Re-engineering and Impairment Costs

The Company recorded $1.5 million and $3.4 million in re-engineering charges during the second quarters of 2015 and 2014, respectively, and $4.2 million and $5.7 million for the respective year-to-date periods. In both years, these charges were primarily related to severance costs incurred for headcount reductions in several of the Company’s operations in connection with changes in its management and organizational structures, and in 2014, the decision to cease operating the Armand Dupree business in the United States.

The balances included in accrued liabilities related to re-engineering and impairment charges as of June 27, 2015 and December 27, 2014 were as follows:



(In millions)	June 27, 2015			December 27, 2014
Beginning of the year balance	$	2.4		$	2.6
Provision	4.2			11.0
Non-cash charges	—			(1.8		)
Cash expenditures:
Severance	(4.2		)	(7.1		)
Other	(0.9		)	(2.3		)
End of period balance	$	1.5		$	2.4

The accrual balance as of June 27, 2015, related primarily to severance payments to be made by the end of the third quarter of 2015. In connection with the decisions to cease operating the Armand Dupree business in the United States and the Nutrimetics business in Thailand, the Company recorded $1.9 million and $0.4 million, respectively, in cost of sales for inventory obsolescence during the first half of 2014.

In February 2015, the Venezuelan government launched an overhaul of its foreign currency exchange structure and created a new exchange mechanism called Simadi that has provided an exchange rate significantly lower than the rate available to the Company under the previous SICAD 2 mechanism. As a result, and based on the perceived impact of this change to the operations of its Venezuelan unit, the Company deemed this change to be a triggering event to evaluate the $15.7 million of long-term fixed assets in Venezuela. This evaluation involved performing an undiscounted cash flow analysis to determine if the carrying value of the assets were recoverable and whether the amount included on the balance sheet was greater than fair value. The Company considered many economic and operating factors, including uncertainty surrounding the interpretation and enforcement of certain product pricing restrictions in Venezuela, the inability to obtain the necessary raw materials locally to meet production demands and the significant decline in the global price of oil. Due to the decline of the global price of oil, the Venezuelan government has not made U.S. dollars widely available through any of the exchange mechanisms it has had in place. Given the devaluation of the Venezuelan bolivar compared with the U.S. dollar, and the lack of U.S dollars available to use for the purchase of raw materials from on-going operations, the Company did not believe it would be able to operate the business profitably. As a result, the Company concluded that the carrying value of the long-term fixed assets in Venezuela was not recoverable. The Company then estimated the fair value of the long-term fixed assets using estimated selling prices available in Venezuela. The primary assets that were considered to continue to maintain a marketable value in Venezuela included commercial office space, a show room and parking spaces. As a result of this evaluation in the first quarter of 2015, the Company recorded an impairment charge of $13.5 million to reduce the long-term fixed asset carrying value in Venezuela to the estimated fair value of $2.2 million, which is considered a non-recurring Level 3 measurement within the fair value hierarchy.