KEMET : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (form 10-K)

The following discussion and analysis provide information that we believe is
useful in understanding our operating results, cash flows, and financial
condition for the three fiscal years ended March 31, 2020, 2019, and 2018. The
discussion should be read in conjunction with, and is qualified in its entirety
by reference to, the consolidated financial statements and related notes
appearing elsewhere in this report. The discussions in this document contain
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 and involve risks and uncertainties. Our actual
future results could differ materially from those discussed here. Factors that
could cause or contribute to such differences include, but are not limited to,
those discussed under the Item 1A, "Risk Factors" and, from time to time, in our
other filings with the Securities and Exchange Commission.
Our Competitive Strengths
We believe that our Company benefits from the following competitive strengths:
Strong Customer Relationships
We have a large and diverse customer base. We believe that our emphasis on
quality control and our performance history establishes loyalty with OEMs, EMSs
and distributors. Our customer base includes most of the world's major
electronics OEMs (including Bosch Group, Cisco Systems, Inc., Continental AG,
Delphi Technologies PLC, Dell Inc., Apple Inc., Google LLC, Tesla Inc., and ABB
Group), EMSs (including Celestica Inc., Flextronics International LTD, Jabil
Circuit, Inc., and Sanmina-SCI Corporation) and distributors (including
TTI, Inc., Arrow Electronics, Inc., Satori Electric Co., and Avnet, Inc.). Our
strong, extensive and efficient worldwide distribution network is one of our
differentiating factors. We believe our ability to provide innovative and
flexible service offerings, superior customer support and focus on
speed-to-market results in a more rewarding customer experience, earning us a
high degree of customer loyalty.
Breadth of Our Diversified Product Offering and Markets
We believe that we have the most complete line of primary capacitor types
spanning a full spectrum of dielectric materials including tantalum, multilayer
ceramic, solid and electrolytic aluminum and film capacitors. As discussed
below, our acquisition of (and previous private label partnership with) TOKIN,
has expanded our product offerings and markets. As a result, we believe we can
satisfy virtually all of our customers' capacitance needs, thereby strengthening
our position as their supplier of choice. In addition, through our acquisition
of TOKIN, we have products to assist in the management of electronic noise
within a device and in communications between devices, as well as products that
can sense and respond to human activity, physical vibration, and electric
current. We sell our products into a wide range of end-markets, including
computing, industrial, telecommunications, transportation, consumer, defense and
healthcare across all geographical regions. No single end market industry
accounted for more than 30% of net sales; although, one customer, an electronics
distributor, accounted for more than 10% of our net sales in fiscal year 2020.
No single end-use direct customer accounted for more than 5% of our net sales in
fiscal year 2020. We believe that well-balanced product, geographic and customer
diversification helps us mitigate some of the negative financial impact through
economic cycles.
Leading Market Positions and Operating Scale
Based on net sales, we believe that we are the largest manufacturer of tantalum
capacitors in the world and one of the largest manufacturers of direct current
film capacitors in the world and have a substantial market position in the
specialty ceramic and custom wet aluminum electrolytic markets. We believe
KEMET's polymer tantalum sales lead the industry with an estimated market share
of approximately 50%. As discussed below, our acquisition of (and previous
private label partnership with) TOKIN allows us to achieve true scale in
operations to manage raw materials sourcing as well as maximize efficiencies. We
believe that our leading market positions and operating scale allow us to
realize production efficiencies, leverage economies of scale and capitalize on
growth opportunities in the global capacitor market.
Strong Presence in Specialty Products
We engage in design collaboration with our customers in order to meet their
specific needs and provide them with customized products satisfying their
engineering specifications. Whether at the concept or design stage, KEMET
provides engineering tools and samples to our customers to enable them to make
the best product selections. KEMET's Field Application Engineers (experts in
electrical circuits) and Technical Product Managers (experts in product
applications) assist our Sales team as they navigate the product selection
process with our customers. During fiscal years 2020 and 2019, respectively,
specialty products accounted for 42.1% and 39.4% of our revenue. By allocating
an increasing portion of our management resources and research and development
("R&D") investment particularly through our acquisition of (and previous
partnership with) TOKIN to specialty products, we have established ourselves as
one of the leading innovators in this

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fast growing, emerging segment of the market, including healthcare, renewable
energy, telecommunication infrastructure and oil and gas.
Low-Cost and Strategic Locations
We believe our manufacturing plants located in Mexico, China, Vietnam,
Indonesia, Thailand, Bulgaria, and Macedonia provide some of the lowest cost
production facilities in the industry. Many of our key customers relocated or
added production facilities to Asia, particularly China. We believe our
manufacturing production footprint is essential to best meet our customers'
demands, production needs, and total value proposition.
Our Brand
Founded by Union Carbide in 1919 as KEMET Laboratories, we believe that we have
established a reputation as a high quality, efficient and affordable partner
that sets our customers' needs as the top priority. This has allowed us to
successfully attract loyal clientele and enable us to expand our operations and
market share over the past few years. We believe our commitment to addressing
the needs of the industry in which we operate has differentiated us from our
competitors. In addition to our traditional reputation of being the
"Easy-To-Buy-From" company by providing excellent customer service and on-time
delivery, we have now evolved to be the "Easy-To-Design-In" company with the
addition of technical resources like KEMET's online Engineering Center and
capacitor selection simulation tools.
Our People
We believe that we have successfully developed a unique corporate culture based
on innovation, customer focus and commitment. We have a strong, highly
experienced and committed team in each of our markets. Many of our professionals
have developed unparalleled experience in building leadership positions in new
markets, as well as successfully integrating acquisitions. Our 22-member senior
management team has an average of 20 years of experience with us and an average
of 29 years of experience in the manufacturing industry.
Business Strategy
Our strategy is to use our position as a leading, high-quality manufacturer of
electronic components and materials to capitalize on the increasingly demanding
requirements of our customers. Refer to "Item 1. Business" for KEMET's strategic
highlights. Other important elements of our strategy include:
One KEMET Campaign.
We continue to focus on improving our commercial and technological capabilities
through various initiatives that all fall under our One KEMET campaign. The One
KEMET campaign aims to ensure that we, as a company, are focused on the same
goals and working with the same processes and systems to ensure consistent
quality and service that allow us to provide our customers with the technologies
they require at a competitive "total cost of ownership." This effort was
launched to ensure that, as we continue to grow, we not only remain grounded in
our core principles but that we also use those principles, operating procedures
and systems as the foundation from which to expand. These initiatives include
our Lean and Six Sigma culture evolution, our global customer accounts
management program and our evolution toward a philosophy of being "easy to
design-in."
Develop Our Significant Customer Relationships and Industry Presence.
We continue to focus on our responsiveness to our customers' needs and
requirements by making order entry and fulfillment easier, faster, more flexible
and more reliable for our customers. We believe this can be accomplished by
focusing on building products around customers' needs and by giving
decision-making authority to customer-facing personnel and by providing
purpose-built systems and processes.
Leverage Our Technological Competence and Expand Our Leadership in Specialty
Products
We continue to leverage our technological competence and our acquisition of
TOKIN by introducing new products in a timely and cost-efficient manner. This
allows us to generate an increasing portion of our sales from new and customized
solutions that meet our customers' varied and evolving electronic component
needs, as well as to improve our financial performance. We believe that by
continuing to build on our strength in the higher growth and higher margin
specialty segments of the capacitor, electro-magnetic, sensor and actuator
markets, we will be well-positioned to achieve our long-term growth objectives
while also improving our profitability. During fiscal year 2020, we introduced
13,233 new products of which 1,361 were first to market, and specialty products
accounted for 42.1% of our revenue over this period.

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Further Expand Our Broad Capacitance Capabilities
We identify ourselves as the "Electronic Components" company and strive to be
the supplier of choice for all our customers' capacitance needs across the full
spectrum of dielectric materials including tantalum, multilayer ceramic, solid
and electrolytic aluminum, film and paper. While we believe we have the most
complete line of capacitor technologies across these primary capacitor types, we
intend to continue to research and pursue additional capacitance technologies
and solutions to maximize the breadth of our product offerings. As discussed
below through our acquisition of TOKIN, we have further expanded our product
offerings to electric double layer capacitors, electro-magnetic devices,
sensors, and actuators. This expansion of product offerings is a continuation of
our focus on the higher margin specialty segments of the market.
Promote the KEMET Brand Globally
We are focused on promoting the KEMET brand globally by highlighting the
high-quality and high reliability of our products and our superior customer
service. We will continue to market our products to new and existing customers
around the world to expand our business. We continue to be recognized by our
customers as a leading global supplier. For example, in calendar years 2015,
2016, and 2017, we received the "Global Operations Excellence Award" from TTI,
Inc.
We received the "Supplier of the Year Award" in the "Consistent Supply Chain "
category for calendar year 2018 from Elektronika Sales Pvt. Ltd and won the 2018
and 2019 "Supplier Excellence Award" from TTI, Inc.
Global Sales & Marketing Strategy
Our motto "Think Global, Act Local" describes our approach to sales and
marketing. Each of our four sales regions (Americas, EMEA, JPKO and APAC) have
account managers, field application engineers, and strategic marketing managers.
In addition, we also have local customer and quality-control support in each
region. This organizational structure allows us to respond to the needs of our
customers on a timely basis and in their native language. The regions are
managed locally and report to a senior manager who is on the KEMET Leadership
Team. Furthermore, this organizational structure ensures the efficient
communication of our global goals and strategies and allows us to serve the
language, cultural and other region-specific needs of our customers. Our
go-to-market strategy includes a combination of strong engagement face to face
with those top customers and an industry leading state of the art digital
platform to engage the remaining customers. In addition, we partner with all the
premier distributors in the electronics industry to ensure we obtain the biggest
reach and leverage their expertise in stocking and servicing those customers.
TOKIN Acquisition
Through our acquisition of TOKIN and the previous cross licensing agreement and
Amended and Restated Private Label Agreement with TOKIN, we have expanded
product offerings and markets for both KEMET and TOKIN. KEMET's strong presence
in the western hemisphere and TOKIN's excellent position in Japan and Asia
significantly enhanced our customer reach and has created cross-selling
opportunities. Through TOKIN we believe we have achieved true scale in
operations allowing us to manage raw materials sourcing as well as to maximize
efficiencies and best practices in manufacturing and product development. We
believe that the international management team of KEMET and TOKIN allows us to
be more sensitive and aware of region-specific business needs compared to our
competitors. Combining our R&D capabilities and university relationships allows
us to be on the forefront of new developments and technological advancements in
the capacitor industry. Leveraging R&D investment in both Japan and the U.S.
enables KEMET to diversify beyond capacitors in the passives market as a result
of the TOKIN acquisition.
Subsequent to the acquisition of TOKIN, the Company has been able to improve its
cash balance, net debt, and interest expense. The purchase of TOKIN gave the
Company access to the Japanese capital markets, which allowed the Company to
refinance its U.S. based debt with a Japanese bank. Interest rates in Japan are
significantly lower than in the U.S.
Recent Developments and Trends
COVID-19
On March 11, 2020, the World Health Organization characterized the outbreak of a
novel strain of coronavirus, known as COVID-19, as a global pandemic and
recommended containment and mitigation measures. There have been extraordinary
and wide-ranging actions taken by international, federal, state and local public
health and governmental authorities to contain and combat the spread of COVID-19
across the world, including quarantines, "stay-at-home" orders, travel-bans, and
similar mandates for many individuals to substantially restrict daily activities
and for many non-essential businesses to curtail or cease normal operations.
Every region is experiencing the severity of COVID-19 differently. As a result,
we're monitoring and complying with local, state, and federal government
requirements and mandated orders regarding our manufacturing, sales, and
corporate

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facilities. As of March 31, 2020, our manufacturing facilities in the North
America, Asia, and Europe, excluding our facility in Italy, were operational
with increased safety and health protocols applicable to all employees.
Our plants in China (Suzhou, Anting, and Xiamen) were closed for a short period
of time during the month of February, but did not experience any major
shut-downs. Our plant in Pontecchio, Italy was shut-down in March in response to
the Italian Prime Minister's shut-down of all business activities in the country
except for those activities essential to the health and safety of the country.
This government mandated stoppage impacted our ability to produce and deliver
film capacitors. Our plant in Pontecchio, Italy reopened and resumed operations
on April 4, 2020.
KEMET has instituted a work from home order and temporarily closed our corporate
and sales offices in North America and Europe. In Asia, a work from home order
has been instituted in our sales offices in accordance with local, state, and
federal government mandates. The Company will continue to closely monitor the
situation and maintain efforts to protect the health and safety of our
employees. The Company is working to ensure business continuity for our
employees and contractors through secure connections to our systems and access
to necessary equipment while working from home.
While there was little impact to the Company's results of operations and
financial condition as of March 31, 2020 due to COVID-19, there is uncertainty
related to the future impact that the global pandemic will have on the Company's
results of operations and financial condition. The extent to which COVID-19 may
adversely impact our business depends on future developments, which are highly
uncertain and unpredictable, including new information concerning the severity
of the outbreak and the effectiveness of actions globally to contain or mitigate
its effects. For example, virus containment efforts could lead to reductions in
plant utilization levels and/or plant closures which could cause us to incur
additional direct costs and lost revenue. If our suppliers experience similar
impacts, we may have difficulty sourcing materials necessary to fulfill customer
production requirements and transporting completed products to our end
customers. As of March 31, 2020, the effects of COVID-19 have not had a
significant impact on the Company's liquidity. The Company is actively
monitoring the impact of COVID-19 on its liquidity and its ability to raise
additional capital, if necessary.
Yageo Merger
On November 11, 2019, the Company entered into the Agreement pursuant to which
Yageo will acquire all of the Company's outstanding shares of common stock for
$27.20 per share, subject to the satisfaction (or waiver of) specified
conditions (the "Merger"). The consummation of the Merger is subject to
customary closing conditions, including the approval by the Company's
stockholders. Certain further closing conditions in the Agreement include: (a)
obtaining antitrust and other regulatory approvals in the United States and
certain other jurisdictions (including, among others, China and Taiwan), (b) the
absence of any applicable restraining order or injunction prohibiting the
Merger, (c) receipt of approval from the Committee on Foreign Investment in the
United States ("CFIUS"), (d) obtaining foreign investment approval by the
Investment Commission, Ministry of Economic Affairs, Taiwan, (e) the approval of
Yageo's stockholders, if required by applicable law and (f) in the case of
Yageo's obligations to complete the Merger, there not having been any "material
adverse effect" (as customarily defined) on the Company. The Agreement contains
certain restrictions on the conduct of our business prior to the completion of
the Merger or the termination of the Agreement, including, among other things, a
restriction prohibiting us from paying any dividends or making certain other
distributions. Upon consummation of the Merger, the Company would be a fully
owned subsidiary of Yageo.
The Agreement is subject to termination if the Merger is not consummated within
twelve months, subject to an automatic extension for a period of ninety days,
for the purpose of obtaining certain antitrust clearances. The Agreement also
contains certain other termination rights and provides that, upon termination of
the Agreement under specified circumstances, including Yageo's decision to
terminate the Agreement if there is a change in the recommendation of the
Company's Board of Directors (the "Board") to adopt the Merger or a termination
of the Agreement by the Company to enter into an agreement for a "superior
proposal," the Company will pay Yageo a cash termination fee of $63.8 million.
The Agreement additionally provides that, upon termination of the Agreement
under specified circumstances, Yageo will pay the Company a cash termination fee
of $65.4 million.
The Merger with Yageo is proceeding as planned with several key milestones
already completed. On February 4, 2020, the required waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the review period under
the Austrian Cartel Act expired, and the pending Merger was approved by the
German Federal Cartel Office. On February 20, 2020 the Company's stockholders
approved the Merger. On March 5, 2020, the Mexican Competition Authority
authorized the pending Merger and on April 15, 2020, the Taiwan Fair Trade
Commission ("TFTC") announced its approval of the pending Merger. On April 23,
2020, CFIUS notified KEMET and Yageo that it completed its review of the Merger
and determined that there were no unresolved national security concerns with
respect to the transaction. On April 29, 2020, the Anti-Monopoly Bureau of
China's State Administration for Market Regulation approved the pending Merger.

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If Yageo fails to obtain approval by Yageo's stockholders, if such approval is
required by applicable law, Yageo will pay the Company a cash termination fee of
$49.1 million. If Yageo fails to obtain debt financing upon the satisfaction of
all conditions to closing, the Company may, within 30 days of termination, elect
to receive a cash termination fee of $63.8 million.
The only remaining regulatory approval required for the consummation of the
Merger is the approval from the Investment Commission, Ministry of Economic
Affairs in Taiwan. The Company currently expects the transaction to close in the
summer of 2020.
Novasentis
On July 1, 2019, the Company acquired the remaining 72.1% interest in Novasentis
for a preliminary purchase price of $2.7 million. Prior to July 2019 the Company
owned 27.9% of Novasentis, a leading developer of film-based haptic actuators,
and accounted for its investment using the equity method of accounting.
We believe Novasentis' haptic actuator technology that we have acquired will
provide unique flexibility, which will enable it to be incorporated into a wide
variety of wearables and virtual/augmented reality applications to provide a
variety of tactile sensations.
Antitrust Class Action Legal Settlement
As previously reported, including as reported in "Item 3. Legal Proceedings" of
the Company's 2019 Annual Report, KEMET and KEC, along with more than 20 other
capacitor manufacturers and subsidiaries (including TOKIN), were named as
defendants in a purported antitrust class action complaint, In re: Capacitors
Antitrust Litigation, No. 3:14-cv-03264-JD, filed on December 4, 2014 with the
United States District Court, Northern District of California (the "U.S. Class
Action Complaint"). The complaint alleges a violation of Section 1 of the
Sherman Act, for which it seeks injunctive and equitable relief and money
damages. On November 8, 2019 KEMET and KEC entered into a settlement agreement
(the "Settlement Agreement") with the plaintiffs in the U.S. Class Action
Complaint by which, in consideration for the release of KEMET, KEC, and their
affiliates from all claims relating in any way to the conduct alleged in the
U.S. Class Action Complaint and from claims which could have been asserted in
the U.S. Class Action Complaint to the extent they relate to the sale of
capacitors in the United States, KEMET agreed to pay an aggregate of $62.0
million to the settlement class of plaintiffs. The Settlement Agreement is
subject to court approval. Pursuant to the terms of the Settlement Agreement,
KEMET paid $10.0 million into an escrow account on December 6, 2019. The
remaining amount will be paid by KEMET within 12 months of the date of the
Settlement Agreement. Under the terms of the Settlement Agreement KEMET and KEC
did not admit to any violation of any statute or law or any liability or
wrongdoing.
The Company recognized the $62.0 million expense in the Consolidated Statements
of Operations for the year ended March 31, 2020 in the line item, "Antitrust
class action settlements and regulatory costs." The remaining payable is
included in the line item, "Accrued expenses," in the Consolidated Balance
Sheets as of March 31, 2020.
Outlook
For the first quarter of fiscal year 2021, we expect net sales to be within the
$278.0 million to $295.0 million range, non-GAAP adjusted gross margin as a
percentage of net sales is expected to be between 28.0% and 30.0%, non-GAAP
adjusted SG&A expenses are expected to be between $43.0 million and $45.0
million, and R&D expenses are expected to be approximately $12.5 million to
$13.5 million. Our non-GAAP adjusted global effective tax rate is expected to be
between 35.0% and 39.0%. We expect to spend in the range of $25.0 million to
$35.0 million in capital expenditures for the first quarter of fiscal year 2021.
The forecast provided for the first quarter of fiscal year 2021 does not include
the impact of any unexpected shutdowns.
The Company has presented certain non-GAAP financial measures as projected for
the first quarter of fiscal year 2021, including adjusted gross margin as a
percentage of net sales, adjusted SG&A expenses, and adjusted global effective
tax rate. Reconciliations of GAAP to non-GAAP adjusted gross margin, GAAP to
non-GAAP adjusted SG&A expenses, and GAAP to non-GAAP global effective tax rate
are not provided. The Company does not forecast GAAP gross margin, GAAP SG&A
expenses, and GAAP global effective tax rate as it cannot, without unreasonable
effort, estimate or predict with certainty various components of each. These
components include stock-based compensation expenses for GAAP gross margin,
stock-based compensation expenses and enterprise resource planning ("ERP")
integration costs/IT transition costs for GAAP SG&A expenses, and the timing of
nondeductible items and tax reform provisions impacting foreign income for GAAP
global effective tax rate. Further, in the future, other items with similar
characteristics to those currently included in adjusted gross margin, adjusted
SG&A expenses, and adjusted global effective tax rate that have a similar impact
on the comparability of periods, and which are not known at this time, may exist
and impact adjusted gross margin, adjusted SG&A expenses, and adjusted global
effective tax rate.

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Off-Balance Sheet Arrangements
As of March 31, 2020, we are not a party to any off-balance sheet financing
arrangements that have, or are reasonably likely to have, a current or future
material effect on our financial condition, revenues, expenses, results of
operations, liquidity, capital expenditures or capital resources.
Critical Accounting Policies
Our accounting policies are summarized in Note 1, "Organization and Significant
Accounting Policies" to the consolidated financial statements. The following
identifies a number of policies which require significant judgments and
estimates or are otherwise deemed critical to our financial statements.
Our estimates and assumptions are based on historical data and other assumptions
that we believe 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.
Our judgments are based on our 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 consolidated financial statements. Readers
should understand that actual future results could differ from these estimates,
assumptions, and judgments.
A quantitative sensitivity analysis is provided where that information is
reasonably available, can be reliably estimated and provides material
information to investors. The amounts used to assess sensitivity (i.e., 1%, 10%,
etc.) are included to allow readers of this Annual Report on Form 10-K to
understand a general cause and effect of changes in the estimates and do not
represent our predictions of variability. For these estimates, it should be
noted that future events rarely develop exactly as forecast, and estimates
require regular review and adjustment. We believe the following critical
accounting policies contain the most significant judgments and estimates used in
the preparation of the consolidated financial statements:
REVENUE RECOGNITION.  The Company recognizes revenue under the guidance provided
in Accounting Standard Codification ("ASC") 606, Revenue from Contracts with
Customers ("ASC 606"). Consistent with the terms of ASC 606, the Company records
revenue on product sales in the period in which the Company satisfies its
performance obligation by transferring control over a product to a customer. The
amount of revenue recognized reflects the consideration the Company expects to
receive in exchange for transferring products to a customer. Recognized revenue
is net of certain sales adjustments common in the industry, including but not
limited to:
• Ship-from-stock and debit ("SFSD") programs,

• Price protection programs

• Product return programs, and

• Rebate programs

SFSD represents the Company's largest sales program and 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. KEMET's SFSD program is specific to
certain distributors within the Americas and EMEA regions. 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 an allowance
based on historical SFSD credits, distributor inventory levels, and certain
accounting assumptions, all of which are reviewed quarterly. We believe this
methodology enables us to make reliable estimates of future adjustments under
the SFSD program. If the historical SFSD run rates used in our calculation
changed by 1% in fiscal year 2020, net sales would have been impacted by $1.2
million.
The Company's sales adjustments are recognized as a reduction in the line item
"Net sales" on the Consolidated Statements of Operations, while the associated
allowances are included in the line item "Accounts receivable, net" on the
Consolidated Balance Sheets. Estimates used in determining 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 has elected the practical expedient under ASC 606-10-10-4 and
evaluates these sales-related adjustments on a portfolio basis.
INVENTORIES.  Inventories are valued at the lower of cost or net realizable
value. For most of the inventory, cost is determined under the first-in,
first-out method. For tool crib, a component of our raw material inventory, cost
is determined

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under the average cost method. The valuation of inventories requires us to make
estimates. We also must assess the prices at which we believe the finished goods
inventory can be sold compared to its cost. A sharp decrease in demand could
adversely impact earnings as the reserve estimates could increase.
Excess and obsolete inventories are based on a combination of usage, age, order
requirements, and sales history. Raw materials and tool crib obsolescence
reserves are based on usage over one and two years, respectively, and the
Company maintains reserves for raw materials and tool cribs that exceed these
ages. Finished goods obsolescence reserves are either based on product age
limits determined by market requirements, and/or based on excess quantities that
exceed product orders and historical product sales.
PENSION AND POST-RETIREMENT BENEFITS.  Our management, with the assistance of
actuarial firms, performs actuarial valuations of the fair values of our pension
and post-retirement plans' benefit obligations. We make certain assumptions that
have a significant effect on the calculated fair value of the obligations such
as the:
• discount rate-used to arrive at the net present value of the obligation; and


•             salary increases-used to calculate the impact future pay increases
              will have on post-retirement obligations.


These assumptions directly impact the actuarial valuation of the obligations
recorded on the Consolidated Balance Sheets and the income or expense that flows
through the Consolidated Statements of Operations.
We base our assumptions on either historical or market data that we consider
reasonable. Variations in these assumptions could have a significant effect on
the amounts reported in Consolidated Balance Sheets and the Consolidated
Statements of Operations. The most critical assumption relates to the discount
rate. A 25 basis point increase or decrease in the weighted average discount
rate would result in changes to the projected benefit obligation of
($3.7) million and $4.0 million, respectively.
GOODWILL, INTANGIBLE ASSETS, AND PROPERTY, PLANT, AND EQUIPMENT. Intangible
assets are classified into three categories: (i) goodwill; (ii) intangible
assets with indefinite useful lives not subject to amortization; and (iii)
intangible assets with definite useful lives subject to amortization. For
goodwill and intangible assets with indefinite useful lives, tests for
impairment must be performed at least annually, or more frequently if events or
circumstances indicate that an asset may be impaired. For intangible assets with
definite useful lives, tests for impairment must be performed if conditions
exist that indicate the carrying value may not be recoverable.
For goodwill, the Company has the option to perform a qualitative assessment
rather than completing the impairment test. The Company must assess whether it
is more likely than not that the fair value of the reporting unit is less than
its carrying amount. If the Company concludes that this is the case, it must
perform the testing discussed below. Otherwise, the Company does not need to
perform any further assessment. The Company assesses its goodwill for impairment
and performs testing, if necessary, as of the first day of the fourth fiscal
quarter.
We evaluate our goodwill on a reporting unit basis. This requires us to estimate
the fair value of the reporting units based on the future net cash flows
expected to be generated. The impairment test, if deemed necessary, involves a
comparison of the fair value of each reporting unit, with the corresponding
carrying amounts. If the reporting unit's carrying amount exceeds its fair
value, then an indication exists that the reporting unit's goodwill may be
impaired. The impairment to be recognized is measured by the amount by which the
carrying value of the reporting unit's goodwill being measured exceeds its
implied fair value. The implied fair value of goodwill is the excess of the fair
value of the reporting unit over the sum of the amounts assigned to identified
net assets. As a result, the implied fair value of goodwill is generally the
residual amount that results from subtracting the value of net assets including
all tangible assets and identified intangible assets from the fair value of the
reporting unit's fair value. We determine the fair value of our reporting units
using an income-based, discounted cash flow ("DCF") analysis, and market-based
approaches (Guideline Publicly Traded Company Method and Guideline Transaction
Method) which examine transactions in the marketplace involving the sale of the
stocks of similar publicly-owned companies, or the sale of entire companies
engaged in operations similar to KEMET. In addition to the above described
reporting unit valuation techniques, our goodwill impairment assessment also
considers our aggregate fair value based upon the value of our outstanding
shares of common stock.
Our goodwill balance of $41.2 million is comprised of $35.6 million related to
KBP, which is within the Tantalum reporting unit, $4.7 million related to
IntelliData, which is a corporate asset, and $0.9 million related to Novasentis,
which is within the Film and Electrolytic reporting unit. As part of our annual
impairment testing, if deemed necessary, we determine the fair value of the
relevant reporting unit(s) using an income-based, DCF analysis for KBP at the
Tantalum product line level and for Novasentis at the Film and Electrolytic
reportable segment level. An internal rate of return analysis is performed for
IntelliData.

                                       41
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Significant assumptions used in a DCF analysis are: • the discount rate based on the weighted average cost of capital ("WACC"),

• estimated sales growth rates, and

• the estimated market price and production cost for tantalum products

Our WACC is determined through market comparisons combined with small stock and
equity risk premiums. Tantalum's sales growth rates are estimated through
KEMET's three-year strategic plan.
For indefinite-lived intangible assets, the Company has the option to perform a
qualitative assessment rather than completing the impairment test. The Company
must assess whether it is more likely than not that the fair value of the
intangible asset is less than its carrying amount. If the Company concludes that
this is the case, it must perform the testing described below. Otherwise, the
Company does not need to perform any further assessment. If deemed necessary,
the Company tests its indefinite-lived intangible assets (trademarks) for
impairment annually, or more frequently if events or circumstances indicate that
an asset may be impaired. The Company performs these annual impairment tests as
of the first day of our fourth fiscal quarter. We evaluate the value of our
trademarks using an income-based, relief from royalty analysis.
Definite-lived intangible assets subject to amortization and property, plant,
and equipment are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset or group of assets
may not be recoverable.
Tests for the recoverability, when necessary, of a definite-lived intangible
asset, property, plant, and equipment, and other long-lived assets are performed
by comparing the carrying amount of the asset to the sum of the estimated future
undiscounted cash flows expected to be generated by the asset. In estimating the
future undiscounted cash flows, we use future projections of cash flows directly
associated with, and which are expected to arise as a direct result of, the use
and eventual disposition of the assets. These assumptions include, among other
estimates, periods of operation and projections of sales and cost of sales.
Changes in any of these estimates could have a material effect on the estimated
future undiscounted cash flows expected to be generated by the asset. If it is
determined that the book value of an asset is not recoverable, an impairment
loss would be calculated equal to the excess of the carrying amount of the asset
over its fair value. The fair value is calculated as the discounted cash flows
of the underlying assets.
INCOME TAXES.  Tax regulations requires items to be included in the tax return
at different times than when these items are reflected in the consolidated
financial statements. As a result, the annual effective tax rate reflected in
our consolidated financial statements is different from that reported in our tax
return (our cash tax rate). Some of these differences are permanent, such as
expenses that are not deductible in our tax return, and some differences reverse
over time, such as depreciation expense. These timing differences create
deferred tax assets and liabilities. Income taxes are accounted for under the
asset and liability method. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the fiscal years
in which those temporary differences are expected to be recovered or settled.
The Company periodically evaluates its net deferred tax assets based on an
assessment of historical performance, ability to forecast future events, and the
likelihood that the Company will realize the benefits through future taxable
income. Valuation allowances are recorded to reduce the net deferred tax assets
to the amount that is more likely than not to be realized. For interim reporting
purposes, the Company records income taxes based on the expected annual
effective income tax rate, taking into consideration global forecasted tax
results and the effect of discrete tax events. The Company makes certain
estimates and judgments in the calculation for the provision for income taxes,
in the resulting tax liabilities, and in the recoverability of deferred tax
assets. All deferred tax assets are reported as noncurrent in the Consolidated
Balance Sheets.
We believe that it is more likely than not that a portion of the deferred tax
assets in various jurisdictions will not be realized, based on the scheduled
reversal of deferred tax liabilities, the recent history of cumulative losses,
and the insufficient evidence of projected future taxable income to overcome the
loss history. Therefore, we have provided a valuation allowance related to
benefits from income taxes. We continue to have net deferred tax assets (future
tax benefits) in several jurisdictions which we expect to realize, assuming,
based on certain estimates and assumptions, sufficient taxable income can be
generated to utilize these deferred tax benefits. If these estimates and related
assumptions change in the future, we may be required to reduce the value of the
deferred tax assets resulting in additional tax expense.
Differences between the provision for income taxes on earnings from continuing
operations and the amount computed using the U.S. Federal statutory income tax
rate are primarily due to the tax on foreign earnings, non-deductible permanent
differences, and differences due to U.S. and foreign tax law changes.
The accounting rules require that we recognize, in our financial statements, the
impact of a tax position, if that position is "more likely than not" of not
being sustained on audit, based on the technical merits of the position.
Accruals for estimated interest and penalties are recorded as a component of
income tax expense.

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To the extent that the provision for income taxes changed by 1.0% of income
before income taxes, consolidated net income would have changed by $0.8 million
in fiscal year 2020.
STOCK-BASED COMPENSATION. Stock-based compensation for stock options is
estimated on the date of grant using the Black-Scholes option-pricing model. The
Black-Scholes model considers volatility in the price of the Company's stock,
the risk-free interest rate, the estimated life of the equity-based award, the
closing market price of the Company's stock on the grant date and the exercise
price. The estimates utilized in the Black-Scholes calculation involve inherent
uncertainties and the application of management judgment. The Company's stock
options were fully expensed during the fiscal year ended March 31, 2017. Upon
adoption of Accounting Standard Update ("ASU") No. 2016-09, Compensation
Stock-Compensation, the Company elected to discontinue estimating forfeitures.
Stock-based compensation cost for restricted stock is measured based on the
closing fair market value of the Company's common stock on the date of grant.
The Company recognizes stock-based compensation cost for arrangements with cliff
vesting as expense ratably on a straight-line basis over the requisite service
period. The Company recognizes stock-based compensation cost for arrangements
with graded vesting as expense on an accelerated basis over the requisite
service period.
Results of Operations
Historically, revenues and earnings may or may not be representative of future
operating results due to various economic and other factors. The following table
sets forth the Consolidated Statements of Operations for the periods indicated
(amounts in thousands):
                                                         Fiscal Years Ended March 31,
                                                     2020            2019            2018
Net sales                                        $ 1,260,554     $ 1,382,818     $ 1,200,181
Operating costs and expenses:
Cost of sales                                        840,066         924,276         860,744
Selling, general and administrative expenses         194,766         202,642         173,620
Research and development                              49,264          44,612          39,114
Restructuring charges                                  8,882           8,779          14,843
(Gain) loss on write down and disposal of
long-lived assets                                     19,710           1,660            (992 )
Total operating costs and expenses                 1,112,688       1,181,969       1,087,329
Operating income                                     147,866         200,849         112,852
Non-operating (income) expense:
Interest income                                       (3,325 )        (2,035 )          (809 )
Interest expense                                      11,021          21,239          32,882
Acquisition (gain) loss                                    -               -        (130,880 )
Antitrust class action settlements and
regulatory costs                                      64,695           6,701           9,900
Other (income) expense, net                           (4,356 )         4,513          14,692
Income before income taxes and equity income
(loss) from equity method investments                 79,831         170,431         187,067
Income tax expense (benefit)                          38,526         (39,460 )         9,132
Income before equity income (loss) from equity
method investments                                    41,305         209,891         177,935
Equity income (loss) from equity method
investments                                               76          (3,304 )        76,192
Net income                                       $    41,381     $   206,587     $   254,127



                                       43

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Consolidated Comparison of Fiscal Year 2020 to Fiscal Year 2019
Net Sales
Net sales of $1.3 billion in fiscal year 2020 decreased $122.3 million from $1.4
billion in fiscal year 2019. Solid Capacitor net sales decreased $49.8 million,
Film and Electrolytic net sales decreased $30.4 million, and MSA net sales
decreased $42.1 million.
The decrease in Solid Capacitors net sales was driven by a $67.6 million
decrease in Tantalum net sales, which was partially offset by a $17.8 million
increase in Ceramics net sales. The decrease in Tantalum net sales was primarily
due to a $56.6 million decrease in distributor net sales across all regions
except for the JPKO region, a $12.4 million decrease in EMS net sales in the
Americas and EMEA regions, and a $7.3 million decrease in OEM net sales across
all regions except for the Americas regions. These decreases in Tantalum net
sales were partially offset by a $5.1 million increase in distributor net sales
in the JPKO region, a $1.9 million increase in EMS net sales in the APAC region,
and a $1.8 million increase in OEM net sales in the Americas region. The
increase in Ceramics net sales was primarily due to a $12.0 million increase in
OEM net sales across all regions, a $10.3 million increase in EMS net sales
across all regions, and a $5.7 million increase in distributor net sales across
the APAC and JPKO regions. These increases in Ceramics net sales were partially
offset by a $10.2 million decrease in distributor net sales across the Americas
and EMEA regions. Solid Capacitors net sales was unfavorably impacted by $4.6
million from foreign currency exchange due to the change in the value of the
Euro compared to the U.S. Dollar.
The decrease in Film and Electrolytic net sales was driven by a $21.1 million
decrease in distributor net sales across all regions except for the JPKO region,
an $11.5 million decrease in OEM net sales across the EMEA and JPKO regions, and
a $2.1 million decrease in EMS net sales in the EMEA region. These decreases in
net sales were partially offset by a $3.2 million increase in EMS net sales
across the Americas and APAC regions, a $0.6 million increase in distributor net
sales in the JPKO region, and a $0.5 million increase in OEM net sales across
the Americas and APAC regions. Film and Electrolytic net sales was unfavorably
impacted by $5.2 million from foreign currency exchange due to the change in the
value of the Euro compared the U.S. Dollar.
The decrease in MSA net sales was driven by a $41.3 million decrease in OEM net
sales across all regions except for the EMEA region, a $1.4 million decrease in
EMS net sales across all regions, and a $0.8 million decrease in distributor net
sales in the APAC region. These decreases in net sales were partially offset by
a $1.2 million increase in distributor net sales across the Americas and EMEA
regions. MSA net sales was favorably impacted by $2.5 million from foreign
currency exchange due to the change in the value of the Japanese Yen compared to
the U.S. dollar.
In fiscal years 2020 and 2019, net sales by channel and the percentages of net
sales by region to total net sales were as follows (dollars in thousands):
             Fiscal Year 2020        Fiscal Year 2019
                           % of                    % of
            Net Sales     Total     Net Sales     Total
APAC       $   509,161    40.4 %   $   533,340    38.6 %
Americas       296,929    23.6 %       337,842    24.4 %
EMEA           276,477    21.9 %       315,535    22.8 %
JPKO           177,987    14.1 %       196,101    14.2 %
Total      $ 1,260,554             $ 1,382,818

In fiscal years 2020 and 2019, the percentages of net sales by channel to total net sales were as follows (dollars in thousands):

                   Fiscal Year 2020             Fiscal Year 2019
               Net Sales     % of Total     Net Sales     % of Total
OEM           $   552,629        43.8 %    $   598,306        43.3 %

Distributor 508,536 40.4 % 584,618 42.2 % EMS

               199,389        15.8 %        199,894        14.5 %
Total         $ 1,260,554                  $ 1,382,818


Gross Margin
Gross margin for the fiscal year ended March 31, 2020 of $420.5 million (33.4%
of net sales) decreased $38.1 million from $458.5 million (33.2% of net sales)
in the prior fiscal year. Gross margin as a percentage of net sales improved 20
basis points in the year-to-year period comparison.

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Solid Capacitors gross margin decreased $10.1 million primarily due to a
decrease in net sales. The decrease in gross margin due to the decrease in net
sales was substantially offset by continued variable margin improvement
resulting from manufacturing process improvements, vertical integration, and
ongoing restructuring activities, as well as a favorable shift in sales mix and
channel. Price increases for certain products also contributed to a higher
margin on a number of products.
Film and Electrolytic gross margin decreased $12.2 million primarily due to a
decrease in net sales caused by a softening in the industrial and automotive
market, and an unfavorable change in sales channel and region mix.
MSA gross margin decreased $15.7 million primarily due to a decrease in net
sales and an unfavorable shift in sales mix.
Selling, General and Administrative Expenses ("SG&A")
SG&A expenses of $194.8 million (15.5% of net sales) for fiscal year 2020
decreased $7.9 million compared to $202.6 million (14.7% of net sales) for
fiscal year 2019. The decrease was mainly attributed to a $15.7 million decrease
in payroll expenses, mainly due to a decrease in incentive compensation, a $2.1
million decrease in travel expenses, and a $2.1 million decrease in consultants
and contractors expenses. This decrease was partially offset by $7.1 million in
Merger-related expenses incurred during fiscal year 2020 compared to no such
expenses during fiscal year 2019. In addition, a $2.5 million increase in
depreciation and amortization expense and a $2.4 million increase in
professional fees unfavorably impacted SG&A expenses in fiscal year 2020
compared to fiscal year 2019.
Research and Development
R&D expenses of $49.3 million (3.9% of net sales) for fiscal year 2020 increased
$4.7 million compared to $44.6 million (3.2% of net sales) for fiscal year 2019.
The increase was primarily related to a $4.1 million increase in payroll
expenses, driven by an increase in headcount related to the Novasentis
acquisition in the current fiscal year, and a $0.6 million increase in materials
and supplies expenses.
Loss on Write Down and Disposal of Long-Lived Assets
During fiscal year 2020, KEMET recorded a net loss on the write down and
disposal of long-lived assets of $19.7 million, which was comprised of $18.9
million in impairment charges and $0.8 million in net losses on the sale and
disposal of long-lived assets. The impairment charges of $18.9 million consisted
of (i) an $8.9 million impairment of previously capitalized IT application
development costs related to a hosted arrangement that was abandoned; (ii) a
$6.1 million impairment of buildings and equipment related to the Film and
Electrolytic plant in Italy, which is operating significantly under capacity;
(iii) a $1.4 million impairment related to under-utilized Solid Capacitors'
equipment at the Thailand plant; (iv) a $0.9 million impairment of the Film and
Electrolytic building in Sweden due to the relocation of operations to Portugal;
and (v) a $0.8 million impairment related to an idle facility in Japan.
During fiscal year 2019, the Company recorded a net loss on the write down and
disposal of long-lived assets of $1.7 million, which was comprised of $0.7
million of impairment charges and $1.0 million in net losses on the sale and
disposal of long-lived assets. The impairment charges were primarily related to
the write down of idle land and machinery of $0.5 million and $0.2 million,
respectively, at TOKIN. The $1.0 million net loss on the sale and disposal of
long-lived assets primarily consisted of the disposal of furniture and fixtures
resulting from the Company relocation of its corporate headquarters to Fort
Lauderdale, Florida and the disposal of old machinery that was no longer being
used.

                                       45
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Restructuring Charges
The Company has implemented restructuring plans, which include programs to
increase competitiveness by removing excess capacity, relocating production to
lower cost locations, and eliminating unnecessary costs throughout the Company.
Significant restructuring plans that occurred during the fiscal year ended
March 31, 2020 are summarized below:
                              Total expected to be     Incurred during year ended
                                    incurred                 March 31, 2020          Cumulative incurred to date
                             Personnel                  Personnel
Restructuring                Reduction  Relocation &    Reduction   Relocation &       Personnel     Relocation &
Plan           Segment         Costs     Exit Costs       Costs      Exit Costs     Reduction Costs   Exit Costs
Tantalum
powder
facility       Solid
relocation (1) Capacitors       1,107        2,606         1,107        (777 )               1,107        2,580
Axial
electrolytic
production
relocation
from Granna to Film and
Evora          Electrolytic       732        4,313           732       2,018                   732        4,313
TOKIN Japan
fixed cost     MSA and
reduction (2)  Corporate        5,729            -         5,021           -                 5,021            -
               Corporate,
               Film and
All Other      Electrolytic     1,505          432           758          23                 1,198          432

______________________________________________________________________________

(1) The credit to relocation and exit costs during the fiscal year ended March
31, 2020 was due to the recovery of costs related to the sale of tantalum that
was recovered ("tantalum reclaim") as part of the plant exit activities.
(2) Personnel reduction costs of 5.0 million for the fiscal year ended March 31,
2020 are comprised of $3.5 million and $1.5 million in the MSA segment and
corporate respectively.
Restructuring charges of $8.9 million in fiscal year 2020 increased $0.1 million
from $8.8 million in fiscal year 2019.
The restructuring charges for the fiscal year ended March 31, 2020, are
comprised of $7.6 million in personnel reduction costs and $1.3 million in
relocation and exit costs.
The personnel reduction costs of $7.6 million were primarily due to $5.0 million
in severance charges due to headcount reductions at TOKIN Japan as part of a
fixed cost reduction plan, $1.1 million in severance charges resulting from the
closing of the tantalum powder facility in Carson City, Nevada, $0.7 million in
severance charges resulting from the closing of the Granna, Sweden manufacturing
plant as axial electrolytic production was moved to the plant in Evora,
Portugal, and $0.5 million in severance charges related to personnel reductions
resulting from a reorganization of Film and Electrolytic's management structure.
The relocation and exit costs of $1.3 million were primarily related to $2.0
million in costs resulting from the relocation of axial electrolytic production
equipment from the Company's plant in Granna, Sweden to its plant in Evora,
Portugal. This expense was partially offset by a $0.8 million credit related
to tantalum reclaim at the tantalum powder facility in Carson City, Nevada.
The Company incurred $8.8 million in restructuring charges in the fiscal year
ended March 31, 2019, including $2.8 million in personnel reduction costs
and $6.0 million in relocation and exit costs.
The personnel reduction costs of $2.8 million were primarily due to $0.9
million in costs related to headcount reductions in the TOKIN legacy group
across various internal and operational functions, $0.3 million in severance
charges related to personnel reductions in the Film and Electrolytic reportable
segment resulting from a reorganization of the segment's management structure,
and $1.6 million in severance charges related to headcount reductions in the
Tantalum product line due to a decline in MnO2 sales.
The relocation and exit costs of $6.0 million were primarily due to $3.4
million in costs related to the Company's relocation of its tantalum powder
equipment from Carson City, Nevada to its plant in Matamoros, Mexico and $2.3
million in costs related to the relocation of axial electrolytic production
equipment from Granna, Sweden to its plant in Evora, Portugal.
Operating Income
Operating income for fiscal year 2020 of $147.9 million declined $53.0 million
compared to operating income of $200.8 million in fiscal year 2019. The decrease
in operating income was primarily due to a $38.1 million decrease in gross
margin, a $18.1 million increase in net loss on write down and disposal of
long-lived assets, a $4.7 million increase in R&D expenses, and a $0.1 million
increase in restructuring charges. These unfavorable changes to operating income
were partially offset by a $7.9 million decrease in SG&A expenses.

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Non-Operating (Income) Expense, net
Non-operating expense, net was $68.0 million in fiscal year 2020 compared to
non-operating expense, net of $30.4 million in fiscal year 2019. The $37.6
million increase in non-operating expense, net was primarily attributable to a
$58.0 million increase in antitrust class action settlements and regulatory
costs. Also contributing to the increase in non-operating expense, net was a
$2.9 million decrease in R&D grant reimbursements and grant income, a $1.9
million pension curtailment expense that occurred during fiscal year 2020
compared to no such expense in fiscal year 2019, and a $1.7 million unfavorable
change in foreign currency exchange (gain) loss, which was primarily due to
currency fluctuations in the Euro, Chinese Yuan, Japanese Yen and British Pound.
These unfavorable changes were partially offset by a $15.9 million decrease in
loss on the early extinguishment of debt. Additionally, net interest expense
decreased $11.5 million compared to fiscal year 2019 due to the refinancing of
the Company's term loan during fiscal year 2019.
Income Taxes
Income tax expense of $38.5 million for fiscal year 2020 increased by $78.0
million compared to income tax benefit of $39.5 million in fiscal year 2019.
Fiscal year 2020 income tax expense was comprised of $19.9 million of U.S.
federal income tax expense, $17.2 million of income tax related to foreign
operations, and $1.4 million in state income tax expense.
Fiscal year 2019 income tax benefit of $39.5 million was comprised of $50.1
million related to the partial release of valuation allowances in the U.S. and
Japan, offset in part by $10.4 million in income tax expense related to foreign
operations and $0.2 million in income tax expense related to U.S. operations.
Equity Income (Loss) from Equity Method Investments
Equity income from equity method investments of $0.1 million in fiscal year 2020
had a favorable change of $3.4 million compared to an equity loss of $3.3
million in fiscal year 2019. The favorable change primarily related to a $0.4
million gain associated with the Novasentis acquisition in July 2019 as a result
of the Company adjusting its investment balance to fair value prior to its
acquisition during fiscal year 2020. The Company impaired its investment in
Novasentis by $2.7 million during fiscal year 2019, which primarily caused the
$3.3 million equity method loss in fiscal year 2019.
Reportable Segment Comparison of Fiscal Year 2020 to Fiscal Year 2019
The following table sets forth the operating income (loss) for each of our
reportable segments for the fiscal years 2020 and 2019. The table also sets
forth each of the reportable segments' net sales as a percentage of total net
sales and total operating income as a percentage of total net sales (amounts in
thousands, except percentages):
                                         For the Fiscal Years Ended
                                March 31, 2020                March 31, 2019
                                          % of Total                    % of Total
                             Amount          Sales         Amount          Sales
Net sales
Solid Capacitors          $   886,063          70.3 %   $   935,838          67.7 %
Film and Electrolytic         175,803          13.9 %       206,240          14.9 %
MSA                           198,688          15.8 %       240,740          17.4 %
Total                     $ 1,260,554         100.0 %   $ 1,382,818         100.0 %

Operating income (loss)
Solid Capacitors          $   345,245                   $   348,150
Film and Electrolytic         (14,209 )                       8,183
MSA                            13,101                        22,546
Corporate                    (196,271 )                    (178,030 )
Total                     $   147,866          11.7 %   $   200,849          14.5 %



                                       47

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Solid Capacitors
The table below sets forth net sales, operating income and operating income as a
percentage of net sales for our Solid Capacitors reportable segment for fiscal
years 2020 and 2019 (amounts in thousands, except percentages):
                                              For the Fiscal Years Ended
                                        March 31, 2020           March 31, 2019
                                                 % to Net                 % to Net
                                      Amount       Sales       Amount       Sales
Tantalum product line net sales     $ 495,695                $ 563,255
Ceramic product line net sales        390,368                  372,583
Solid Capacitors net sales          $ 886,063                $ 935,838

Solid Capacitors operating income $ 345,245 39.0 % $ 348,150

37.2 %

Net Sales
Solid Capacitors net sales of $886.1 million in fiscal year 2020 decreased $49.8
million from $935.8 million in fiscal year 2019. Tantalum product line net sales
of $495.7 million in fiscal year 2020 decreased $67.6 million from $563.3
million in fiscal year 2019. Ceramic product line net sales of $390.4 million in
fiscal year 2020 increased $17.8 million from $372.6 million in fiscal year
2019.
The decrease in Solid Capacitors net sales was driven by a $67.6 million
decrease in Tantalum net sales, which was partially offset by a $17.8 million
increase in Ceramics net sales. The decrease in Tantalum net sales was primarily
due to a $56.6 million decrease in distributor net sales across all regions
except for the JPKO region, a $12.4 million decrease in EMS net sales in the
Americas and EMEA regions, and a $7.3 million decrease in OEM net sales across
all regions except for the Americas regions. These decreases in Tantalum net
sales were partially offset by a $5.1 million increase in distributor net sales
in the JPKO region, a $1.9 million increase in EMS net sales in the APAC region,
and a $1.8 million increase in OEM net sales in the Americas region. The
increase in Ceramics net sales was primarily due to a $12.0 million increase in
OEM net sales across all regions, a $10.3 million increase in EMS net sales
across all regions, and a $5.7 million increase in distributor net sales across
the APAC and JPKO regions. These increases in Ceramics net sales were partially
offset by a $10.2 million decrease in distributor net sales across the Americas
and EMEA regions. Solid Capacitors net sales was unfavorably impacted by $4.6
million from foreign currency exchange due to the change in the value of the
Euro compared to the U.S. Dollar.
Reportable Segment Operating Income
Segment operating income of $345.2 million for fiscal year 2020 decreased $2.9
million from $348.2 million for fiscal year 2019. The decrease in operating
income was primarily attributable to a decrease in gross margin of $10.1
million, which was driven by a decrease in net sales. The decrease in gross
margin due to the decrease in net sales was substantially offset by continued
variable margin improvement resulting from manufacturing process improvements,
vertical integration, and ongoing restructuring activities, as well as a
favorable shift in sales mix and channel. Price increases for certain products
also contributed to a higher margin on a number of products. Also contributing
to the decrease in operating income was a $1.6 million increase in R&D expenses.
These unfavorable changes to operating income were partially offset by a $5.7
million decrease in SG&A expenses, a $4.4 million decrease in restructuring
charges, and a $1.3 million decrease in net loss on write down and disposal of
long-lived assets during fiscal year 2020 compared to fiscal year 2019.

                                       48
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Film and Electrolytic
The table below sets forth net sales, operating income (loss) and operating
income (loss) as a percentage of net sales for our Film and Electrolytic
reportable segment for the fiscal years 2020 and 2019 (amounts in thousands,
except percentages):
                                             For the Fiscal Years Ended
                                      March 31, 2020            March 31, 2019
                                                % to Net                  % to Net
                                    Amount        Sales       Amount        Sales
Net sales                         $ 175,803                 $  206,240

Segment operating income (loss) (14,209 ) (8.1 )% 8,183

4.0 %

Net Sales
Film and Electrolytic net sales of $175.8 million in fiscal year 2020 decreased
$30.4 million from $206.2 million in fiscal year 2019. The decrease in net sales
was driven by a $21.1 million decrease in distributor net sales across all
regions except for the JPKO region, an $11.5 million decrease in OEM net sales
across the EMEA and JPKO regions, and a $2.1 million decrease in EMS net sales
in the EMEA region. These decreases in net sales were partially offset by a $3.2
million increase in EMS net sales across the Americas and APAC regions, a $0.6
million increase in distributor net sales in the JPKO region, and a $0.5 million
increase in OEM net sales across the Americas and APAC regions. Film and
Electrolytic net sales was unfavorably impacted by $5.2 million from foreign
currency exchange due to the change in the value of the Euro compared the U.S.
Dollar.
Reportable Segment Operating Income (Loss)
Segment operating loss of $14.2 million in fiscal year 2020 had a $22.4 million
unfavorable change from operating income of $8.2 million in fiscal year 2019.
The unfavorable change in operating income was primarily attributable to a $12.2
million decrease in gross margin driven by a decrease in net sales caused by a
softening in the industrial and automotive market, and an unfavorable change in
sales channel and region mix. The unfavorable change in operating income (loss)
was also attributable to a $1.5 million increase in R&D expenses, a $0.7 million
increase in restructuring charges, a $7.9 million unfavorable change in (gain)
loss on write down and disposal of long-lived assets, and a $0.1 million
increase in SG&A expenses.
Electro-Magnetic, Sensors, and Actuators
The following table sets forth net sales, operating income, and operating income
as a percentage of net sales for our MSA reportable segment in fiscal years 2020
and 2019 (amounts in thousands, except percentages).
                                      For the Fiscal Years Ended
                               March 31, 2020            March 31, 2019
                                         % to Net                  % to Net
                             Amount        Sales       Amount        Sales
Net sales                  $  198,688                $  240,740
Segment operating income       13,101       6.6 %        22,546       9.4 %


Net Sales
MSA net sales of $198.7 million in fiscal year 2020 decreased $42.1 million from
$240.7 million in fiscal year 2019. The decrease in net sales was driven by a
$41.3 million decrease in OEM net sales across all regions except for the EMEA
region, a $1.4 million decrease in EMS net sales across all regions, and a $0.8
million decrease in distributor net sales in the APAC region. These decreases in
net sales were partially offset by a $1.2 million increase in distributor net
sales across the Americas and EMEA regions. MSA net sales was favorably impacted
by $2.5 million from foreign currency exchange due to the change in the value of
the Japanese Yen compared to the U.S. dollar.
Reportable Segment Operating Income
Segment operating income of $13.1 million in fiscal year 2020 decreased $9.4
million from $22.5 million in fiscal year 2019. The decrease in operating income
was primarily due to a $15.7 million decrease in gross margin, which was
primarily driven by a decrease in net sales and an unfavorable shift in sales
mix. A $3.1 million increase in restructuring charges also contributed to the
decrease in operating income. This decrease to operating income was partially
offset by a $9.2 million decrease in SG&A expenses and a $0.2 million decrease
in R&D expenses during fiscal year 2020 compared to fiscal year 2019.

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Consolidated Comparison of Fiscal Year 2019 to Fiscal Year 2018
For a discussion of consolidated results for the fiscal year ended March 31,
2019 compared to the fiscal year ended March 31, 2018, refer to Part II, Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in our Annual Report on Form 10-K for the fiscal year ended March
31, 2019, which is incorporated herein by reference.
Reportable Segment Comparison of Fiscal Year 2019 to Fiscal Year 2018
For a discussion of reportable segment results for the fiscal year ended March
31, 2019 compared to the fiscal year ended March 31, 2018, refer to Part II,
Item 7, "Management's Discussion and Analysis of Financial Condition and Results
of Operations" in our Annual Report on Form 10-K for the fiscal year ended March
31, 2019, which is incorporated herein by reference.
Liquidity and Capital Resources
Our liquidity needs arise from working capital requirements, acquisitions,
capital expenditures, principal and interest payments on debt, costs associated
with the implementation of our restructuring plans, and in the past, dividend
payments. Historically, these cash needs have been met by cash flows from
operations, borrowings under our loan agreements, and existing cash and cash
equivalents balances.
TOKIN Term Loan Facility
On October 29, 2018, the Company entered into a JPY 33.0 billion Term Loan
Agreement (the "TOKIN Term Loan Facility") by and among TOKIN, the lenders party
thereto (the "Lenders") and Sumitomo Mitsui Trust Bank, Limited in its capacity
as agent (the "Agent"), arranger and Lender. Funding for the Term Loan facility
occurred on November 7, 2018. The proceeds, which were net of an arrangement fee
withheld from the funding amount, were JPY 32.1 billion, or approximately $283.9
million using the exchange rate as of November 7, 2018. Net of the arrangement
fee, bank issuance costs, and other indirect issuance costs, the Company's net
proceeds from the TOKIN Term Loan Facility was $281.8 million.
Principal payments on the TOKIN Term Loan Facility are required semi-annually in
the amount of JPY 1.4 billion (approximately $12.7 million using the exchange
rate as of March 31, 2020), with a final payment of JPY 16.5 billion
(approximately $152.0 million using the exchange rate as of March 31, 2020) due
upon maturity on September 30, 2024. Interest payments are due semi-annually on
the TOKIN Term Loan Facility.
The carrying value of the TOKIN Term Loan Facility at March 31, 2020 and 2019
was $258.7 million and $276.8 million, respectively.
Revolving Line of Credit
The revolving line of credit has a facility amount of up to $75.0 million which
is based on factors including outstanding eligible accounts receivable,
inventory, and equipment collateral. There were no borrowings under the
revolving line of credit during fiscal year 2020, and the Company's available
borrowing capacity under the Loan and Security Agreement was $34.3 million as of
March 31, 2020.
Customer Advances
As of March 31, 2020, the Company has received a total of $56.5 million in
customer advances (collectively, the "Advances") from three separate customers.
The three customers agreed to make Advances to the Company in an aggregate
amount of up to $72.0 million (collectively, the "Customer Capacity
Agreements"). The Customer Capacity Agreements are being used to fund the
expansion of capacity for various electronic components that are sold to these
customers (the "Investments").
The Advances will be repaid beginning on the date that production from the
Investments is sufficient to meet the Company's obligations under the agreements
with the Customers. Repayments will be made on a quarterly basis as determined
by calculations that generally consider the number of components purchased by
the Customers during the quarter. Repayments based on the calculations will
continue until either the Advances are repaid in full, or December 31, 2038 for
all three Customers. The Company has a quarterly repayment cap in the agreement
with each of the Customers and is not required to make any quarterly repayments
to the Customers that in the aggregate exceeds $1.8 million. If the Customers do
not purchase a minimum number of components that would require full repayment of
the Advances by December 31, 2038, then the Advances shall be deemed repaid in
full. Additionally, if the Customers do not purchase a minimum number of
components that would require a payment on the Advances for a period of 16
consecutive quarters, the Advances shall be deemed repaid in full.

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The carrying value of these Advances was $56.5 million and $13.4 million as of
March 31, 2020 and 2019, respectively. During fiscal year 2020, the Company had
$42.8 million in capital expenditures related to the Customer Capacity
Agreements.
Short-term Liquidity
Cash and cash equivalents of $222.4 million as of March 31, 2020 increased $14.5
million from $207.9 million as of March 31, 2019. Our net working capital
(current assets less current liabilities) of $343.8 million decreased $19.8
million from $363.6 million as of March 31, 2019, with the decrease primarily
due to an increase in accrued expenses related to anti-trust settlements. Cash
and cash equivalents held by our foreign subsidiaries totaled $137.1 million and
$139.6 million at March 31, 2020 and 2019, respectively. We currently do not
intend nor foresee a need to repatriate cash and cash equivalents held by
foreign subsidiaries. If these funds are needed for our operations in the U.S.,
we may be required to accrue U.S. withholding taxes on the distributed foreign
earnings.
Based on our current operating plans, we believe cash and cash equivalents,
including expected cash generated from operations, are sufficient to fund our
operating requirements for at least the next twelve months, including $5.9
million in interest payments, $29.1 million in debt principal payments, $54.3
million in antitrust settlement payments, $50.0 million to $75.0 million in
capital expenditures, excluding approximately $15.0 million to $18.0 million of
customer-funded capacity expansion related to Customer Capacity Agreements, and
$1.7 million in restructuring payments. The Company's expected capital
expenditures in fiscal year 2021 mainly relate to the Company's continued plan
of capacity expansion to support future growth, and to improve our information
technology infrastructure around the world. As of March 31, 2020, our borrowing
capacity, which is based on factors including outstanding eligible accounts
receivable, inventory and equipment collateral, under the revolving line of
credit was $34.3 million. The revolving line of credit expires on April 28,
2022.
Cash and cash equivalents increased by $14.5 million during the year ended
March 31, 2020, as compared to a decrease of $78.9 million during the year ended
March 31, 2019 and an increase of $177.1 million during the year ended March 31,
2018 as follows (amounts in thousands):
                                                          Fiscal Years 

Ended March 31,

                                                        2020          2019  

2018

Net cash provided by (used in) operating
activities                                          $  158,856     $ 131,731     $ 120,761
Net cash provided by (used in) investing
activities                                            (143,313 )    (147,012 )     102,364
Net cash provided by (used in) financing
activities                                               8,814       (56,657 )     (55,798 )
Effect of foreign currency fluctuations on cash         (1,812 )      (6,990 )       9,745
Net increase (decrease) in cash, cash
equivalents, and restricted cash                        22,545       (78,928 )     177,072
Less: restricted cash at the end of the year             8,064             -             -
Net increase (decrease) in cash and cash
equivalents                                         $   14,481     $ 

(78,928 ) $ 177,072

Operating Cash Flow Activities
During fiscal years 2020, 2019, and 2018, cash provided by operating activities
totaled $158.9 million, $131.7 million, and $120.8 million, respectively.
During fiscal year 2020, cash provided by operating activities was $27.1 million
higher than fiscal year 2019 due to a lower use of net working capital
(excluding cash), which positively impacted operating cash flows. This favorable
change was partially offset by lower cash-generating income.
During fiscal year 2019, cash provided by operating activities was $11.0 million
higher than fiscal year 2018 due to higher cash-generating income. This
favorable change was partially offset by an increase in net working capital
(excluding cash), which negatively impacted operating cash flows.
Investing Cash Flow Activities
During fiscal years 2020, 2019, and 2018, cash provided by (used in) investing
activities totaled $(143.3) million, $(147.0) million, and $102.4 million,
respectively.

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During fiscal year 2020, cash used in investing activities included capital
expenditures of $146.3 million, primarily related to expanding capacity at our
manufacturing facilities in Mexico, China, Thailand and Japan, as well as
information technology projects across the world. Of the $146.3 million capital
expenditures, $42.8 million related to the Customer Capacity Agreements.
Additionally, the Company invested $5.0 million in the form of capital
contributions to KEMET Jianghai and used $1.3 million in cash to purchase the
remaining ownership interests in Novasentis. Partially offsetting these uses of
cash was the receipt of $8.9 million from the periodic settlements of a net
investment hedge and $0.4 million in dividends from our equity method
investments.
During fiscal year 2019, cash used in investing activities included capital
expenditures of $146.1 million, primarily related to expanding capacity at our
manufacturing facilities in Mexico, Portugal, China, Thailand and Japan, as well
as information technology projects in the United States and Mexico. Of the
$146.1 million in capital expenditures, $16.3 million related to the Customer
Capacity Agreements. Additionally, the Company invested $4.0 million in the form
of capital contributions to KEMET Jianghai and Novasentis. Partially offsetting
these uses of cash were $2.3 million in proceeds from asset sales and $0.8
million in dividend proceeds.
Financing Cash Flow Activities
During fiscal years 2020, 2019, and 2018, cash provided by (used in) financing
activities totaled $8.8 million, $(56.7) million, and $(55.8) million,
respectively.
During fiscal year 2020, the Company received $43.1 million in customer advances
related to Customer Capacity Agreements. Additionally, we received $6.5 million
upon the termination of cross-currency swaps designated as fair value hedges,
and we received $0.3 million in proceeds from the exercise of stock options.
Partially offsetting these cash inflows was $26.9 million in payments on long
term debt, $5.8 million in dividend payments for two quarters, $7.0 million in
payments for the periodic settlement of cross-currency swaps designated as cash
flow hedges, and $1.5 million in principal payments on finance leases.
During fiscal year 2019, the Company received $281.8 million in proceeds from
the TOKIN Term Loan Facility, net of discount, bank issuance costs, and other
indirect issuance costs, $13.4 million in customer advances related to Customer
Capacity Agreements, received proceeds on an interest free loan from the
Portuguese Government of $1.1 million, and received $0.5 million in cash
proceeds from the exercise of stock options. The Company made $344.5 million in
payments on long term debt, including two quarterly principal payments on the
Term Loan Credit Agreement of $4.3 million, for a total of $8.6 million, $323.4
million to repay the remaining balance on the Term Loan Credit Agreement, and
one principal payment on the TOKIN Term Loan Facility of $12.4 million. An early
payment premium on the Term Loan Credit Agreement used $3.2 million in cash.
Lastly, the Company paid two quarterly cash dividends for a total of $5.8
million.

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Commitments

At March 31, 2020, the Company's contractual liabilities, including payments due by period, were as follows (amounts in thousands):

                                                           Payment Due by 

Period

                                                                                                  More than

Contractual obligations Total Year 1 Years 2 - 3

     Years 4 - 5        5 years
Debt obligations (1)          $  272,618     $   29,111     $      51,942     $     191,311     $       254
Pension and other
post-retirement benefits
(2)                               93,661          6,486            15,327            19,081          52,767
Contract liabilities (3)          56,506              -             9,000            14,400          33,106
Antitrust settlements and
regulatory costs (4)              54,310         54,310                 -                 -               -
Operating lease obligations
(5)                               35,711          8,921            10,914             6,558           9,318
Purchase commitments              29,055         29,055                 -                 -               -
Interest obligations (1)          22,341          5,918            10,190             6,233               -
Employee separation
liability                          7,044            487               657               657           5,243
Finance lease obligations
(5)                                3,195          1,376             1,542               202              75
Restructuring liability            1,833          1,744                89                 -               -
Total                         $  576,274     $  137,408     $      99,661     $     238,442     $   100,763

______________________________________________________________________________

(1) Refer to Note 4, "Debt" for additional information.
(2) Reflects expected benefit payments through fiscal year 2030.
(3) Repayment of the Customer Advances assumes the customers purchase products
in a quantity sufficient to require the maximum permitted quarterly repayment
allowed per the agreements. Repayment timing and amounts are estimates and are
subject to change based upon actual and estimated product purchases by the
customers in these agreements. Refer to the contract liabilities section in Note
1, "Organization and significant accounting policies" for additional
information.
(4) In addition to amounts reflected in the table, an additional $23.1 million
has been recorded in the line item "Accrued expenses," for which the timing of
payment has not been determined.
(5) Refer to Note 14, "Leases" for additional information.
Uncertain Income Tax Positions
We have recognized a liability for our unrecognized uncertain income tax
positions of approximately $6.3 million as of March 31, 2020. The ultimate
resolution and timing of payment for remaining matters continues to be uncertain
and are, therefore, excluded from the above table.
Non-GAAP Financial Measures
To complement our Consolidated Statements of Operations and Cash Flows, we use
non-GAAP financial measures of adjusted gross margin, adjusted SG&A expenses,
adjusted operating income, adjusted net income, EBITDA, adjusted EBITDA, and
certain related ratios. Management believes that these non-GAAP financial
measures are complements to GAAP amounts and such measures are useful to
investors. The presentation of these non-GAAP measures is not meant to be
considered in isolation or as an alternative to net income as an indicator of
our performance, or, in the case of EBITDA, as an alternative to cash flows from
operating activities as a measure of liquidity.

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The following table provides a reconciliation from non-GAAP adjusted gross margin to GAAP gross margin, the most directly comparable GAAP measure (amounts in thousands, except percentages):

                                                    Fiscal Years Ended March 31,
                                                2020            2019            2018
Net sales                                   $ 1,260,554     $ 1,382,818     $ 1,200,181
Cost of sales                                   840,066         924,276         860,744
Gross Margin (GAAP)                             420,488         458,542         339,437
Gross margin as a % of net sales                   33.4 %          33.2 %          28.3 %
Non-GAAP adjustments:
Plant start-up costs                                369            (927 )   

929

Stock-based compensation expense                  3,843           2,756     

1,519

Adjusted gross margin (non-GAAP)            $   424,700     $   460,371     $   341,885
Adjusted gross margin as a % of net sales          33.7 %          33.3 %   

28.5 %

The following table provides a reconciliation from non-GAAP adjusted SG&A
expenses to GAAP SG&A expenses, the most directly comparable GAAP measure
(amounts in thousands):
                                                         Fiscal Years Ended March 31,
                                                        2020          2019         2018
SG&A expenses (GAAP)                                $   194,766    $ 202,642    $ 173,620
Non-GAAP adjustments:
ERP integration costs/IT transition costs                 6,282        8,813           80
Stock-based compensation expense                          7,803        9,751        5,890
Legal expenses related to antitrust class actions         5,454        5,195        6,736
Merger related expenses                                   7,119            -            -
Contingent consideration fair value adjustment              127            -            -
Adjusted SG&A expenses (non-GAAP)                   $   167,981    $ 

178,883 $ 160,914

The following table provides a reconciliation from non-GAAP adjusted operating
income to GAAP operating income, the most directly comparable GAAP measure
(amounts in thousands):
                                                          Fiscal Years Ended March 31,
                                                        2020          2019          2018
Operating income (GAAP)                              $ 147,866     $ 200,849     $ 112,852
Non-GAAP adjustments:
(Gain) loss on write down and disposal of
long-lived assets                                       19,710         1,660          (992 )
ERP integration costs/IT transition costs                6,282         8,813            80
Stock-based compensation                                12,084        12,866         7,657
Restructuring charges                                    8,882         8,779        14,843
Legal expenses related to antitrust class actions        5,454         5,195         6,736
Plant start-up costs                                       369          (927 )         929
Merger related expenses                                  7,119             -             -
Contingent consideration fair value adjustment             127             -             -
Adjusted operating income (non-GAAP)                 $ 207,893     $ 237,235     $ 142,105



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The following table provides a reconciliation from non-GAAP adjusted net income
to GAAP net income, the most directly comparable GAAP measure (amounts in
thousands):
                                                          Fiscal Years Ended March 31,
                                                        2020          2019          2018
Net income (GAAP)                                    $  41,381     $ 206,587     $ 254,127
Non-GAAP adjustments:
Equity (income) loss from equity method
investments                                                (76 )       3,304       (76,192 )
Acquisition (gain) loss                                      -             -      (130,880 )
(Gain) loss on write down and disposal of
long-lived assets                                       19,710         1,660          (992 )
Restructuring charges                                    8,882         8,779        14,843
R&D grant reimbursements and grant income               (1,595 )      (4,559 )           -
ERP integration costs/IT transition costs                6,282         8,813            80
Stock-based compensation                                12,084        12,866         7,657
Settlements, regulatory costs, and legal expenses
related to antitrust class actions                      70,149        11,896        16,636
Net foreign exchange (gain) loss                        (6,762 )      (7,230 )      13,145
Plant start-up costs                                       369          (927 )         929
Loss on early extinguishment of debt                         -        15,946           486
Write off of debt issuance costs                           453             -             -
Merger related expenses                                  7,119             -             -
Curtailment/settlement expense on defined benefit
pension plans                                            1,949             -             -
Unrealized (gain) loss on equity securities               (705 )           -             -
Contingent consideration fair value adjustment             127             -             -
Income tax effect of non-GAAP adjustments              (22,085 )     (50,012 )         (30 )
Adjusted net income (non-GAAP)                       $ 137,282     $ 207,123     $  99,809






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The following table provides a reconciliation from EBITDA and non-GAAP adjusted
EBITDA to GAAP net income, the most directly comparable GAAP measure (amounts in
thousands):
                                                          Fiscal Years Ended March 31,
                                                        2020          2019          2018
Net income (U.S. GAAP)                               $  41,381     $ 206,587     $ 254,127
Non-GAAP adjustments:
Income tax expense (benefit)                            38,526       (39,460 )       9,132
Interest expense, net                                    7,696        19,204        32,073
Depreciation and amortization                           62,819        52,628        50,661
EBITDA (non-GAAP)                                      150,422       238,959       345,993
Excluding the following items:
Equity (income) loss from equity method
investments                                                (76 )       3,304       (76,192 )
Acquisition (gain) loss                                      -             -      (130,880 )
(Gain) loss on write down and disposal of
long-lived assets                                       19,710         1,660          (992 )
ERP integration costs/IT transition costs                6,282         8,813            80
Stock-based compensation                                12,084        12,866         7,657
Restructuring charges                                    8,882         8,779        14,843
R&D grant reimbursements and grant income               (1,595 )      (4,559 )           -
Settlements, regulatory costs, and legal expenses
related to antitrust class actions                      70,149        11,896        16,636
Net foreign exchange (gain) loss                        (6,762 )      (7,230 )      13,145
Plant start-up costs                                       369          (927 )         929
Loss on early extinguishment of debt                         -        15,946           486
Write off of debt issuance costs                           453             -             -
Merger related expenses                                  7,119             -             -
Curtailment/settlement expense on defined benefit
pension plans                                            1,949             -             -
Unrealized (gain) loss on equity securities               (705 )           -             -
Contingent consideration fair value adjustment             127             -             -
Adjusted EBITDA (non-GAAP)                           $ 268,408     $ 289,507     $ 191,705


Adjusted gross margin represents net sales less cost of sales excluding
adjustments which are outlined in the quantitative reconciliation provided
above. Management uses adjusted gross margin to facilitate our analysis and
understanding of our business operations by excluding the items outlined in the
quantitative reconciliation provided above which might otherwise make
comparisons of our ongoing business with prior periods more difficult and
obscure trends in ongoing operations. The Company believes that adjusted gross
margin is useful to investors because it provides a supplemental way to
understand the underlying operating performance of the Company. Adjusted gross
margin should not be considered as an alternative to gross margin or any other
performance measure derived in accordance with GAAP.
Adjusted SG&A expenses represents SG&A expenses excluding adjustments which are
outlined in the quantitative reconciliation provided above. Management uses
Adjusted SG&A expenses to facilitate our analysis and understanding of our
business operations by excluding these items which might otherwise make
comparisons of our ongoing business with prior periods more difficult and
obscure trends in ongoing operations. The Company believes that Adjusted SG&A
expenses is useful to investors because it provides a supplemental way to
understand the underlying operating performance of the Company. Adjusted SG&A
expenses should not be considered as an alternative to SG&A expenses or any
other performance measure derived in accordance with GAAP.
Adjusted operating income represents operating income, excluding adjustments
which are outlined in the quantitative reconciliation provided above. We use
adjusted operating income to facilitate our analysis and understanding of our
business operations by excluding the items outlined in the quantitative
reconciliation provided above which might otherwise make comparisons of our
ongoing business with prior periods more difficult and obscure trends in ongoing
operations. The Company believes that adjusted operating income is useful to
investors to provide a supplemental way to understand our underlying operating
performance and allows investors to monitor and understand changes in our
ability to generate income from ongoing

                                       56
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business operations. Adjusted operating income should not be considered as an
alternative to operating income or any other performance measure derived in
accordance with GAAP.
Adjusted net income represents net income, excluding adjustments which are
outlined in the quantitative reconciliation provided above. We use adjusted net
income to evaluate our operating performance by excluding the items outlined in
the quantitative reconciliation provided above which might otherwise make
comparisons of our ongoing business with prior periods more difficult and
obscure trends in ongoing operations. The Company believes that adjusted net
income is useful to investors because it provides a supplemental way to
understand the underlying operating performance of the Company and allows
investors to monitor and understand changes in our ability to generate income
from ongoing business operations. Adjusted net income should not be considered
as an alternative to net income, operating income or any other performance
measures derived in accordance with GAAP.
EBITDA represents net income before income tax expense, interest expense, net,
and depreciation and amortization expense. We present EBITDA as a supplemental
measure of our ability to service debt. We believe EBITDA is an appropriate
supplemental measure of debt service capacity because cash expenditures on
interest are, by definition, available to pay interest, and tax expense is
inversely correlated to interest expense because tax expense goes down as
deductible interest expense goes up; and depreciation and amortization are
non-cash charges.
We also present adjusted EBITDA, which is EBITDA excluding adjustments that are
outlined in the quantitative reconciliation provided above, as a supplemental
measure of our performance and because we believe this measure is frequently
used by securities analysts, investors, and other interested parties in the
evaluation of companies in our industry. The items excluded from adjusted EBITDA
are excluded in order to better reflect our continuing operations.
In evaluating adjusted EBITDA, one should be aware that in the future we may
incur expenses similar to the adjustments noted above. Our presentation of
adjusted EBITDA should not be construed as an inference that our future results
will be unaffected by these types of adjustments. Adjusted EBITDA is not a
measurement of our financial performance under GAAP and should not be considered
as an alternative to net income, operating income, or any other performance
measures derived in accordance with GAAP or as an alternative to cash flow from
operating activities as a measure of our liquidity.
Our adjusted EBITDA measure has limitations as an analytical tool, and should
not be considered in isolation or as a substitute for analysis of our results as
reported under GAAP. Some of these limitations are:
•          it does not reflect our cash expenditures, future requirements for
           capital expenditures or contractual commitments;

• it does not reflect changes in, or cash requirements for, our working

           capital needs;


•          it does not reflect the significant interest expense or the cash
           requirements necessary to service interest or principal payments on
           our debt;


•          although depreciation and amortization are non-cash charges, the
           assets being depreciated and amortized will often have to be

replaced

           in the future, and our adjusted EBITDA measure does not reflect any
           cash requirements for such replacements;

• it is not adjusted for all non-cash income or expense items that are

           reflected in our Consolidated Statements of Cash Flows;

• it does not reflect the impact of earnings or charges resulting from

           matters we consider not to be indicative of our ongoing 

operations;

• it does not reflect limitations on or costs related to transferring

           earnings from our subsidiaries to us; and

• other companies in our industry may calculate this measure differently

           than we do, limiting its usefulness as a comparative measure.


Because of these limitations, adjusted EBITDA should not be considered as a
measure of discretionary cash available to us to invest in the growth of our
business or as a measure of cash that will be available to us to meet our
obligations. You should compensate for these limitations by relying primarily on
our GAAP results and using adjusted EBITDA only supplementally.
Recent Accounting Pronouncements
Recently Adopted Accounting Pronouncements
On April 1, 2019, the Company early adopted ASU No. 2018-15, Customer's
Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement
that is a Service Contract. This ASU amends the definition of a hosting
arrangement and requires a customer in a hosting arrangement that is a service
contract to capitalize certain implementation

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costs as if the arrangement was an internal-use software project. Under this
ASU, a customer will apply ASC 350-40 to determine whether to capitalize
implementation costs of the cloud computing arrangement that is a service
contract or expense them as incurred. The Company early adopted this ASU in the
first quarter of fiscal year 2020 and applied the ASU prospectively to
implementation costs incurred after April 1, 2019. The adoption of this ASU did
not have a material impact on our Consolidated Financial Statements.
On April 1, 2019, the Company adopted Topic 842, as amended, which superseded
the lease accounting guidance under Topic 840, and generally requires lessees to
recognize operating and financing lease liabilities and corresponding ROU assets
on the balance sheet and to provide enhanced disclosures surrounding the amount,
timing, and uncertainty of cash flows arising from leasing arrangements. The
Company adopted the new guidance using the modified retrospective transition
approach by applying the standard to all leases existing as of the date of the
initial application and not restating comparative periods. The most significant
impact was the recognition of ROU assets and lease liabilities for operating
leases, while our accounting for finance leases remained substantially
unchanged. For information regarding the impact of Topic 842 adoption, see
"Significant Accounting Policies - Leases" in Note 1, "Organization and
significant accounting policies" and Note 14, "Leases."
Recent Accounting Pronouncements Not Yet Adopted
In March 2020, the Financial Accounting Standards Board ("FASB") issued ASU
2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of
Reference Rate Reform on Financial Reporting ("ASU 2020-04") to provide
temporary optional expedients and exceptions to the contract modifications,
hedge relationships, and other transactions affected by reference rate reform if
certain criteria are met. This ASU, which was effective upon issuance and may be
applied through December 31, 2022, is applicable to all contracts and hedging
relationships that reference the London Interbank Offered Rate or any other
reference rate expected to be discontinued. The Company is currently evaluating
the impact of this ASU on our Consolidated Financial Statements.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):
Simplifying the Accounting for Income Taxes, which simplifies the accounting for
income taxes. The guidance will be effective for the Company in the first
quarter of fiscal year 2022 on a prospective basis, and early adoption is
permitted. The Company is currently evaluating the impact of this ASU on our
Consolidated Financial Statements.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses
(Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU
2016-13"), which requires the measurement and recognition of expected credit
losses for financial assets held at amortized cost. ASU 2016-13 replaces the
existing incurred loss impairment model with a forward-looking expected credit
loss model which will result in earlier recognition of credit losses. The
guidance will be effective for the Company in the first quarter of fiscal year
2021 and we do not expect the adoption of this guidance to have a material
impact on our Consolidated Financial Statements.
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.
Effect of Inflation
Inflation generally affects us by increasing the cost of labor, equipment, and
raw materials. We do not believe that inflation has had any material effect on
our business over the past three fiscal years except for the following
discussion in Commodity Price Risk.

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