Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note
1
. Basis of Financial Statement Presentation
The condensed consolidated financial statements contained herein are unaudited and have been prepared from the books and records of KEMET Corporation and its subsidiaries (“KEMET” or the “Company”). In the opinion of management, the condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods. The condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q, and therefore, do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, and cash flows in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”). Although the Company believes the disclosures are adequate to make the information presented not misleading, it is suggested that these condensed consolidated financial statements be read in conjunction with the audited financial statements and notes thereto included in the Company’s Form 10-K for the fiscal year ended
March 31, 2016
(the “Company’s
2016
Annual Report”).
The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. In consolidation, all significant intercompany amounts and transactions have been eliminated. Certain prior year amounts have been reclassified to conform to current year presentation. Net sales and operating results for the
quarter and six-month periods ended
September 30, 2016
are not necessarily indicative of the results to be expected for the full year.
The Company’s significant accounting policies are presented in the Company’s
2016
Annual Report.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, assumptions, and judgments based on historical data and other assumptions that management believes are reasonable. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements. In addition, they affect the reported amounts of revenues and expenses during the reporting period.
The Company’s judgments are based on management’s assessment as to the effect certain estimates, assumptions, or future trends or events may have on the financial condition and results of operations reported in the unaudited condensed consolidated financial statements. It is important that readers of these unaudited financial statements understand that actual results could differ from these estimates, assumptions, and judgments.
Recently Issued Accounting Pronouncements
New accounting standards adopted/issued
In August 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-15,
Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The update clarifies how cash receipts and cash payments in certain transactions are presented and classified in the statement of cash flows. The effective date of this update is for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. The update requires retrospective application to all periods presented but may be applied prospectively if retrospective application is impracticable. The Company is currently evaluating the impact of the adoption of this principle on the Company’s consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation. This guidance changes several aspects of the accounting for share-based payment award transactions, including: (1) Accounting and Cash Flow Classification for Excess Tax Benefits and Deficiencies, (2) Forfeitures, and (3) Tax Withholding Requirements and Cash Flow Classification. This ASU is effective for fiscal years and interim periods within those years beginning after December 15, 2016. Early application is permitted, and KEMET adopted ASU No. 2016-09 as of April 1, 2016. The Company elected to discontinue estimating forfeitures that are expected to occur and recorded a cumulative effect adjustment to retained earnings of
130,000
as of April 1, 2016. There was no cumulative adjustment related to the excess tax benefits as the Company did not have an additional paid in capital pool of excess tax benefits. The adoption did not have a significant impact to the Company’s consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases. The ASU requires lessees to recognize a right-of-use asset and a lease liability for virtually all of their leases (other than short-term leases). The guidance is to be applied using a modified retrospective approach at the beginning of the earliest comparative period in the financial statements. This ASU is effective for fiscal years and interim periods within those years beginning after December 15, 2018. Early application is permitted. The Company is currently in the process of assessing the impact the adoption of this guidance will have on the Company’s consolidated financial statements.
In July 2015, the FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory. The ASU requires an entity that uses first-in, first-out or average cost to measure its inventory at the lower of cost or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. ASU 2015-11 was effective for interim and annual reporting periods beginning April 1, 2016. The adoption of ASU 2015-11 did not materially impact the Company’s operating results and financial position.
In April 2015, the FASB issued ASU No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. The ASU specifies that debt issuance costs related to a note shall be reported in the balance sheet as a direct reduction from the face amount of the note.
In August 2015, the FASB issued ASU No. 2015-15, Interest - Imputation of Interest (Subtopic 835-30) - Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements, which clarifies the treatment of debt issuance costs associated with line-of-credit arrangements that were not specifically addressed in ASU 2015-03. ASU 2015-15 states that entities may elect to continue to treat debt issuance costs associated with lines of credit as an asset, consistent with current treatment. The Company adopted these ASUs in the first quarter of fiscal year 2017.
The ASUs did not impact the Company’s results of operations or liquidity. The balance sheet as of March 31, 2016 has been adjusted to reflect retrospective application of the new accounting guidance as follows (amounts in thousands):
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As Previously Reported
|
|
Retrospective Adjustment
|
|
As Adjusted
|
Other assets
|
$
|
5,832
|
|
|
$
|
(2,764
|
)
|
|
$
|
3,068
|
|
Total assets
|
702,544
|
|
|
(2,764
|
)
|
|
699,780
|
|
Long-term debt, less current portion
|
388,597
|
|
|
(2,764
|
)
|
|
385,833
|
|
Total liabilities and stockholders’ equity
|
702,544
|
|
|
(2,764
|
)
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|
699,780
|
|
In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements-Going Concern. The new guidance requires management to assess if there is substantial doubt about an entity’s ability to continue as a going concern for each annual and interim period. If conditions or events give rise to substantial doubt, disclosures are required. ASU 2014-15 is effective for the annual period ending after December 15, 2016, and for annual and interim periods thereafter; early application is permitted. This new guidance is not expected to have a material impact on the Company’s Consolidated Financial Statements.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which supersedes existing accounting standards for revenue recognition and creates a single framework. The new guidance requires either a retrospective or a modified retrospective approach at adoption. Early adoption is permitted, but not before Company’s fiscal year that begins on April 1, 2017 (the original effective date of the ASU). Additional updates to Topic 606 issued by the FASB in 2015 and 2016 include the following:
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•
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ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which defers the effective date of the new guidance such that the new provisions will now be required for fiscal years, and interim periods within those years, beginning after December 15, 2017 (ASU No. 2015-14 is effective for the Company’s fiscal year that begins on April 1, 2018 and interim periods within that fiscal year).
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•
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ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations, which clarifies the implementation guidance on principal versus agent considerations (reporting revenue gross versus net).
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•
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ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which clarifies the implementation guidance on identifying performance obligations and classifying licensing arrangements.
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|
•
|
ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which clarifies the implementation guidance in a number of other areas.
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The Company is currently in the process of assessing the impact the adoption of the new revenue standards will have on its consolidated financial statements and related disclosures, as well as the available transition methods.
There are currently no other accounting standards that have been issued that will have a significant impact on the Company’s financial position, results of operations or cash flows upon adoption.
Fair Value Measurement
The Company utilizes three levels of inputs to measure the fair value of (a) nonfinancial assets and liabilities that are recognized or disclosed at fair value in the Company’s consolidated financial statements on a recurring basis (at least annually) and (b) all financial assets and liabilities. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.
The first two inputs are considered observable and the last is considered unobservable. The levels of inputs are as follows:
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•
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Level 1—Quoted prices in active markets for identical assets or liabilities.
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•
|
Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
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•
|
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
|
Assets and liabilities measured at fair value on a recurring basis as of
September 30, 2016
and
March 31, 2016
are as follows (amounts in thousands):
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Carrying Value September 30,
|
|
Fair Value September 30,
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Fair Value Measurement Using
|
|
Carrying Value March 31,
|
|
Fair Value March 31,
|
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Fair Value Measurement Using
|
|
2016
|
|
2016
|
|
Level 1
|
|
Level 2 (2)
|
|
Level 3
|
|
2016
|
|
2016
|
|
Level 1
|
|
Level 2 (2)
|
|
Level 3
|
Assets (Liabilities):
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|
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|
|
|
|
|
|
|
|
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|
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Money markets (1)
|
$
|
640
|
|
|
$
|
640
|
|
|
$
|
640
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
738
|
|
|
$
|
738
|
|
|
$
|
738
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Total debt
|
(386,098
|
)
|
|
(384,352
|
)
|
|
(354,987
|
)
|
|
(29,365
|
)
|
|
—
|
|
|
(387,833
|
)
|
|
(284,261
|
)
|
|
(254,713
|
)
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|
(29,548
|
)
|
|
—
|
|
NEC TOKIN option,
net (3)
|
(31,000
|
)
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|
(31,000
|
)
|
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—
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|
|
—
|
|
|
(31,000
|
)
|
|
(20,600
|
)
|
|
(20,600
|
)
|
|
—
|
|
|
—
|
|
|
(20,600
|
)
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___________________
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(1)
|
Included in the line item “Cash and cash equivalents” on the Condensed Consolidated Balance Sheets.
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(2)
|
The valuation approach used to calculate fair value was a discounted cash flow based on the borrowing rate for each respective debt facility.
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(3)
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See Note
6
, “Investment in NEC TOKIN,” for a description of the NEC TOKIN option. The value of the option depends on the enterprise value of NEC TOKIN Corporation and its forecasted EBITDA over the duration of the option. The option has been valued using option pricing methods in a Monte Carlo simulation.
|
The table below summarizes NEC TOKIN option valuation activity using significant unobservable inputs (Level 3) (amounts in thousands):
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|
|
|
March 31, 2016
|
$
|
(20,600
|
)
|
Change in value of NEC TOKIN option
|
(10,400
|
)
|
September 30, 2016
|
$
|
(31,000
|
)
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Inventories
Inventories are stated at the lower of cost or market. The components of inventories are as follows (amounts in thousands):
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September 30, 2016
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March 31, 2016
|
Raw materials and supplies
|
$
|
75,211
|
|
|
$
|
80,289
|
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Work in process
|
50,081
|
|
|
46,631
|
|
Finished goods
|
55,698
|
|
|
58,060
|
|
|
180,990
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|
|
184,980
|
|
Inventory reserves
|
(16,013
|
)
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|
(16,101
|
)
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|
$
|
164,977
|
|
|
$
|
168,879
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Warrant
As of
September 30, 2016
and
March 31, 2016
,
8.4 million
shares were subject to the warrant (which expires June 30, 2019) held by K Equity, LLC.
Revenue Recognition
The Company ships products to customers based upon firm orders and revenue is recognized when the sales process is complete. This occurs when products are shipped to the customer in accordance with the terms of an agreement of sale, there is a fixed or determinable selling price, title and risk of loss have been transferred and collectability is reasonably assured. Based on product availability, customer requirements and customer consent, the Company may ship products earlier than the initial planned ship date. Shipping and handling costs are included in cost of sales.
A portion of sales is related to products designed to meet customer specific requirements. These products typically have stricter tolerances making them useful to the specific customer requesting the product and to customers with similar or less stringent requirements. The Company recognizes revenue when title to the products transfers to the customer.
A portion of sales is made to distributors under agreements allowing certain rights of return and price protection on unsold merchandise held by distributors. The Company’s distributor policy includes inventory price protection and “ship-from-stock and debit” (“SFSD”) programs common in the industry.
KEMET’s SFSD program provides authorized distributors with the flexibility to meet marketplace prices by allowing them, upon a pre-approved case-by-case basis, to adjust their purchased inventory cost to correspond with current market demand. Requests for SFSD adjustments are considered on an individual basis, require a pre-approved cost adjustment quote from their local KEMET sales representative and apply only to a specific customer, part, specified special price amount, specified quantity, and are only valid for a specific period of time. To estimate potential SFSD adjustments corresponding with current period sales, KEMET records a sales reserve based on historical SFSD credits, distributor inventory levels, and certain accounting assumptions, all of which are reviewed quarterly.
Most of the Company’s distributors have the right to return to KEMET a certain portion of the purchased inventory, which, in general, does not exceed
6%
of their purchases from the previous fiscal quarter. KEMET estimates future returns based on historical return patterns and records a corresponding allowance on the Condensed Consolidated Balance Sheets. The Company also offers volume based rebates on a case-by-case basis to certain customers in each of the Company’s sales channels.
The establishment of sales allowances is recognized as a component of the line item “Net sales” on the Condensed Consolidated Statements of Operations, while the associated reserves are included in the line item “Accounts receivable, net” on the Condensed Consolidated Balance Sheets. Estimates used in determining sales allowances are subject to various factors. This includes, but is not limited to, changes in economic conditions, pricing changes, product demand, inventory levels in the supply chain, the effects of technological change, and other variables that might result in changes to the Company’s estimates.
The Company provides a limited warranty to customers that the Company’s products meet certain specifications. The warranty period is generally limited to
one year
, and the Company’s liability under the warranty is generally limited to a replacement of the product or refund of the purchase price of the product. Warranty costs as a percentage of net sales were less
than
1.0%
for the
quarters and six-month periods ended
September 30, 2016
and
2015
. The Company recognizes warranty costs when they are both probable and reasonably estimable.
Note
2
. Debt
A summary of debt is as follows (amounts in thousands):
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September 30,
2016
|
|
March 31,
2016
|
10.5% Senior Notes, net (1)
|
$
|
352,217
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|
|
$
|
353,952
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|
Revolving line of credit
|
33,881
|
|
|
33,881
|
|
Total debt
|
386,098
|
|
|
387,833
|
|
Current maturities
|
—
|
|
|
(2,000
|
)
|
Total long-term debt
|
$
|
386,098
|
|
|
$
|
385,833
|
|
(1) As noted in Note 1, “Basis of Financial Statements Presentation,” ASU No. 2015-03, Interest - Imputation of Interest, was adopted as of April 1, 2016. As such, debt issuance cost, if any, is included within the respective debt balance. Amounts shown are net of premium and debt issuance costs of
$0.8 million
and
$1.0 million
as of
September 30, 2016
and
March 31, 2016
, respectively which reduce the 10.5% Senior Notes balance.
The line item “Interest expense” on the Condensed Consolidated Statements of Operations for the
quarters and six-month periods ended
September 30, 2016
and
2015
, consists of the following (amounts in thousands):
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Quarters Ended September 30,
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Six-Month Periods Ended September 30,
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2016
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2015
|
|
2016
|
|
2015
|
Contractual interest expense
|
$
|
9,688
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|
|
$
|
9,784
|
|
|
$
|
19,398
|
|
|
$
|
19,570
|
|
Capitalized interest
|
(51
|
)
|
|
(236
|
)
|
|
(103
|
)
|
|
(276
|
)
|
Amortization of debt issuance costs
|
348
|
|
|
348
|
|
|
696
|
|
|
696
|
|
Amortization of debt (premium) discount
|
(200
|
)
|
|
(185
|
)
|
|
(399
|
)
|
|
(366
|
)
|
Imputed interest on acquisition-related obligations
|
40
|
|
|
54
|
|
|
81
|
|
|
107
|
|
Interest expense on capital lease
|
85
|
|
|
46
|
|
|
160
|
|
|
93
|
|
Total interest expense
|
$
|
9,910
|
|
|
$
|
9,811
|
|
|
$
|
19,833
|
|
|
$
|
19,824
|
|
Revolving Line of Credit
On May 2, 2016, the Loan and Security Agreement dated September 30, 2010, as amended, by and among KEMET Electronics Corporation (“KEC”), KEMET Electronics Marketing (S) Pte. Ltd., KEMET Foil Manufacturing, LLC (“KEMET Foil”), KEMET Blue Powder Corporation (“KEMET Blue Powder”), The Forest Electric Company and the financial institutions party thereto (the “Loan and Security Agreement”), was amended and, as a result, the revolving credit facility increased to
$65.0 million
. The Company had the following activity for the
six-month period ended September 30, 2016
and resulting balances under the revolving line of credit (amounts in thousands, excluding percentages):
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March 31,
2016
|
|
Six-Month Period Ended September 30, 2016
|
|
September 30,
2016
|
|
Outstanding Borrowings
|
|
Additional Borrowings
|
|
Repayments
|
|
Outstanding Borrowings
|
|
Rate (1) (2)
|
|
Due Date
|
U.S. Facility
|
$
|
19,881
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
19,881
|
|
|
4.750
|
%
|
|
December 19, 2019
|
Singapore Facility
|
|
|
|
|
|
|
|
|
|
|
|
Singapore Borrowing 1 (3)
|
12,000
|
|
|
—
|
|
|
—
|
|
|
12,000
|
|
|
3.375
|
%
|
|
November 19, 2016
|
Singapore Borrowing 2 (3)
|
2,000
|
|
|
—
|
|
|
—
|
|
|
2,000
|
|
|
3.375
|
%
|
|
January 9, 2017
|
Total Facilities
|
$
|
33,881
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
33,881
|
|
|
|
|
|
______________________________________________________________________________
(1) For U.S. borrowings, Base Rate plus
1.50%
, as defined in the Loan and Security Agreement.
(2) For Singapore borrowings, London Interbank Offer Rate (“LIBOR”), plus a spread of
2.50%
as of
September 30, 2016
.
(3) The Company has the intent and ability to extend the due date on the Singapore borrowings.
As of
September 30, 2016
, these were the only borrowings under the revolving line of credit, and the Company’s available borrowing capacity under the Loan and Security Agreement was
$31.1 million
.
10.5% Senior Notes
On May 10, 2016, the Company repurchased and retired
$2.0 million
of its
10.5%
Senior Notes due May 1, 2018 (the “
10.5%
Senior Notes”). As of
September 30, 2016
and
March 31, 2016
, the Company had outstanding
$353.0 million
and
$355.0 million
, respectively in aggregate principal amount of the Company’s
10.5%
Senior Notes. The Company had interest payable related to the
10.5%
Senior Notes included in the line item “Accrued expenses” on its Condensed Consolidated balance sheets of
$15.4 million
and
$15.5 million
as of
September 30, 2016
and
March 31, 2016
, respectively.
Note
3
. Impairment charges
In the quarter ended
September 30, 2016
we recorded a write down of long-lived assets of
$6.2 million
due to the following two actions.
On August 31, 2016, KEMET Electronics Corporation, a wholly-owned subsidiary of KEMET made the decision to shut-down operations of its wholly-owned subsidiary, KEMET Foil Manufacturing, LLC (“KFM”). Operations at KFM’s Knoxville, Tennessee plant ceased as of October 31, 2016. KFM supplied formed foil to the Company’s Film and Electrolytic Business Group (“Film and Electrolytic”), as well as to certain third party customers. The Company anticipates that Film and Electrolytic will achieve raw material cost savings by purchasing its formed foil from suppliers that have the advantage of lower utility costs. During the second fiscal quarter ending September 30, 2016, Film and Electrolytic recorded impairment charges totaling
$4.1 million
comprised of
$3.0 million
for the write down of property plant and equipment and
$1.1 million
for the write down of intangible assets. The impairment charges are recorded on the Condensed Consolidated Statements of Operations line item “Write down of long-lived assets”. In addition, the Company has accrued severance charges and restructuring costs described in Note
4
, “Restructuring Charges.”
The Solid Capacitor Business Group (“Solid Capacitors”) initiated a plan to relocate its K-Salt operations from a leased facility equipment to its existing Matamoros, Mexico facility. Impairment charges of approximately
$2.1 million
are recorded on the Condensed Consolidated Statements of Operations line item “Write down of long-lived assets”. In addition, the Company has accrued severance charges described in Note
4
, “Restructuring Charges” and expects to incur equipment relocation costs of approximately
$1.2 million
in the third quarter of fiscal year 2017.
Note
4
. 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
|
|
|
$
|
—
|
|
Note
5
. Comprehensive Income (Loss) and Accumulated Other Comprehensive Income
Changes in Accumulated Other Comprehensive Income (Loss) (“AOCI”) for the quarters ended
September 30, 2016
and
2015
include the following components (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency
Translation (1)
|
|
Post-Retirement
Benefit Plan Adjustments
|
|
Defined Benefit
Pension Plans,
Net of Tax (2)
|
|
Ownership Share of
Equity Method
Investees’ Other
Comprehensive
Income (Loss)
|
|
Foreign Exchange Contracts
|
|
Net Accumulated
Other
Comprehensive
Income (Loss)
|
Balance at June 30, 2016
|
$
|
(16,658
|
)
|
|
$
|
1,072
|
|
|
$
|
(14,998
|
)
|
|
$
|
(12,123
|
)
|
|
$
|
(1,232
|
)
|
|
$
|
(43,939
|
)
|
Other comprehensive income (loss) before reclassifications
|
(689
|
)
|
|
—
|
|
|
—
|
|
|
(179
|
)
|
|
(1,981
|
)
|
|
(2,849
|
)
|
Amounts reclassified out of AOCI
|
—
|
|
|
(43
|
)
|
|
164
|
|
|
—
|
|
|
1,140
|
|
|
1,261
|
|
Other comprehensive income (loss)
|
(689
|
)
|
|
(43
|
)
|
|
164
|
|
|
(179
|
)
|
|
(841
|
)
|
|
(1,588
|
)
|
Balance at September 30, 2016
|
$
|
(17,347
|
)
|
|
$
|
1,029
|
|
|
$
|
(14,834
|
)
|
|
$
|
(12,302
|
)
|
|
$
|
(2,073
|
)
|
|
$
|
(45,527
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency
Translation
|
|
Post-Retirement
Benefit Plan Adjustments
|
|
Defined Benefit
Pension Plans,
Net of Tax (2)
|
|
Ownership Share of
Equity Method
Investees’ Other
Comprehensive
Income (Loss)
|
|
Foreign Exchange Contracts
|
|
Net Accumulated
Other
Comprehensive
Income (Loss)
|
Balance at June 30, 2015
|
$
|
(6,267
|
)
|
|
$
|
1,119
|
|
|
$
|
(20,196
|
)
|
|
$
|
605
|
|
|
$
|
(1,944
|
)
|
|
$
|
(26,683
|
)
|
Other comprehensive income (loss) before reclassifications
|
(4,466
|
)
|
|
—
|
|
|
—
|
|
|
(3,674
|
)
|
|
(1,742
|
)
|
|
(9,882
|
)
|
Amounts reclassified out of AOCI
|
—
|
|
|
(39
|
)
|
|
245
|
|
|
—
|
|
|
972
|
|
|
1,178
|
|
Other comprehensive income (loss)
|
(4,466
|
)
|
|
(39
|
)
|
|
245
|
|
|
(3,674
|
)
|
|
(770
|
)
|
|
(8,704
|
)
|
Balance at September 30, 2015
|
$
|
(10,733
|
)
|
|
$
|
1,080
|
|
|
$
|
(19,951
|
)
|
|
$
|
(3,069
|
)
|
|
$
|
(2,714
|
)
|
|
$
|
(35,387
|
)
|
Changes in AOCI for the
six-month periods ended September 30, 2016
and
2015
include the following components (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency
Translation (1)
|
|
Post-Retirement
Benefit Plan Adjustments
|
|
Defined Benefit
Pension Plans,
Net of Tax (2)
|
|
Ownership Share of
Equity Method
Investees’ Other
Comprehensive
Income (Loss)
|
|
Foreign Exchange Contracts
|
|
Net Accumulated
Other
Comprehensive
Income (Loss)
|
Balance at March 31, 2016
|
$
|
(10,272
|
)
|
|
$
|
1,114
|
|
|
$
|
(15,161
|
)
|
|
$
|
(6,739
|
)
|
|
$
|
(367
|
)
|
|
$
|
(31,425
|
)
|
Other comprehensive income (loss) before reclassifications
|
(7,075
|
)
|
|
—
|
|
|
—
|
|
|
(5,563
|
)
|
|
(4,599
|
)
|
|
(17,237
|
)
|
Amounts reclassified out of AOCI
|
—
|
|
|
(85
|
)
|
|
327
|
|
|
—
|
|
|
2,893
|
|
|
3,135
|
|
Other comprehensive income (loss)
|
(7,075
|
)
|
|
(85
|
)
|
|
327
|
|
|
(5,563
|
)
|
|
(1,706
|
)
|
|
(14,102
|
)
|
Balance at September 30, 2016
|
$
|
(17,347
|
)
|
|
$
|
1,029
|
|
|
$
|
(14,834
|
)
|
|
$
|
(12,302
|
)
|
|
$
|
(2,073
|
)
|
|
$
|
(45,527
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency
Translation
|
|
Post-Retirement
Benefit Plan Adjustments
|
|
Defined Benefit
Pension Plans,
Net of Tax (2)
|
|
Ownership Share of
Equity Method
Investees’ Other
Comprehensive
Income (Loss)
|
|
Foreign Exchange Contracts
|
|
Net Accumulated
Other
Comprehensive
Income (Loss)
|
Balance at March 31, 2015
|
$
|
(12,132
|
)
|
|
$
|
1,159
|
|
|
$
|
(20,363
|
)
|
|
$
|
1,537
|
|
|
$
|
1,003
|
|
|
$
|
(28,796
|
)
|
Other comprehensive income (loss) before reclassifications
|
1,399
|
|
|
—
|
|
|
—
|
|
|
(4,606
|
)
|
|
(5,193
|
)
|
|
(8,400
|
)
|
Amounts reclassified out of AOCI
|
—
|
|
|
(79
|
)
|
|
412
|
|
|
—
|
|
|
1,476
|
|
|
1,809
|
|
Other comprehensive income (loss)
|
1,399
|
|
|
(79
|
)
|
|
412
|
|
|
(4,606
|
)
|
|
(3,717
|
)
|
|
(6,591
|
)
|
Balance at September 30, 2015
|
$
|
(10,733
|
)
|
|
$
|
1,080
|
|
|
$
|
(19,951
|
)
|
|
$
|
(3,069
|
)
|
|
$
|
(2,714
|
)
|
|
$
|
(35,387
|
)
|
|
|
(1)
|
Due primarily to the Company’s valuation allowance on deferred tax assets, there were
no
significant deferred tax effects associated with the cumulative currency translation gains and losses during the
quarter and six-month periods ended
September 30, 2016
.
|
|
|
(2)
|
Ending balance is net of tax of
$2.0 million
and
$2.2 million
as of
September 30, 2016
and
September 30, 2015
, respectively.
|
Note
6
. Investment in NEC TOKIN
On March 12, 2012, KEC, a wholly owned subsidiary of the Company, entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) with NEC TOKIN Corporation (“NEC TOKIN”), a manufacturer of tantalum capacitors, electro-magnetic, electro-mechanical and access devices, to acquire
51%
of the common stock of NEC TOKIN (which represented a
34%
economic interest, as calculated based on the number of common shares held by KEC, directly and indirectly, in proportion to the aggregate number of outstanding common and convertible preferred shares of NEC TOKIN as of such date) (the “Initial Purchase”) from NEC Corporation (“NEC”) of Japan. The transaction closed on February 1, 2013, at which time KEC paid a purchase price of
$50.0 million
for new shares of common stock of NEC TOKIN (the “Initial Closing”). The Company accounts for its investment in NEC TOKIN using the equity method for a non-consolidated variable interest entity since KEC does not have the power to direct significant activities of NEC TOKIN. The Company believes that the NEC TOKIN convertible preferred stock represents in-substance common stock of NEC TOKIN and, as a result, its method of calculating KEC’s economic basis in NEC TOKIN is the appropriate basis on which to recognize its share of the earnings or loss of NEC TOKIN.
In connection with KEC’s execution of the Stock Purchase Agreement, KEC entered into a Stockholders’ Agreement (the “Stockholders’ Agreement”) with NEC TOKIN and NEC, which provides for restrictions on transfers of NEC TOKIN’s capital stock, certain tag-along and first refusal rights on transfer, restrictions on NEC’s ability to convert the preferred stock of NEC TOKIN held by it, certain management services to be provided to NEC TOKIN by KEC (or an affiliate of KEC) and certain board representation rights. KEC holds
four
of
seven
NEC TOKIN director positions. However, NEC has significant board rights.
Concurrent with execution of the Stock Purchase Agreement and the Stockholders’ Agreement, KEC entered into an Option Agreement (the “Option Agreement”) with NEC, which was amended on August 29, 2014, whereby KEC had the right to purchase additional shares of NEC TOKIN common stock from NEC TOKIN for a purchase price of
$50.0 million
resulting in an economic interest of approximately
49%
while maintaining ownership of
51%
of NEC TOKIN’s common stock (the “First Call Option”) by providing notice of the First Call Option between the Initial Closing and April 30, 2015. Upon providing such First Call Option notice, but not before April 1, 2015, KEC could also have exercised a second option to purchase all outstanding capital stock of NEC TOKIN from its stockholders, primarily NEC, for a purchase price based on the greater of
six
times LTM EBITDA (as defined in the Option Agreement) less the previous payments and certain other adjustments, or the outstanding amount of NEC TOKIN’s debt obligation to NEC (the “Second Call Option”) by providing notice of the Second Call Option by May 31, 2018. The First and Second Call Options expired on April 30, 2015 without being exercised.
Through May 31, 2018, NEC may require KEC to purchase all outstanding capital stock of NEC TOKIN from its stockholders, primarily NEC (the “Put Option”), provided that KEC’s payment of the Put Option price is permitted under the
10.5%
Senior Notes and Loan and Security Agreement. However, in the event that KEC issues new debt securities principally to refinance its outstanding
10.5%
Senior Notes due 2018 and its currently outstanding credit agreement, including amounts to pay related fees and expenses and to use for general corporate purposes (“Refinancing Notes”), prior to NEC’s delivery of its notification of exercise of the Put Option, then the earliest date NEC may exercise the Put Option is automatically extended to the day immediately following the final scheduled maturity date of such Refinancing Notes, or in the event such Refinancing Notes are redeemed in full prior to such final scheduled maturity date, then on the day immediately following the date of such full redemption, but in any event beginning no later than November 1, 2019. If not previously exercised, the Put Option will expire on October 31, 2023.
The purchase price for the Put Option will be based on the greater of
six
times LTM EBITDA less previous payments and certain other adjustments, or the outstanding amount of NEC TOKIN’s debt obligation to NEC as of the date the Put Option is exercised. The purchase price for the Put Option is reduced by the amount of NEC TOKIN’s debt obligation to NEC which KEC will assume. The determination of the purchase price could be modified in the event there is a disagreement between NEC and KEC under the Stockholders’ Agreement.
The Company has marked the option to fair value and in the
quarter and six-month periods ended
September 30, 2016
recognized a
$1.6 million
gain and a
$10.4 million
loss, respectively, which was included on the line item “Change in value of the NEC TOKIN option” in the Condensed Consolidated Statement of Operations. The line item “Other non-current obligations” on the Condensed Consolidated Balance Sheets includes
$31.0 million
and
$20.6 million
as of
September 30, 2016
and
March 31, 2016
, respectively, related to the respective fair value of the Put Option.
KEC’s total investment in NEC TOKIN including the net call derivative described above on February 1, 2013, the closing date of the acquisition, was
$54.5 million
which includes
$50.0 million
cash consideration plus approximately
$4.5
million
in transaction expenses (fees for legal, accounting, due diligence, investment banking and various other services necessary to complete the transactions). The Company has made an allocation of the aggregate purchase price, which was based upon estimates that the Company believes are reasonable.
Summarized financial information for NEC TOKIN follows (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
September 30,
2016
|
|
March 31,
2016
|
Current assets
|
$
|
249,818
|
|
|
$
|
240,427
|
|
Non-current assets
|
258,333
|
|
|
260,614
|
|
Current liabilities
|
171,193
|
|
|
179,360
|
|
Non-current liabilities
|
368,011
|
|
|
335,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters Ended September 30,
|
|
Six-Month Periods Ended September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Sales
|
$
|
126,589
|
|
|
$
|
117,358
|
|
|
$
|
247,099
|
|
|
$
|
232,092
|
|
Gross profit
|
27,055
|
|
|
25,055
|
|
|
53,601
|
|
|
49,723
|
|
Net income (loss)
|
2,012
|
|
|
2,007
|
|
|
4,362
|
|
|
7,261
|
|
A reconciliation between NEC TOKIN’s net income (loss) and KEC’s equity investment income (loss) follows (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters Ended September 30,
|
|
Six-Month Periods Ended September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
NEC TOKIN net income (loss)
|
$
|
2,012
|
|
|
$
|
2,007
|
|
|
4,362
|
|
|
7,261
|
|
KEC’s economic interest %
|
34
|
%
|
|
34
|
%
|
|
34
|
%
|
|
34
|
%
|
Equity income (loss) from NEC TOKIN before adjustments
|
684
|
|
|
682
|
|
|
1,483
|
|
|
2,469
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
Amortization and depreciation
|
(581
|
)
|
|
(488
|
)
|
|
(1,125
|
)
|
|
(624
|
)
|
Inventory profit elimination
|
78
|
|
|
(32
|
)
|
|
46
|
|
|
(98
|
)
|
Equity income (loss) from NEC TOKIN
|
$
|
181
|
|
|
$
|
162
|
|
|
$
|
404
|
|
|
$
|
1,747
|
|
A reconciliation between NEC TOKIN’s net assets and KEC’s investment in NEC TOKIN follows (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
September 30,
2016
|
|
March 31,
2016
|
Investment in NEC TOKIN
|
$
|
15,174
|
|
|
$
|
20,334
|
|
Purchase price accounting basis adjustments:
|
|
|
|
Property, plant and equipment (1)
|
3,565
|
|
|
3,365
|
|
Technology (1)
|
(10,413
|
)
|
|
(10,134
|
)
|
Long-term debt (1)
|
(1,684
|
)
|
|
(1,975
|
)
|
Goodwill
|
(8,377
|
)
|
|
(7,555
|
)
|
Indemnity asset for legal investigation
|
(8,500
|
)
|
|
(8,500
|
)
|
Inventory profit elimination (2)
|
326
|
|
|
371
|
|
Other
|
(650
|
)
|
|
(604
|
)
|
KEC’s 34% economic interest in NEC TOKIN’s net assets
|
$
|
(10,559
|
)
|
|
$
|
(4,698
|
)
|
(1) Amortized over the estimated lives.
(2) Adjusted each period for any activity.
As of
September 30, 2016
, KEC’s maximum loss exposure as a result of its investments in NEC TOKIN is limited to the aggregate of the carrying value of the investment, any accounts receivable balance due from NEC TOKIN and obligations in the Put Option.
Summarized transactions between KEC and NEC TOKIN are as follows (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters Ended September 30,
|
|
Six-Month Periods Ended September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
KEC’s sales to NEC TOKIN
|
$
|
5,135
|
|
|
$
|
4,474
|
|
|
$
|
8,282
|
|
|
$
|
9,330
|
|
NEC TOKIN’s sales to KEMET
|
1,889
|
|
|
2,112
|
|
|
3,761
|
|
|
3,590
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2016
|
|
March 31,
2016
|
Accounts receivable
|
$
|
3,708
|
|
|
$
|
5,220
|
|
Accounts payable
|
792
|
|
|
1,019
|
|
Management service agreement receivable (1)
|
649
|
|
|
748
|
|
(1) In accordance with the Stockholders’ Agreement, KEC entered into a management services agreement with NEC TOKIN to provide services for which KEC is being reimbursed.
Beginning in March 2014, NEC TOKIN and certain of its subsidiaries received inquiries, requests for information and other communications from government authorities in China, the United States, the European Commission, Japan, South Korea Taiwan, Singapore and Brazil concerning alleged anti-competitive activities within the capacitor industry.
On September 2, 2015, the United States Department of Justice announced a plea agreement with NEC TOKIN in which NEC TOKIN agreed to plead guilty to a one-count felony charge of unreasonable restraint of interstate and foreign trade and commerce in violation of Section 1 of the Sherman Act, and to pay a criminal fine of
$13.8 million
. The plea agreement was approved by the United States District Court, Northern District of California, on January 21, 2016. The fine is payable over
five years
in
six
installments of
$2.3 million
each, plus accrued interest. The first payment was made in February 2016 and the next payment is due in February 2017.
On December 9, 2015, the Taiwan Fair Trade Commission (“TFTC”) publicly announced that NEC TOKIN would be fined
1,218.2 million
New Taiwan dollars (“NTD”) (approximately U.S.
$38.8 million
) for violations of the Taiwan Fair Trade Act. Subsequently, the TFTC has reduced the fine to
NTD609.1 million
(approximately U.S.
$19.4 million
). In February 2016, NEC TOKIN commenced an administrative suit in Taiwan, challenging the validity of the amount of the fine.
On March 29, 2016, the Japan Fair Trade Commission published an order by which NEC TOKIN was fined ¥
127.2 million
(approximately U.S.
$1.3 million
) for violation of the Japanese Antimonopoly Act. Payment of the fine was made on October 31, 2016.
On July 26, 2016, Brazil’s Administrative Council for Economic Defense approved a cease and desist agreement with NEC TOKIN in which NEC TOKIN made a financial contribution of Brazilian real
601 thousand
(approximately U.S.
$0.2 million
) to Brazil’s Fund for Defense of Diffuse Rights.
On May 2, 2016, NEC TOKIN reached a preliminary settlement, followed by definitive settlement agreements on July 15, 2016 which are subject to court approval, in
two
antitrust suits filed with the United States District Court, Northern District of California as In re: Capacitors Antitrust Litigation, No. 3:14-cv-03264-JD (the “Class Action Suits”). Pursuant to the terms of the settlement agreements, in consideration of the release of NEC TOKIN and its subsidiaries (including NEC TOKIN America, Inc.) from claims asserted in the Class Action Suits, NEC TOKIN will pay an aggregate
$37.3 million
to a settlement class of direct purchasers of capacitors and a settlement class of indirect purchasers of capacitors. Each of the respective class payments is payable in
five
installments, the first of which became due on July 29, 2016, the next
three
of which are due each year thereafter on the anniversary of the initial payment, and the final payment is due by December 31, 2019. NEC TOKIN has paid the initial installment payments into the two plaintiff classes’ respective escrow accounts.
The remaining governmental investigations are continuing at various stages. As of
September 30, 2016
, NEC TOKIN’s accrual for antitrust and civil litigation claims totaled
$72.7 million
. This amount includes the best estimate of losses
which may result from the ongoing antitrust investigations, civil litigation and claims. However, the actual outcomes could differ from what has been accrued.
Pursuant to the Stock Purchase Agreement, NEC is required to indemnify NEC TOKIN and/or KEC for any breaches by NEC TOKIN or NEC of certain representations, warranties and covenants in the Stock Purchase Agreement. NEC’s aggregate liability for indemnification claims is limited to
$25.0 million
. Accordingly, KEMET, under equity method accounting, has established an indemnity asset in the amount of
$8.5 million
(based upon our
34%
economic interest in NEC TOKIN). However, pursuant to the Stock Purchase Agreement, claims arising out of fraud or criminal conduct are not limited by the
$25.0 million
indemnification cap, and for such claims the claimant retains all remedies available in equity or at law.
Note
7
. Segment and Geographic Information
The Company is organized into
two
business groups: Solid Capacitors and Film and Electrolytic. The business groups are responsible for their respective manufacturing sites as well as their respective research and development efforts. The Company does not allocate indirect Selling, general and administrative (“SG&A”) or shared Research and development (“R&D”) expenses to the business groups.
Solid Capacitors
Operating in
nine
manufacturing sites in the United States, Mexico and China, Solid Capacitors primarily produces tantalum, aluminum polymer, and ceramic capacitors which are sold globally. Solid Capacitors also produces tantalum powder used in the production of tantalum capacitors and has a product innovation center in the United States.
Film and Electrolytic
Operating in
ten
manufacturing sites throughout Europe, Asia, and the United States, Film and Electrolytic primarily produces film, paper, and electrolytic capacitors which are sold globally. Film and Electrolytic also manufactures etched foils utilized as a core component in the manufacture of electrolytic capacitors. In addition, this business group has product innovation centers in the United Kingdom, Italy, Germany and Sweden.
The following table reflects each business group’s net sales, operating income (loss), depreciation and amortization expenses and sales by region for the
quarters and six-month periods ended
September 30, 2016
and
2015
(amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters Ended September 30,
|
|
Six-Month Periods Ended September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
Solid Capacitors
|
$
|
142,641
|
|
|
$
|
141,284
|
|
|
$
|
284,585
|
|
|
$
|
280,961
|
|
Film and Electrolytic
|
44,667
|
|
|
44,839
|
|
|
87,658
|
|
|
92,752
|
|
|
$
|
187,308
|
|
|
$
|
186,123
|
|
|
$
|
372,243
|
|
|
$
|
373,713
|
|
Operating income (loss) (1) (2):
|
|
|
|
|
|
|
|
|
|
|
|
Solid Capacitors
|
$
|
35,410
|
|
|
$
|
33,979
|
|
|
$
|
70,489
|
|
|
$
|
64,012
|
|
Film and Electrolytic
|
(7,096
|
)
|
|
2,217
|
|
|
(8,563
|
)
|
|
2,929
|
|
Corporate
|
(25,264
|
)
|
|
(22,209
|
)
|
|
(49,978
|
)
|
|
(51,711
|
)
|
|
$
|
3,050
|
|
|
$
|
13,987
|
|
|
$
|
11,948
|
|
|
$
|
15,230
|
|
Depreciation and amortization expense:
|
|
|
|
|
|
|
|
|
|
|
|
Solid Capacitors
|
$
|
5,147
|
|
|
$
|
5,178
|
|
|
$
|
10,565
|
|
|
$
|
10,934
|
|
Film and Electrolytic
|
2,836
|
|
|
2,928
|
|
|
5,551
|
|
|
5,870
|
|
Corporate
|
1,457
|
|
|
1,159
|
|
|
2,760
|
|
|
2,378
|
|
|
$
|
9,440
|
|
|
$
|
9,265
|
|
|
$
|
18,876
|
|
|
$
|
19,182
|
|
__________________
(1)
Restructuring charges included in Operating income (loss) are as follows (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters Ended September 30,
|
|
Six-Month Periods Ended September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Restructuring charges:
|
|
|
|
|
|
|
|
|
|
|
|
Solid Capacitors
|
$
|
558
|
|
|
$
|
570
|
|
|
$
|
694
|
|
|
$
|
802
|
|
Film and Electrolytic
|
3,115
|
|
|
(749
|
)
|
|
3,664
|
|
|
537
|
|
Corporate
|
325
|
|
|
202
|
|
|
328
|
|
|
508
|
|
|
$
|
3,998
|
|
|
$
|
23
|
|
|
$
|
4,686
|
|
|
$
|
1,847
|
|
(2)
Write down of long-lived assets included in Operating income (loss) are as follows (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters Ended September 30,
|
|
Six-Month Periods Ended September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Write down of Long-lived Assets
|
|
|
|
|
|
|
|
|
|
|
|
Solid Capacitors
|
$
|
2,076
|
|
|
$
|
—
|
|
|
$
|
2,076
|
|
|
$
|
—
|
|
Film and Electrolytic
|
4,117
|
|
|
—
|
|
|
4,117
|
|
|
—
|
|
Corporate
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
$
|
6,193
|
|
|
$
|
—
|
|
|
$
|
6,193
|
|
|
$
|
—
|
|
___________________
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters Ended September 30,
|
|
Six-Month Periods Ended September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Sales by region:
|
|
|
|
|
|
|
|
|
|
|
|
North and South America (“Americas”)
|
$
|
56,781
|
|
|
$
|
58,080
|
|
|
$
|
111,882
|
|
|
$
|
114,114
|
|
Europe, Middle East, Africa (“EMEA”)
|
60,047
|
|
|
59,458
|
|
|
120,533
|
|
|
121,015
|
|
Asia and Pacific Rim (“APAC”)
|
70,480
|
|
|
68,585
|
|
|
139,828
|
|
|
138,584
|
|
|
$
|
187,308
|
|
|
$
|
186,123
|
|
|
$
|
372,243
|
|
|
$
|
373,713
|
|
Note
8
. Defined Benefit Pension and Other Postretirement Benefit Plans
The Company sponsors
six
defined benefit pension plans in Europe,
one
plan in Singapore and
two
plans in Mexico. In addition, the Company sponsors a post-retirement plan in the United States. Costs recognized for benefit plans are recorded using estimated amounts which may change as actual costs for the fiscal year are determined.
The components of net periodic benefit (income) costs relating to the Company’s pension and other postretirement benefit plans are as follows for the quarters ended
September 30, 2016
and
2015
(amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
Post-retirement Benefit Plan
|
|
Quarters Ended September 30,
|
|
Quarters Ended September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Net service cost
|
$
|
347
|
|
|
$
|
404
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest cost
|
358
|
|
|
338
|
|
|
4
|
|
|
6
|
|
Expected return on net assets
|
(94
|
)
|
|
(105
|
)
|
|
—
|
|
|
—
|
|
Amortization:
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial (gain) loss
|
115
|
|
|
197
|
|
|
(43
|
)
|
|
(39
|
)
|
Prior service cost
|
21
|
|
|
15
|
|
|
—
|
|
|
—
|
|
Total net periodic benefit (income) costs
|
$
|
747
|
|
|
$
|
849
|
|
|
$
|
(39
|
)
|
|
$
|
(33
|
)
|
The components of net periodic benefit (income) costs relating to the Company’s pension and other postretirement benefit plans are as follows for the
six-month periods ended September 30, 2016
and
2015
(amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
Post-retirement Benefit Plan
|
|
Six-Month Periods Ended September 30,
|
|
Six-Month Periods Ended September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Net service cost
|
$
|
693
|
|
|
$
|
1,121
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest cost
|
717
|
|
|
675
|
|
|
8
|
|
|
12
|
|
Expected return on net assets
|
(188
|
)
|
|
(210
|
)
|
|
—
|
|
|
—
|
|
Amortization:
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial (gain) loss
|
230
|
|
|
394
|
|
|
(85
|
)
|
|
(79
|
)
|
Prior service cost
|
42
|
|
|
29
|
|
|
—
|
|
|
—
|
|
Total net periodic benefit (income) costs
|
$
|
1,494
|
|
|
$
|
2,009
|
|
|
$
|
(77
|
)
|
|
$
|
(67
|
)
|
In fiscal year
2017
, the Company expects to contribute up to
$1.7 million
to the pension plans,
$0.5 million
of which has been contributed as of
September 30, 2016
. For the postretirement benefit plan, the Company’s policy is to pay benefits as costs are incurred.
Note
9
. Stock-based Compensation
As of
September 30, 2016
, the 2014 Amendment and Restatement of the KEMET Corporation 2011 Omnibus Equity Incentive Plan (the “2011 Incentive Plan”), approved by the Company’s stockholders in 2014, is the only plan the Company has to issue equity based awards to executives and key employees. Upon adoption of the 2011 Incentive Plan, no further awards were permitted to be granted under the Company’s prior plans, including the 1992 Key Employee Stock Option Plan, the 1995 Executive Stock Option Plan, and the 2004 Long-Term Equity Incentive Plan (collectively, the “Prior Plans”).
The 2011 Incentive Plan authorized the grant of up to
7.4 million
shares of the Company’s Common Stock, comprised of
6.6 million
shares under the 2011 Incentive Plan and
0.8 million
shares remaining from the Prior Plans and authorizes the Company to provide equity-based compensation in the form of:
|
|
•
|
stock options, including incentive stock options, entitling the optionee to favorable tax treatment under Section 422 of the Code;
|
|
|
•
|
stock appreciation rights;
|
|
|
•
|
restricted stock and restricted stock units (“RSUs”);
|
|
|
•
|
other share-based awards; and,
|
Options issued under these plans vest within
one
to
three
years and expire
ten
years from the grant date. The Company grants RSUs to members of the Board of Directors, the Chief Executive Officer and key management. Once vested and settled, RSUs are converted into restricted stock. For members of the Board of Directors and senior personnel, such restricted stock cannot be sold until
90
days after termination of service with the Company, or until the individual achieves the targeted ownership under the Company’s stock ownership guidelines, and only to the extent that such ownership level exceeds the target. Compensation expense is recognized over the respective vesting periods.
Historically, the Board of Directors of the Company has approved annual Long Term Incentive Plans (“LTIP”) which cover
two
year periods and are primarily based upon the achievement of an Adjusted EBITDA range for the two-year period. At the time of the award, the individual plans entitle the participants to receive cash or RSUs, or a combination of both as determined by the Company’s Board of Directors. The 2013/2014 LTIP, 2014/2015 LTIP, 2015/2016 LTIP, 2016/2017 LTIP, and 2017/2018 LTIP also awarded RSUs which vest over the course of
three
years from the anniversary of the establishment of the plan and are not subject to a performance metric. The Company assesses the likelihood of meeting the Adjusted EBITDA financial metric on a quarterly basis and adjusts compensation expense to match expectations. Any related liability is reflected in the line item “Accrued expenses” on the Condensed Consolidated Balance Sheets and any restricted stock unit commitment is reflected in the line item “Additional paid-in capital” on the Condensed Consolidated Balance Sheets.
On May 18, 2016, the Company granted RSUs under the 2017/2018 LTIP with a grant date fair value of
$2.46
that vests as follows (amounts in thousands):
|
|
|
|
|
Shares
|
May 18, 2017
|
202
|
|
May 18, 2018
|
202
|
|
May 18, 2019
|
209
|
|
Total shares granted
|
613
|
|
The following is the vesting schedule of RSUs under each respective LTIP, which vested during the
six-month period ended
September 30, 2016
(shares in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
2016/2017
|
|
2015/2016
|
|
2014/2015
|
Time-based award vested
|
|
187
|
|
|
111
|
|
|
130
|
|
Performance-based award vested
|
|
—
|
|
|
103
|
|
|
73
|
|
Restricted stock activity, excluding the LTIP activity discussed above, for the
six-month period ended
September 30, 2016
is as follows (amounts in thousands except fair value):
|
|
|
|
|
|
|
|
|
Shares
|
|
Weighted-
average
Fair Value on
Grant Date
|
Non-vested restricted stock at March 31, 2016
|
1,430
|
|
|
$
|
3.51
|
|
Granted
|
70
|
|
|
3.00
|
|
Vested
|
(103
|
)
|
|
2.22
|
|
Forfeited
|
(13
|
)
|
|
3.21
|
|
Non-vested restricted stock at September 30, 2016
|
1,384
|
|
|
$
|
3.59
|
|
The compensation expense associated with stock-based compensation for the quarters ended
September 30, 2016
and
2015
is recorded on the Condensed Consolidated Statements of Operations as follows (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended September 30, 2016
|
|
Quarter Ended September 30, 2015
|
|
Stock
Options
|
|
Restricted
Stock
|
|
LTIPs
|
|
Stock
Options
|
|
Restricted
Stock
|
|
LTIPs
|
Cost of sales
|
$
|
7
|
|
|
$
|
98
|
|
|
$
|
196
|
|
|
$
|
28
|
|
|
$
|
163
|
|
|
$
|
268
|
|
Selling, general and administrative expenses
|
7
|
|
|
343
|
|
|
404
|
|
|
26
|
|
|
350
|
|
|
433
|
|
Research and development
|
—
|
|
|
6
|
|
|
43
|
|
|
1
|
|
|
5
|
|
|
54
|
|
Total
|
$
|
14
|
|
|
$
|
447
|
|
|
$
|
643
|
|
|
$
|
55
|
|
|
$
|
518
|
|
|
$
|
755
|
|
The compensation expense associated with stock-based compensation for the
six-month periods ended September 30, 2016
and
2015
is recorded on the Condensed Consolidated Statements of Operations as follows (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six-Month Period Ended September 30, 2016
|
|
Six-Month Period Ended September 30, 2015
|
|
Stock
Options
|
|
Restricted
Stock
|
|
LTIPs
|
|
Stock
Options
|
|
Restricted
Stock
|
|
LTIPs
|
Cost of sales
|
$
|
18
|
|
|
$
|
288
|
|
|
$
|
379
|
|
|
$
|
61
|
|
|
$
|
315
|
|
|
$
|
496
|
|
Selling, general and administrative expenses
|
17
|
|
|
690
|
|
|
831
|
|
|
68
|
|
|
693
|
|
|
891
|
|
Research and development
|
1
|
|
|
11
|
|
|
97
|
|
|
3
|
|
|
11
|
|
|
69
|
|
Total
|
$
|
36
|
|
|
$
|
989
|
|
|
$
|
1,307
|
|
|
$
|
132
|
|
|
$
|
1,019
|
|
|
$
|
1,456
|
|
In the “Operating activities” section of the Condensed Consolidated Statements of Cash Flows, stock-based compensation expense was treated as an adjustment to Net income (loss) for the
quarters and six-month periods ended
September 30, 2016
, and
2015
.
No
stock options were exercised in the
six-month periods ended
September 30, 2016
and
September 30, 2015
.
Note
10
. Income Taxes
During the quarter ended
September 30, 2016
, the Company recognized
$0.8 million
of income tax expense related to foreign operations. During the
six-month period ended September 30, 2016
, the Company recognized
$2.6 million
of income tax expense related to foreign operations.
During the
quarter ended September 30, 2015
, the Company recognized
$1.4 million
of income tax expense, comprised of
$1.3 million
from foreign operations and
$0.1 million
from state income tax expense. During the
six-month period ended September 30, 2015
, the Company recognized
$1.2 million
of income tax expense, comprised of
$1.6 million
from foreign operations,
$0.6 million
of income tax benefit due to the reduction in the U.S. valuation allowance associated with the acquisition of IntelliData, Inc. (“IntelliData”), and
$0.2 million
of state income tax expense.
There was
no
U.S. federal income tax benefit from net operating losses for the
quarter and six-month periods ended
September 30, 2016
and
2015
due to a valuation allowance recorded on deferred tax assets.
Note
11
. Basic and Diluted Net Income (Loss) Per Common Share
The following table presents basic earnings per share (“EPS”) and diluted EPS (amounts in thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters Ended September 30,
|
|
Six-Month Periods Ended
September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Numerator:
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
$
|
(4,998
|
)
|
|
$
|
7,194
|
|
|
$
|
(17,203
|
)
|
|
$
|
(29,856
|
)
|
Denominator:
|
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding:
|
|
|
|
|
|
|
|
|
|
Basic
|
46,590
|
|
|
45,767
|
|
|
46,471
|
|
|
45,660
|
|
Assumed conversion of employee stock grants
|
—
|
|
|
217
|
|
|
—
|
|
|
—
|
|
Assumed conversion of warrants
|
—
|
|
|
4,020
|
|
|
—
|
|
|
—
|
|
Diluted
|
46,590
|
|
|
50,004
|
|
|
46,471
|
|
|
45,660
|
|
|
|
|
|
|
|
|
|
Net income (loss) per basic share
|
$
|
(0.11
|
)
|
|
$
|
0.16
|
|
|
$
|
(0.37
|
)
|
|
$
|
(0.65
|
)
|
|
|
|
|
|
|
|
|
Net income (loss) per diluted share
|
$
|
(0.11
|
)
|
|
$
|
0.14
|
|
|
$
|
(0.37
|
)
|
|
$
|
(0.65
|
)
|
Common stock equivalents that could potentially dilute net income (loss) per basic share in the future, but were not included in the computation of diluted earnings per share because the impact would have been anti-dilutive, are as follows (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters Ended September 30,
|
|
Six-Month Periods Ended September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Assumed conversion of employee stock grants
|
2,596
|
|
|
3,942
|
|
|
2,322
|
|
|
3,507
|
|
Assumed conversion of warrants
|
5,771
|
|
|
—
|
|
|
5,380
|
|
|
5,305
|
|
Note
12
: Derivatives
In fiscal year 2015, the Company began using certain derivative instruments (i.e., foreign exchange contracts) to reduce exposure to the volatility of foreign currencies impacting revenues and the costs of its products.
Certain operating expenses at the Company’s Mexican facilities are paid in Mexican pesos. In order to hedge a portion of these forecasted cash flows, the Company purchases foreign exchange contracts, with terms generally less than twelve months, to buy Mexican pesos for periods and amounts consistent with underlying cash flow exposures. These contracts are designated as cash flow hedges at inception and monitored for effectiveness on a routine basis. There were
$34.4 million
in peso contracts (notional value) outstanding at
September 30, 2016
.
The Company formally documents all relationships between hedging instruments and hedged items, as well as risk management objectives and strategies for undertaking various hedge transactions.
The Company records and presents the fair values of all of its derivative assets and liabilities in the Consolidated Balance Sheets on a net basis, since they are subject to master netting agreements. As of
September 30, 2016
, no netting took place, as all contracts were in the liability position.
The balance sheet classifications and fair value of derivative instruments as of
September 30, 2016
are as follows (amounts in thousands):
|
|
|
|
|
|
|
|
Fair Value of Derivative Instruments (1)
|
Prepaid and other current assets
|
|
$
|
—
|
|
Accrued expenses
|
|
2,073
|
|
______________________________________________________________________________
(1) Fair Value measured using Level 2 inputs by adjusting the market spot rate by forward points, based on the date of the contract. The spot rates and forward points used are based on an average rate from an actively traded market.
The impact on the Consolidated Statement of Operations for the
quarter and six month period ended
September 30, 2016
are as follows (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
Impact of Foreign Exchange Contracts on Condensed Consolidated Statement of Operations
|
Statement Caption
|
|
Quarter Ended September 30, 2016
|
|
Six-Month Period Ended September 30, 2016
|
Net Sales
|
|
$
|
—
|
|
|
$
|
—
|
|
Operating costs and expenses:
|
|
|
|
|
Cost of sales
|
|
(1,140
|
)
|
|
(2,893
|
)
|
Total operating costs and expenses
|
|
(1,140
|
)
|
|
(2,893
|
)
|
Operating income (loss)
|
|
$
|
(1,140
|
)
|
|
$
|
(2,893
|
)
|
Unrealized gains and losses associated with the change in value of these financial instruments are recorded in AOCI. Changes in the derivatives’ fair values are deferred and recorded as a component of AOCI until the underlying transaction is settled and recorded to the income statement. When the hedged item affects income, gains or losses are reclassified from AOCI to the Consolidated Statement of Operations as Cost of sales for foreign exchange contracts to purchase such foreign currency. Any ineffectiveness, if material, in the Company’s hedging relationships is recognized immediately as a loss, within the same income statement accounts as described above; to date, there has been no ineffectiveness. Changes in derivative balances impact the line items “Prepaid and other assets” and “Accrued Expenses” on the Consolidated Balance Sheets and Statements of Cash Flows.
Note
13
. Concentrations of Risks
The Company sells to customers globally and, as the Company generally does not require collateral from its customers, on a monthly basis the Company evaluates customer account balances in order to assess the Company’s financial risks of collection.
One
customer, TTI, Inc., an electronics distributor, accounted for over
10%
of the Company’s net sales in the
quarters and six-month periods ended
September 30, 2016
and
2015
. There were
no
accounts receivable balances from any customer exceeding
10%
of gross accounts receivable as of
September 30, 2016
and
March 31, 2016
.
Electronics distributors are an important distribution channel in the electronics industry and accounted for
46%
and
42%
of the Company’s net sales in the
six-month periods ended September 30, 2016
and
2015
, respectively. As a result of the Company’s concentration of sales to electronics distributors, the Company may experience fluctuations in the Company’s operating results as electronics distributors experience fluctuations in end-market demand and/or adjust their inventory stocking levels.
Note
14
. Condensed Consolidating Financial Statements
The
10.5%
Senior Notes are fully and unconditionally guaranteed, jointly and severally, on a senior basis by certain of the Company’s
100%
owned domestic subsidiaries (“Guarantor Subsidiaries”) and secured by a first priority lien on
51%
of the capital stock of certain of our foreign restricted subsidiaries (“Non-Guarantor Subsidiaries”). The Company’s Guarantor Subsidiaries and Non-Guarantor Subsidiaries are not consistent with the Company’s business groups or geographic operations; accordingly, this basis of presentation is not intended to present the Company’s financial condition, results of operations or cash flows for any purpose other than to comply with the specific requirements for subsidiary guarantor reporting. The Company is required to present condensed consolidating financial information in order for the subsidiary guarantors of the Company’s public debt to be exempt from reporting under the Securities Exchange Act of 1934, as amended.
Condensed consolidating financial statements for the Company’s Guarantor Subsidiaries and Non-Guarantor Subsidiaries are presented in the following tables (amounts in thousands):
Condensed Consolidating Balance Sheet
September 30, 2016
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Reclassifications
and Eliminations
|
|
Consolidated
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
623
|
|
|
$
|
48,399
|
|
|
$
|
25,731
|
|
|
$
|
—
|
|
|
$
|
74,753
|
|
Accounts receivable, net
|
—
|
|
|
32,116
|
|
|
55,973
|
|
|
—
|
|
|
88,089
|
|
Intercompany receivable
|
31,782
|
|
|
164,695
|
|
|
153,766
|
|
|
(350,243
|
)
|
|
—
|
|
Inventories, net
|
—
|
|
|
107,191
|
|
|
57,786
|
|
|
—
|
|
|
164,977
|
|
Prepaid expenses and other
|
3,325
|
|
|
18,219
|
|
|
12,410
|
|
|
(2,964
|
)
|
|
30,990
|
|
Total current assets
|
35,730
|
|
|
370,620
|
|
|
305,666
|
|
|
(353,207
|
)
|
|
358,809
|
|
Property and equipment, net
|
514
|
|
|
82,229
|
|
|
138,747
|
|
|
—
|
|
|
221,490
|
|
Goodwill
|
—
|
|
|
40,294
|
|
|
—
|
|
|
—
|
|
|
40,294
|
|
Intangible assets, net
|
—
|
|
|
25,357
|
|
|
5,636
|
|
|
—
|
|
|
30,993
|
|
Investment in NEC TOKIN
|
—
|
|
|
15,174
|
|
|
—
|
|
|
—
|
|
|
15,174
|
|
Investments in subsidiaries
|
373,172
|
|
|
427,702
|
|
|
93,359
|
|
|
(894,233
|
)
|
|
—
|
|
Deferred income taxes
|
—
|
|
|
755
|
|
|
6,994
|
|
|
—
|
|
|
7,749
|
|
Other assets
|
27
|
|
|
1,643
|
|
|
796
|
|
|
—
|
|
|
2,466
|
|
Long-term intercompany receivable
|
66,172
|
|
|
40,612
|
|
|
1,089
|
|
|
(107,873
|
)
|
|
—
|
|
Total assets
|
$
|
475,615
|
|
|
$
|
1,004,386
|
|
|
$
|
552,287
|
|
|
$
|
(1,355,313
|
)
|
|
$
|
676,975
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
29
|
|
|
33,084
|
|
|
30,942
|
|
|
—
|
|
|
64,055
|
|
Intercompany payable
|
23,243
|
|
|
272,187
|
|
|
54,813
|
|
|
(350,243
|
)
|
|
—
|
|
Accrued expenses
|
17,246
|
|
|
19,107
|
|
|
21,662
|
|
|
—
|
|
|
58,015
|
|
Income taxes payable
|
—
|
|
|
2,996
|
|
|
261
|
|
|
(2,964
|
)
|
|
293
|
|
Total current liabilities
|
40,518
|
|
|
327,374
|
|
|
107,678
|
|
|
(353,207
|
)
|
|
122,363
|
|
Long-term debt, less current portion
|
352,217
|
|
|
19,881
|
|
|
14,000
|
|
|
—
|
|
|
386,098
|
|
Other non-current obligations
|
—
|
|
|
35,112
|
|
|
47,528
|
|
|
—
|
|
|
82,640
|
|
Deferred income taxes
|
—
|
|
|
2,242
|
|
|
752
|
|
|
—
|
|
|
2,994
|
|
Long-term intercompany payable
|
—
|
|
|
66,172
|
|
|
41,701
|
|
|
(107,873
|
)
|
|
—
|
|
Stockholders’ equity
|
82,880
|
|
|
553,605
|
|
|
340,628
|
|
|
(894,233
|
)
|
|
82,880
|
|
Total liabilities and stockholders’ equity
|
$
|
475,615
|
|
|
$
|
1,004,386
|
|
|
$
|
552,287
|
|
|
$
|
(1,355,313
|
)
|
|
$
|
676,975
|
|
Condensed Consolidating Balance Sheet (1)
March 31, 2016
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Reclassifications
and Eliminations
|
|
Consolidated
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
640
|
|
|
$
|
36,209
|
|
|
$
|
28,155
|
|
|
$
|
—
|
|
|
$
|
65,004
|
|
Accounts receivable, net
|
—
|
|
|
41,025
|
|
|
52,143
|
|
|
—
|
|
|
93,168
|
|
Intercompany receivable
|
30,210
|
|
|
132,523
|
|
|
170,224
|
|
|
(332,957
|
)
|
|
—
|
|
Inventories, net
|
—
|
|
|
113,289
|
|
|
55,590
|
|
|
—
|
|
|
168,879
|
|
Prepaid expenses and other
|
3,325
|
|
|
12,161
|
|
|
12,974
|
|
|
(2,964
|
)
|
|
25,496
|
|
Total current assets
|
34,175
|
|
|
335,207
|
|
|
319,086
|
|
|
(335,921
|
)
|
|
352,547
|
|
Property and equipment, net
|
255
|
|
|
93,936
|
|
|
147,648
|
|
|
—
|
|
|
241,839
|
|
Goodwill
|
—
|
|
|
40,294
|
|
|
—
|
|
|
—
|
|
|
40,294
|
|
Intangible assets, net
|
—
|
|
|
27,252
|
|
|
6,049
|
|
|
—
|
|
|
33,301
|
|
Investment in NEC TOKIN
|
—
|
|
|
20,334
|
|
|
—
|
|
|
—
|
|
|
20,334
|
|
Investments in subsidiaries
|
382,108
|
|
|
429,723
|
|
|
93,359
|
|
|
(905,190
|
)
|
|
—
|
|
Deferred income taxes
|
—
|
|
|
800
|
|
|
7,597
|
|
|
—
|
|
|
8,397
|
|
Other assets
|
—
|
|
|
2,452
|
|
|
616
|
|
|
—
|
|
|
3,068
|
|
Long-term intercompany receivable
|
67,500
|
|
|
41,428
|
|
|
1,088
|
|
|
(110,016
|
)
|
|
—
|
|
Total assets
|
$
|
484,038
|
|
|
$
|
991,426
|
|
|
$
|
575,443
|
|
|
$
|
(1,351,127
|
)
|
|
$
|
699,780
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
$
|
2,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,000
|
|
Accounts payable
|
20
|
|
|
34,618
|
|
|
36,343
|
|
|
—
|
|
|
70,981
|
|
Intercompany payable
|
280
|
|
|
275,498
|
|
|
57,179
|
|
|
(332,957
|
)
|
|
—
|
|
Accrued expenses
|
17,305
|
|
|
11,807
|
|
|
21,208
|
|
|
—
|
|
|
50,320
|
|
Income taxes payable
|
—
|
|
|
2,983
|
|
|
434
|
|
|
(2,964
|
)
|
|
453
|
|
Total current liabilities
|
19,605
|
|
|
324,906
|
|
|
115,164
|
|
|
(335,921
|
)
|
|
123,754
|
|
Long-term debt, less current portion
|
351,952
|
|
|
19,881
|
|
|
14,000
|
|
|
—
|
|
|
385,833
|
|
Other non-current obligations
|
—
|
|
|
25,797
|
|
|
49,095
|
|
|
—
|
|
|
74,892
|
|
Deferred income taxes
|
—
|
|
|
2,242
|
|
|
578
|
|
|
—
|
|
|
2,820
|
|
Long-term intercompany payable
|
—
|
|
|
67,500
|
|
|
42,516
|
|
|
(110,016
|
)
|
|
—
|
|
Stockholders’ equity
|
112,481
|
|
|
551,100
|
|
|
354,090
|
|
|
(905,190
|
)
|
|
112,481
|
|
Total liabilities and stockholders’ equity
|
$
|
484,038
|
|
|
$
|
991,426
|
|
|
$
|
575,443
|
|
|
$
|
(1,351,127
|
)
|
|
$
|
699,780
|
|
(1) Derived from audited financial statements.
Condensed Consolidating Statement of Operations
For the
Quarter Ended September 30, 2016
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Reclassifications
and Eliminations
|
|
Consolidated
|
Net sales
|
$
|
—
|
|
|
$
|
217,526
|
|
|
$
|
169,343
|
|
|
$
|
(199,561
|
)
|
|
$
|
187,308
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
489
|
|
|
169,559
|
|
|
157,295
|
|
|
(186,448
|
)
|
|
140,895
|
|
Selling, general and administrative expenses
|
9,631
|
|
|
18,717
|
|
|
10,738
|
|
|
(13,114
|
)
|
|
25,972
|
|
Research and development
|
91
|
|
|
4,499
|
|
|
2,526
|
|
|
—
|
|
|
7,116
|
|
Restructuring charges
|
—
|
|
|
3,452
|
|
|
546
|
|
|
—
|
|
|
3,998
|
|
Write down of long-lived assets
|
—
|
|
|
6,193
|
|
|
—
|
|
|
—
|
|
|
6,193
|
|
Net (gain) loss on sales and disposals of assets
|
(285
|
)
|
|
634
|
|
|
(265
|
)
|
|
—
|
|
|
84
|
|
Total operating costs and expenses
|
9,926
|
|
|
203,054
|
|
|
170,840
|
|
|
(199,562
|
)
|
|
184,258
|
|
Operating income (loss)
|
(9,926
|
)
|
|
14,472
|
|
|
(1,497
|
)
|
|
1
|
|
|
3,050
|
|
Non-operating (income) expense:
|
|
|
|
|
|
|
|
|
|
Interest income
|
—
|
|
|
—
|
|
|
(6
|
)
|
|
—
|
|
|
(6
|
)
|
Interest expense
|
9,396
|
|
|
379
|
|
|
135
|
|
|
—
|
|
|
9,910
|
|
Change in value of NEC TOKIN option
|
—
|
|
|
(1,600
|
)
|
|
—
|
|
|
—
|
|
|
(1,600
|
)
|
Other (income) expense, net
|
(8,843
|
)
|
|
8,469
|
|
|
(531
|
)
|
|
—
|
|
|
(905
|
)
|
Equity in earnings of subsidiaries
|
(5,481
|
)
|
|
—
|
|
|
—
|
|
|
5,481
|
|
|
—
|
|
Income (loss) from continuing operations before income taxes and equity income (loss) from NEC TOKIN
|
(4,998
|
)
|
|
7,224
|
|
|
(1,095
|
)
|
|
(5,480
|
)
|
|
(4,349
|
)
|
Income tax expense (benefit)
|
—
|
|
|
19
|
|
|
811
|
|
|
—
|
|
|
830
|
|
Income (loss) from continuing operations before equity income (loss) from NEC TOKIN
|
(4,998
|
)
|
|
7,205
|
|
|
(1,906
|
)
|
|
(5,480
|
)
|
|
(5,179
|
)
|
Equity income (loss) from NEC TOKIN
|
—
|
|
|
181
|
|
|
—
|
|
|
—
|
|
|
181
|
|
Net income (loss)
|
$
|
(4,998
|
)
|
|
$
|
7,386
|
|
|
$
|
(1,906
|
)
|
|
$
|
(5,480
|
)
|
|
$
|
(4,998
|
)
|
Condensed Consolidating Statements of Comprehensive Income (Loss)
Quarter Ended September 30, 2016
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
$
|
(4,648
|
)
|
|
$
|
6,190
|
|
|
$
|
(2,648
|
)
|
|
$
|
(5,480
|
)
|
|
$
|
(6,586
|
)
|
Condensed Consolidating Statement of Operations
For the
Quarter Ended September 30, 2015
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Reclassifications
and Eliminations
|
|
Consolidated
|
Net sales
|
$
|
—
|
|
|
$
|
222,770
|
|
|
$
|
175,473
|
|
|
$
|
(212,120
|
)
|
|
$
|
186,123
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
521
|
|
|
173,470
|
|
|
167,722
|
|
|
(198,396
|
)
|
|
143,317
|
|
Selling, general and administrative expenses
|
8,906
|
|
|
16,511
|
|
|
11,255
|
|
|
(13,724
|
)
|
|
22,948
|
|
Research and development
|
66
|
|
|
4,218
|
|
|
1,868
|
|
|
—
|
|
|
6,152
|
|
Restructuring charges
|
—
|
|
|
941
|
|
|
(918
|
)
|
|
—
|
|
|
23
|
|
Net (gain) loss on sales and disposals of assets
|
(7
|
)
|
|
(400
|
)
|
|
103
|
|
|
—
|
|
|
(304
|
)
|
Total operating costs and expenses
|
9,486
|
|
|
194,740
|
|
|
180,030
|
|
|
(212,120
|
)
|
|
172,136
|
|
Operating income (loss)
|
(9,486
|
)
|
|
28,030
|
|
|
(4,557
|
)
|
|
—
|
|
|
13,987
|
|
Non-operating (income) expense:
|
|
|
|
|
|
|
|
|
|
Interest income
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
(3
|
)
|
Interest expense
|
9,465
|
|
|
265
|
|
|
81
|
|
|
—
|
|
|
9,811
|
|
Change in value of NEC TOKIN option
|
—
|
|
|
(2,200
|
)
|
|
—
|
|
|
—
|
|
|
(2,200
|
)
|
Other (income) expense, net
|
(8,466
|
)
|
|
9,265
|
|
|
(2,890
|
)
|
|
—
|
|
|
(2,091
|
)
|
Equity in earnings of subsidiaries
|
(17,679
|
)
|
|
—
|
|
|
—
|
|
|
17,679
|
|
|
—
|
|
Income (loss) from continuing operations before income taxes and equity income (loss) from NEC TOKIN
|
7,194
|
|
|
20,700
|
|
|
(1,745
|
)
|
|
(17,679
|
)
|
|
8,470
|
|
Income tax expense (benefit)
|
—
|
|
|
123
|
|
|
1,315
|
|
|
—
|
|
|
1,438
|
|
Income (loss) from continuing operations before equity income (loss) from NEC TOKIN
|
7,194
|
|
|
20,577
|
|
|
(3,060
|
)
|
|
(17,679
|
)
|
|
7,032
|
|
Equity income (loss) from NEC TOKIN
|
—
|
|
|
162
|
|
|
—
|
|
|
—
|
|
|
162
|
|
Net income (loss)
|
$
|
7,194
|
|
|
$
|
20,739
|
|
|
$
|
(3,060
|
)
|
|
$
|
(17,679
|
)
|
|
$
|
7,194
|
|
Condensed Consolidating Statements of Comprehensive Income (Loss)
For the
Quarter Ended September 30, 2015
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
$
|
7,277
|
|
|
$
|
16,222
|
|
|
$
|
(7,330
|
)
|
|
$
|
(17,679
|
)
|
|
$
|
(1,510
|
)
|
Condensed Consolidating Statement of Operation
For the
Six-Month Period Ended September 30, 2016
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Reclassifications
and Eliminations
|
|
Consolidated
|
Net sales
|
$
|
—
|
|
|
$
|
431,039
|
|
|
$
|
339,893
|
|
|
$
|
(398,689
|
)
|
|
$
|
372,243
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
766
|
|
|
336,662
|
|
|
318,525
|
|
|
(372,646
|
)
|
|
283,307
|
|
Selling, general and administrative expenses
|
19,776
|
|
|
36,206
|
|
|
21,948
|
|
|
(26,044
|
)
|
|
51,886
|
|
Research and development
|
156
|
|
|
8,873
|
|
|
5,019
|
|
|
—
|
|
|
14,048
|
|
Restructuring charges
|
—
|
|
|
3,591
|
|
|
1,095
|
|
|
—
|
|
|
4,686
|
|
Write down of long-lived assets
|
—
|
|
|
6,193
|
|
|
—
|
|
|
—
|
|
|
6,193
|
|
Net (gain) loss on sales and disposals of assets
|
(285
|
)
|
|
1,023
|
|
|
(563
|
)
|
|
—
|
|
|
175
|
|
Total operating costs and expenses
|
20,413
|
|
|
392,548
|
|
|
346,024
|
|
|
(398,690
|
)
|
|
360,295
|
|
Operating income (loss)
|
(20,413
|
)
|
|
38,491
|
|
|
(6,131
|
)
|
|
1
|
|
|
11,948
|
|
Non-operating (income) expense:
|
|
|
|
|
|
|
|
|
|
Interest income
|
—
|
|
|
3
|
|
|
(12
|
)
|
|
—
|
|
|
(9
|
)
|
Interest expense
|
18,819
|
|
|
778
|
|
|
236
|
|
|
—
|
|
|
19,833
|
|
Change in value of NEC TOKIN option
|
—
|
|
|
10,400
|
|
|
—
|
|
|
—
|
|
|
10,400
|
|
Other (income) expense, net
|
(18,193
|
)
|
|
17,885
|
|
|
(2,991
|
)
|
|
—
|
|
|
(3,299
|
)
|
Equity in earnings of subsidiaries
|
(3,836
|
)
|
|
—
|
|
|
—
|
|
|
3,836
|
|
|
—
|
|
Income (loss) from continuing operations before income taxes and equity income (loss) from NEC TOKIN
|
(17,203
|
)
|
|
9,425
|
|
|
(3,364
|
)
|
|
(3,835
|
)
|
|
(14,977
|
)
|
Income tax expense (benefit)
|
—
|
|
|
57
|
|
|
2,573
|
|
|
—
|
|
|
2,630
|
|
Income (loss) from continuing operations before equity income (loss) from NEC TOKIN
|
(17,203
|
)
|
|
9,368
|
|
|
(5,937
|
)
|
|
(3,835
|
)
|
|
(17,607
|
)
|
Equity income (loss) from NEC TOKIN
|
—
|
|
|
404
|
|
|
—
|
|
|
—
|
|
|
404
|
|
Net income (loss)
|
$
|
(17,203
|
)
|
|
$
|
9,772
|
|
|
$
|
(5,937
|
)
|
|
$
|
(3,835
|
)
|
|
$
|
(17,203
|
)
|
Condensed Consolidating Statements of Comprehensive Income (Loss)
For the
Six-Month Period Ended September 30, 2016
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
$
|
(18,531
|
)
|
|
$
|
2,503
|
|
|
$
|
(11,442
|
)
|
|
$
|
(3,835
|
)
|
|
$
|
(31,305
|
)
|
Condensed Consolidating Statement of Operations
For the
Six-Month Period Ended September 30, 2015
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Reclassifications
and Eliminations
|
|
Consolidated
|
Net sales
|
$
|
—
|
|
|
$
|
444,540
|
|
|
$
|
357,073
|
|
|
$
|
(427,900
|
)
|
|
$
|
373,713
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
699
|
|
|
354,984
|
|
|
333,952
|
|
|
(398,441
|
)
|
|
291,194
|
|
Selling, general and administrative expenses
|
18,722
|
|
|
39,990
|
|
|
24,125
|
|
|
(29,459
|
)
|
|
53,378
|
|
Research and development
|
(53
|
)
|
|
8,602
|
|
|
3,877
|
|
|
—
|
|
|
12,426
|
|
Restructuring charges
|
—
|
|
|
1,456
|
|
|
391
|
|
|
—
|
|
|
1,847
|
|
Net (gain) loss on sales and disposals of assets
|
(7
|
)
|
|
(753
|
)
|
|
398
|
|
|
—
|
|
|
(362
|
)
|
Total operating costs and expenses
|
19,361
|
|
|
404,279
|
|
|
362,743
|
|
|
(427,900
|
)
|
|
358,483
|
|
Operating income (loss)
|
(19,361
|
)
|
|
40,261
|
|
|
(5,670
|
)
|
|
—
|
|
|
15,230
|
|
Non-operating (income) expense:
|
|
|
|
|
|
|
|
|
|
Interest income
|
—
|
|
|
—
|
|
|
(6
|
)
|
|
—
|
|
|
(6
|
)
|
Interest expense
|
18,934
|
|
|
598
|
|
|
292
|
|
|
—
|
|
|
19,824
|
|
Change in value of NEC TOKIN option
|
—
|
|
|
27,000
|
|
|
—
|
|
|
—
|
|
|
27,000
|
|
Other (income) expense, net
|
(17,553
|
)
|
|
17,068
|
|
|
(690
|
)
|
|
—
|
|
|
(1,175
|
)
|
Equity in earnings of subsidiaries
|
9,114
|
|
|
—
|
|
|
—
|
|
|
(9,114
|
)
|
|
—
|
|
Income (loss) from continuing operations before income taxes and equity income (loss) from NEC TOKIN
|
(29,856
|
)
|
|
(4,405
|
)
|
|
(5,266
|
)
|
|
9,114
|
|
|
(30,413
|
)
|
Income tax expense (benefit)
|
—
|
|
|
(364
|
)
|
|
1,554
|
|
|
—
|
|
|
1,190
|
|
Income (loss) from continuing operations before equity income (loss) from NEC TOKIN
|
(29,856
|
)
|
|
(4,041
|
)
|
|
(6,820
|
)
|
|
9,114
|
|
|
(31,603
|
)
|
Equity income (loss) from NEC TOKIN
|
—
|
|
|
1,747
|
|
|
—
|
|
|
—
|
|
|
1,747
|
|
Net income (loss)
|
$
|
(29,856
|
)
|
|
$
|
(2,294
|
)
|
|
$
|
(6,820
|
)
|
|
$
|
9,114
|
|
|
$
|
(29,856
|
)
|
Condensed Consolidating Statements of Comprehensive Income (Loss)
For the
Six-Month Period Ended September 30, 2015
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
$
|
(27,224
|
)
|
|
$
|
(11,713
|
)
|
|
$
|
(6,624
|
)
|
|
$
|
9,114
|
|
|
$
|
(36,447
|
)
|
Condensed
Consolidating Statement of Cash Flows
For the
Six-Month Period Ended September 30, 2016
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Reclassifications
and Eliminations
|
|
Consolidated
|
Sources (uses) of cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
$
|
2,481
|
|
|
$
|
14,940
|
|
|
$
|
5,622
|
|
|
$
|
—
|
|
|
$
|
23,043
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
—
|
|
|
(2,750
|
)
|
|
(7,594
|
)
|
|
—
|
|
|
(10,344
|
)
|
Net cash used in investing activities
|
—
|
|
|
(2,750
|
)
|
|
(7,594
|
)
|
|
—
|
|
|
(10,344
|
)
|
Financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments of long-term debt
|
(1,870
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,870
|
)
|
Purchase of treasury stock
|
(628
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(628
|
)
|
Net cash provided by (used in) financing activities
|
(2,498
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,498
|
)
|
Net increase (decrease) in cash and cash equivalents
|
(17
|
)
|
|
12,190
|
|
|
(1,972
|
)
|
|
—
|
|
|
10,201
|
|
Effect of foreign currency fluctuations on cash
|
—
|
|
|
—
|
|
|
(452
|
)
|
|
—
|
|
|
(452
|
)
|
Cash and cash equivalents at beginning of fiscal period
|
640
|
|
|
36,209
|
|
|
28,155
|
|
|
—
|
|
|
65,004
|
|
Cash and cash equivalents at end of fiscal period
|
$
|
623
|
|
|
$
|
48,399
|
|
|
$
|
25,731
|
|
|
$
|
—
|
|
|
$
|
74,753
|
|
Condensed Consolidating Statements of Cash Flows
For the
Six-Month Period Ended September 30, 2015
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Reclassifications
and Eliminations
|
|
Consolidated
|
Sources (uses) of cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
$
|
575
|
|
|
$
|
(6,284
|
)
|
|
$
|
(5,223
|
)
|
|
$
|
—
|
|
|
$
|
(10,932
|
)
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
—
|
|
|
(4,630
|
)
|
|
(4,638
|
)
|
|
—
|
|
|
(9,268
|
)
|
Proceeds from sale of assets
|
—
|
|
|
247
|
|
|
—
|
|
|
—
|
|
|
247
|
|
Acquisitions, net of cash received
|
—
|
|
|
(2,892
|
)
|
|
—
|
|
|
—
|
|
|
(2,892
|
)
|
Net cash used in investing activities
|
—
|
|
|
(7,275
|
)
|
|
(4,638
|
)
|
|
—
|
|
|
(11,913
|
)
|
Financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from revolving line of credit
|
—
|
|
|
6,000
|
|
|
2,000
|
|
|
—
|
|
|
8,000
|
|
Payments of revolving line of credit
|
—
|
|
|
(3,500
|
)
|
|
—
|
|
|
—
|
|
|
(3,500
|
)
|
Payments of long-term debt
|
—
|
|
|
—
|
|
|
(481
|
)
|
|
—
|
|
|
(481
|
)
|
Purchase of treasury stock
|
(575
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(575
|
)
|
Net cash provided by (used in) financing activities
|
(575
|
)
|
|
2,500
|
|
|
1,519
|
|
|
—
|
|
|
3,444
|
|
Net increase (decrease) in cash and cash equivalents
|
—
|
|
|
(11,059
|
)
|
|
(8,342
|
)
|
|
—
|
|
|
(19,401
|
)
|
Effect of foreign currency fluctuations on cash
|
—
|
|
|
—
|
|
|
354
|
|
|
—
|
|
|
354
|
|
Cash and cash equivalents at beginning of fiscal period
|
640
|
|
|
33,094
|
|
|
22,628
|
|
|
—
|
|
|
56,362
|
|
Cash and cash equivalents at end of fiscal period
|
$
|
640
|
|
|
$
|
22,035
|
|
|
$
|
14,640
|
|
|
$
|
—
|
|
|
$
|
37,315
|
|