Restructuring and Exit Costs

In 2015, the Company 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 included the potential disposition of the Company’s microelectronics product line which was committed to in the first quarter of 2016 and subsequently completed in April 2016. The restructuring plan was otherwise substantially completed in the first quarter of 2016. Total restructuring charges were $2.8 million, which includes $1.3 million in facilities costs related to the consolidation of manufacturing operations, $1.2 million in employee severance costs and $0.3 million in other exit costs. The Company also incurred $0.6 million in accelerated equipment depreciation expense related to the consolidation of manufacturing operations. Total cash expenditures related to restructuring activities were approximately $1.5 million.

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, for employee termination benefits to be paid in accordance with its ongoing employee termination benefit arrangement.

In June 2015, the Company 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 June 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. For the year ended December 31, 2015, the expense related to the exit of this leased space was $1.2 million, before tax, and was recorded as a component of the total restructuring charge. During the nine months ended September 30, 2016, the Company recorded an additional restructuring charge of $0.1 million related to a revision to the sublease income assumption.

During the three and nine months ended September 30, 2016, cash payments in connection with the restructuring plan were $26,000 and $0.5 million, respectively, primarily related to employee severance costs and other exit costs. During the three and nine months ended September 30, 2015, cash payments in connection with the restructuring plan were $0.7 million and $0.8 million, respectively, primarily related to employee severance costs.

For the nine months ended September 30, 2016, the Company recorded net charges related to its restructuring plan of $0.3 million within “restructuring and exit costs” and also recorded $0.1 million of accelerated depreciation expense within “cost of revenue” in the condensed consolidated statements of operations. No restructuring or related charges were recorded during the three months ended September 30, 2016. For the three and nine months ended September 30, 2015, the Company recorded net charges related to its restructuring plan of $56,000 and $2.4 million, respectively, within “restructuring and exit costs” and also recorded $0.1 million and $0.3 million, respectively, of accelerated depreciation expense within “cost of revenue” in the condensed consolidated statements of operations.

As of September 30, 2016, the restructuring liability associated with lease obligation costs of $0.2 million is recorded in “accounts payable and accrued liabilities” and $0.7 million of lease obligation costs is recorded in “other long term liabilities” in the condensed consolidated balance sheet.

The following table summarizes the restructuring and exit costs for the nine months ended September 30, 2016 (in thousands):



	Employee Severance Costs			Lease Obligation Costs			Other Exit Costs			Total
Restructuring liability as of December 31, 2015	$	294		$	1,043		$	—		$	1,337
Costs incurred	67			86			298			451
Amounts paid	(207		)	—			(246		)	(453		)
Accruals released	(154		)	—			—			(154		)
Other non-cash adjustments	—			(237		)	(52		)	(289		)
Restructuring liability as of September 30, 2016	$	—		$	892		$	—		$	892