro forma amounts presented are not necessarily indicative of either the actual consolidated results had the acquisition occurred as of April 1, 2016, or of future consolidated operating results (amounts in thousands, except per share data):
 
Fiscal Years Ended March 31,
 
2018 (1)
 
2017 (2)
Pro forma revenues (3)
$
1,217,655

 
$
1,060,777

Pro forma net income from continuing operations available to common stockholders (3)
51,975

 
226,086

Pro forma earnings per common share - basic (3)
0.98

 
4.86

Pro forma earnings per common share - diluted (3)
0.89

 
4.08

Pro forma common shares - basic
52,798

 
46,552

Pro forma common shares - diluted
58,640

 
55,389

___________________________________________
(1) The net income for the fiscal year ended March 31, 2018 excludes the following: 34% of the gain on sale of the EMD business of $75.2 million, the gain related to the fair value of KEMET’s previous 34% interest in TOKIN of $68.7 million, and the bargain gain on the acquisition of TOKIN of $62.2 million.
(2) The net income for the fiscal year ended March 31, 2017 includes the following: 34% of the gain on sale of the EMD business of $123.4 million (which includes the release of a valuation allowance that was recorded in the fourth quarter of fiscal year 2017 and the use of the deferred tax asset which was recorded in the first quarter of fiscal year 2018), the gain related to the fair value of KEMET’s previous 34% interest in TOKIN of $66.7 million, and the bargain gain on the acquisition of TOKIN of $60.3 million.
The following table reflects the bargain purchase gain resulting from the TOKIN Acquisition (amounts in thousands):
Net consideration transferred
$
150,358

Fair value of KEMETs previously held equity interest in TOKIN (1)
204,112

Less: fair value of net assets acquired
(416,629
)
Bargain purchase gain
$
(62,159
)
______________________________________
(1) Value based in the 34% of the enterprise value determined under the discounted cash flow method.