11. Leadership Changes

On January 7, 2016, the Company’s former Chief Financial Officer and Chief Operating Officer entered into a separation and transition agreement (the “Separation and Transition Agreement”) pursuant to which he served as Co-Chief Financial Officer from January 15, 2016 through March 31, 2016 and separated from the Company effective March 31, 2016. Subject to the terms of the Separation and Transition Agreement, the Company was required to provide severance and other related benefits through April 2016. The Company recorded a liability, measured at its estimated fair value, for payments to be made under the Separation and Transition Agreement, with a corresponding charge to “Selling, operating and administrative expenses” in the accompanying Condensed Consolidated Statements of Income. In April 2016, the Company made a lump sum severance payment. The Company incurred a total cost of $1,043,000, including $331,000 of equity-based compensation expense, during the nine months ended September 30, 2016 related to this separation.

On May 4, 2015, the Company’s former President entered into a retirement agreement with the Company (the “Retirement Agreement”) pursuant to which he retired on August 19, 2015. Subject to the terms of the Retirement Agreement, the Company is required to provide retirement benefits over a 24-month period, beginning in September 2015. The Company recorded a liability, measured at its estimated fair value, for payments that will be made under the Retirement Agreement, with a corresponding charge to “Selling, operating and administrative expenses.” The Company incurred a total cost of $877,000, including $216,000 of equity-based compensation expense, during the year ended December 31, 2015 related to this retirement. As of September 30, 2016 and December 31, 2015, the short-term portion of the liability was $237,000 and $250,000, respectively, and is included in “Accrued liabilities” in the accompanying Condensed Consolidated Balance Sheets. As of September 30, 2016 and December 31, 2015, the long-term portion of the liability was $0 and $175,000, respectively, and is included in “Other liabilities, net of current portion” in the accompanying Condensed Consolidated Balance Sheets.

On December 31, 2014, the Company’s former Chief Executive Officer retired and pursuant to the terms of the Separation and Release of Claims Agreement (the “Separation Agreement”), the Company is required to provide severance and other related benefits over a 36-month period, beginning in October 2015. The Company recorded a liability, measured at its estimated fair value, for payments that will be made under the Separation Agreement, with a corresponding charge to “Selling, general and administrative expenses.” The Company will incur a total cost of $3,581,000, including $1,007,000 of equity-based compensation expense related to this retirement. Of this amount, the Company has recognized a total of $3,557,000, of which $0 was incurred during the nine months ended September 30, 2016. As of September 30, 2016 and December 31, 2015, the short-term portion of the liability was $781,000 and $759,000, respectively, and is included in “Accrued liabilities” in the accompanying Condensed Consolidated Balance Sheets. As of September 30, 2016 and December 31, 2015, the long-term portion of the liability was $198,000 and $789,000, respectively, and is included in “Other liabilities, net of current portion” in the accompanying Condensed Consolidated Balance Sheets.

The Company’s severance and other related expenses incurred for the aforementioned leadership changes were $0 and $503,000 for the three months ended September 30, 2016 and 2015, respectively, and $1,043,000 and $1,542,000 for the nine months ended September 30, 2016 and 2015, respectively, which is included in “Selling, operating and administrative expenses” in the accompanying Condensed Consolidated Statements of Income.

The following table presents a rollforward of the estimated fair value liability established for the aforementioned severance and other related costs from January 1, 2016 to September 30, 2016 (in thousands):


Balance, January 1, 2016	$	2,021
Severance and other related expenses		1,043
Accretion		48
Cash payments		(1,565)
Non-cash adjustment (a)		(331)
Balance, September 30, 2016	$	1,216

(a)

For the nine months ended September 30, 2016, the non-cash adjustment represents the non-cash equity-based compensation expense recorded for the accelerated vesting of restricted stock units pursuant to the terms of the Separation and Transition Agreement.