Restructuring Charges

KEMET’s restructuring plans are focused on making the Company more competitive by reducing excess capacity, relocating production to lower cost locations and eliminating unnecessary costs throughout the Company.

A summary of the expenses aggregated in the Condensed Consolidated Statements of Operations line item “Restructuring charges” in the quarters and six-month periods ended September 30, 2016 and 2015, is as follows (amounts in thousands):



	Quarters Ended September 30,					Six-Month Periods Ended September 30,
	2016		2015			2016		2015
Personnel reduction costs/(benefits)	$	1,432	$	(434	)	$	2,079	$	1,110
Relocation and exit costs	2,566		457			2,607		737
Restructuring charges	$	3,998	$	23		$	4,686	$	1,847

Quarter Ended September 30, 2016

The Company incurred $4.0 million in restructuring charges in the quarter ended September 30, 2016 comprised of $1.4 million in personnel reduction costs and $2.6 million in manufacturing relocation and exit costs.

The personnel reduction costs of $1.4 million consist of $0.4 million in headcount reductions related to the shut-down of operations for KFM in Knoxville, Tennessee, $0.4 million related to the consolidation of certain Solid Capacitor manufacturing in Matamoros, Mexico, $0.3 million in U.S. headcount reductions related to the relocation of global marketing functions to the Company’s Fort Lauderdale, Florida office, $0.2 million related to overhead reductions corresponding with the relocation of research and development (“R&D”) 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 manufacturing relocation costs of $2.6 million primarily consists of $2.2 million related to contract termination costs related to the shut-down of operations for KFM, $0.3 million related to 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.

Six-Month Period Ended September 30, 2016

The Company incurred $4.7 million in restructuring charges in the six-month period ended September 30, 2016 comprised of $2.1 million in personnel reduction costs and $2.6 million in manufacturing relocation and exit costs.

The personnel reduction costs of $2.1 million consist of $0.4 million in headcount reductions related to the shut-down of operations for KFM in Knoxville, Tennessee, $0.5 million related to the consolidation of certain Solid Capacitor manufacturing in Matamoros, Mexico, $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, $0.2 million related to overhead reductions as we relocate the R&D operations from Weymouth, England to Evora, Portugal, $0.2 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, and $0.1 million in manufacturing headcount reductions related to the relocation of the K-Salt operations to the existing Matamoros, Mexico plant.

The manufacturing relocation costs of $2.6 million primarily consists of $2.2 million in related to contract termination costs related to the shut-down of operations for KFM, $0.3 million related to 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.

Quarter Ended September 30, 2015

The Company incurred $23 thousand in restructuring charges in the quarter ended September 30, 2015 including a credit to personnel reduction costs of $0.4 million and $0.5 million in manufacturing relocation costs.

The credit to personnel reduction costs of $0.4 million is due primarily to a $1.2 million reversal of a severance accrual in Italy. The Company originally recorded the accrual in the third quarter of fiscal year 2015 corresponding with a plan to reduce headcount by 50 employees. Under the plan, 24 employees were terminated. However, due to unexpected workforce attrition combined with achieving other cost reduction goals, the Company decided not to complete the remaining headcount reduction. Consequently, the Company reversed the remaining accrual during the second quarter of fiscal year 2016. This was partially offset by the following expenses: $0.5 million for headcount reductions in Matamoros, Mexico related to the relocation of certain Solid Capacitor manufacturing from Matamoros, Mexico to Victoria, Mexico, and $0.2 million for headcount reductions related to the outsourcing of the Company’s information technology function and overhead reductions in North America and Europe.

The Company also incurred $0.5 million of manufacturing relocation costs for transfers of Film and Electrolytic production lines to lower cost regions.

Six-Month Period Ended September 30, 2015

The Company incurred $1.8 million in restructuring charges in the quarter ended September 30, 2015 comprised of $1.1 million of personnel reduction costs and $0.7 million in manufacturing relocation costs.

The personnel reduction costs of $1.1 million consist of the following: $0.6 million related to a headcount reduction in Suzhou, China for the Film and Electrolytic production line transfer from Suzhou, China to Anting, China, $0.4 million for headcount reductions in Europe (primarily Landsberg, Germany), $0.8 million for headcount reductions in Matamoros, Mexico related to the relocation of certain Solid Capacitor manufacturing from Matamoros, Mexico to Victoria, Mexico, and $0.4 million for headcount reductions related to the outsourcing of the Company’s information technology function and overhead reductions in North America and Europe. These personnel reduction costs were partially offset by a $1.2 million reversal of a severance accrual in Italy.

The Company also incurred $0.7 million of manufacturing relocation costs for transfers of Film and Electrolytic production lines to lower cost regions.

Reconciliation of restructuring liability

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 Condensed Consolidated Balance Sheets for the quarters and six-month periods ended September 30, 2016 and 2015 are as follows (amounts in thousands):



	Quarter Ended September 30, 2016						Quarter Ended September 30, 2015
	Personnel Reductions			Manufacturing Relocations			Personnel Reductions			Manufacturing Relocations
Beginning of period	$	1,079		$	—		$	6,555		$	—
Costs charged to expense	1,432			2,566			(434		)	457
Costs paid or settled	(408		)	(584		)	(3,843		)	(457		)
Change in foreign exchange	(2		)	—			2			—
End of period	$	2,101		$	1,982		$	2,280		$	—



	Six-Month Period Ended September 30, 2016						Six-Month Period Ended September 30, 2015
	Personnel Reductions			Manufacturing Relocations			Personnel Reductions			Manufacturing Relocations
Beginning of period	$	976		$	—		$	7,239		$	—
Costs charged to expense	2,079			2,607			1,110			737
Costs paid or settled	(931		)	(625		)	(6,283		)	(737		)
Change in foreign exchange	(23		)	—			214			—
End of period	$	2,101		$	1,982		$	2,280		$	—