Restructuring and Exit costs

6 Months Ended

Jun. 30, 2015

Restructuring and Related Activities [Abstract]

Restructuring and Exit Costs

The Company has initiated a restructuring plan to consolidate U.S. manufacturing operations and to reduce headcount and operating expenses in order to align the Company’s cost structure with the current business forecast and to improve operational efficiency. The plan also includes the potential divestiture of a product line. In connection with the restructuring plan, the Company expects to incur total restructuring and related charges of approximately $4.2 million, including $2.1 million in facilities costs related to the consolidation of manufacturing operations, $1.2 million in employee severance costs, $740,000 in accelerated equipment depreciation expense, as well as $160,000 in relocation costs. Upon completion of the plan, which is anticipated to be by the end of the first quarter of 2016, total cash expenditures related to restructuring activities are expected to be approximately $2.2 million, including $118,000 which was paid in the second quarter of 2015.

The Company accounts for charges resulting from restructuring and exit activities in accordance with ASC Topic 420, Exit or Disposal Cost Obligations (“ASC 420”), and, ASC Topic 712, Compensation-Nonretirement Postemployment Benefits (“ASC 712”) for employee termination benefits to be paid in accordance with its ongoing employee termination benefit arrangement.

In June 2015, the Company had ceased use of approximately 60,000 square feet of its Peoria, AZ manufacturing facility, and determined this leased space would have no future economic benefit to the Company based on the current business forecast. As a result, in the three months ended June 30, 2015, the Company recorded a liability for the future rent obligation associated with this space, net of estimated sublease income, in accordance with ASC Topic 420. The liability recorded related to the exit of this leased space was $1.2 million, before tax, and is a component of the total expected restructuring charge of $4.2 million.

Restructuring charges for the three months ended June 30, 2015 also include $1.1 million in employee severance costs for work force reductions. This accrual includes planned severance payments that are provided in consideration of past employee services under the Company’s ongoing employee termination benefit arrangement, which were probable of incurrence and estimable as of June 30, 2015. The Company paid $118,000 in employee severance costs during the three months ended June 30, 2015.

For the three months ended June 30, 2015, the Company recorded total charges related to its restructuring plan of $2.3 million, within "restructuring and exit costs" and recorded $185,000 of accelerated depreciation expense within “cost of goods sold” in the condensed consolidated statements of operations. As of June 30, 2015, the Company had a $1.0 million liability associated with employee severances recorded in “accrued employee compensation”, $327,000 of lease obligation costs recorded within “other current liabilities” and $881,000 of lease obligation costs recorded within other “long term liabilities” in the consolidated balance sheet.

The following table summarizes the restructuring and exit costs as of and for the quarter ended June 30, 2015 (in thousands):



	Employee Severance Costs			Lease Obligation Costs		Other Exit Costs		Total
Costs incurred	$	1,132		$	1,208	$	—	$	2,340
Amounts paid	$	(118	)	$	—	$	—	$	(118	)
Amounts reserved at June 30, 2015	$	1,014		$	1,208	$	—	$	2,222