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. Restructuring plans which include personnel reduction costs initiated during the nine-month period ended December 31, 2017 are summarized below:

•

KEMET will take a reduction in force across various overhead functions in its Simpsonville, South Carolina office as these functions are relocated to the new corporate headquarters in Fort Lauderdale, Florida. The reduction is expected to be substantially complete by March 31, 2018. Within the TOKIN legacy group, KEMET will take a reduction in force across various internal operational and overhead functions.


•	The Solid Capacitors segment will modify 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 are expected to be recognized over the next seven quarters.


•	The Film and Electrolytic segment anticipates a voluntary reduction in force in its Italian operations.

These restructuring plans are summarized in the table below (amounts in thousands):



		Total expected to be incurred				Incurred during quarter ended December 31, 2017				Cumulative incurred to date
Restructuring Plan ⁽¹⁾	Segment	Personnel Reduction Costs		Relocation & Exit Costs		Personnel Reduction Costs		Relocation & Exit Costs		Personnel Reduction Costs		Relocation & Exit Costs
US overhead function relocation to Fort Lauderdale, FL	Corporate	$	3,127	$	909	$	957	$	—	$	2,134	$	909
TOKIN operational & overhead function reduction in force	MSA, Corporate, & Solid Capacitors	5,328		—		143		—		143		—
Tantalum powder facility relocation	Solid Capacitors	897		2,098		—		—		—		—
Italian operations reduction in force	Film and Electrolytic	5,000		—		2,202		—		2,202		—

⁽¹⁾Restructuring charges included are not all-inclusive of the expenses aggregated in the Condensed Consolidated Statement of Operations line item "Restructuring charges."

A summary of the expenses aggregated in the Condensed Consolidated Statements of Operations line item “Restructuring charges” in the quarters and nine-month periods ended December 31, 2017 and 2016, is as follows (amounts in thousands):



	Quarters Ended December 31,					Nine-Month Periods Ended December 31,
	2017		2016			2017		2016
Personnel reduction costs	$	3,278	$	(215	)	$	4,389	$	1,864
Relocation and exit costs	252		(154		)	2,147		2,453
Restructuring charges	$	3,530	$	(369	)	$	6,536	$	4,317

Quarter Ended December 31, 2017

The Company incurred $3.5 million in restructuring charges in the quarter ended December 31, 2017 comprised of $3.3 million in personnel reduction costs and $0.3 million in manufacturing relocation and exit costs.

The personnel reduction costs of $3.3 million are due to $2.2 million related to a voluntary reduction in force in the Film & Electrolytic segment's Italian operations; $1.0 million in U.S. headcount reductions related to the relocation of global marketing, finance and accounting, and information technology functions to the Company’s Fort Lauderdale, Florida office from Simpsonville, South Carolina; and $0.1 million in headcount reductions within the TOKIN legacy group related to a European sales reorganization.

The manufacturing relocation and exit costs of $0.3 million primarily consist of $0.1 million in expenses related to the relocation of the K-Salt operations to the existing Matamoros, Mexico plant and $0.1 million in exit costs related to the shut-down of operations for KFM in Knoxville, Tennessee.

Nine-Month Period Ended December 31, 2017

The Company incurred $6.5 million in restructuring charges in the nine-month period ended December 31, 2017 comprised of $4.4 million in personnel reduction costs and $2.1 million in manufacturing relocation and exit costs.

The personnel reduction costs of $4.4 million are due to $2.2 million related to a voluntary reduction in force in the Film & Electrolytic segment's Italian operations; $2.1 million in U.S. headcount reductions related to the relocation of global marketing, finance and accounting, and information technology functions to the Company’s Fort Lauderdale, Florida office from Simpsonville, South Carolina; and $0.1 million in headcount reductions within the TOKIN legacy group related to a European sales reorganization.

The manufacturing relocation and exit costs of $2.1 million primarily consist of $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, Florida 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.

Quarter Ended December 31, 2016

The Company recorded a credit of $0.4 million in restructuring charges in the quarter ended December 31, 2016 comprised of a $0.2 million credit to personnel reduction costs and a $0.2 million credit to manufacturing relocation and exit costs.

The credit to personnel reduction costs of $0.2 million is due to natural attrition in Matamoros, Mexico resulting in a reduction in severance accrual.

The credit to manufacturing relocation costs of $0.2 million primarily consists of a $0.3 million reduction in accrual related to contract termination costs for the shut-down of operations for KFM, partially offset by the following charges: $0.1 million related to transfers of Film and Electrolytic production lines and R&D functions to lower cost regions and $0.1 million in expenses related to the relocation of the K-Salt operations to the existing Matamoros, Mexico plant.

Nine-Month Period Ended December 31, 2016

The Company incurred $4.3 million in restructuring charges in the nine-month period ended December 31, 2016 comprised of $1.9 million in personnel reduction costs and $2.5 million in manufacturing relocation and exit costs.

The personnel reduction costs of $1.9 million consist of $0.4 million in headcount reductions related to the shut-down of operations for KFM in Knoxville, Tennessee, $0.3 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, $0.3 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, $0.2 million related to overhead reductions as we relocated the 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 $2.5 million primarily consist of $1.9 million in expenses related to contract termination costs related to the shut-down of operations for KFM, $0.4 million related to transfers of Film and Electrolytic production lines and R&D functions to lower cost regions, $0.1 million related to the transfer of certain Tantalum production from Simpsonville, South Carolina to Victoria, Mexico and $0.1 million in expenses related to the relocation of the K-Salt operations to the existing Matamoros, Mexico plant.

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 nine-month periods ended December 31, 2017 and 2016 is as follows (amounts in thousands):



	Quarter Ended December 31, 2017						Quarter Ended December 31, 2016
	Personnel Reductions			Manufacturing Relocations			Personnel Reductions			Manufacturing Relocations
Beginning of period	$	1,494		$	312		$	2,101		$	1,982
Costs charged to expense	3,278			252			(215		)	(154		)
Costs paid or settled	(444		)	(252		)	(579		)	(832		)
Change in foreign exchange	49			(1		)	(46		)	—
End of period	$	4,377		$	311		$	1,261		$	996



	Nine-Month Period Ended December 31, 2017						Nine-Month Period Ended December 31, 2016
	Personnel Reductions			Manufacturing Relocations			Personnel Reductions			Manufacturing Relocations
Beginning of period	$	999		$	406		$	976		$	—
TOKIN opening balance	—			314			—			—
Costs charged to expense	4,389			2,147			1,864			2,453
Costs paid or settled	(1,080		)	(2,553		)	(1,510		)	(1,457		)
Change in foreign exchange	69			(3		)	(69		)	—
End of period	$	4,377		$	311		$	1,261		$	996