14. Leadership Changes and Restructuring Activities

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. 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 Consolidated Statements of Income. The Company incurred a total cost of $1,043,000, including $331,000 of equity-based compensation expense during the year ended December 31, 2016. All amounts were paid during the year ended December 31, 2016.

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” in the accompanying Consolidated Statements of Income. The Company incurred a total cost of $877,000, including $216,000 of equity-based compensation expense, during the year ended December 31, 2015. As of December 31, 2016 and December 31, 2015, the short-term portion of the liability was $175,000 and $250,000, respectively, and is included in “Accrued liabilities” in the accompanying Consolidated Balance Sheets. As of December 31, 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 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 $3,569,000, of which $12,000 was incurred during the year ended December 31, 2016. As of December 31, 2016 and 2015, the short-term portion of the liability was $789,000 and $759,000, respectively, and is included in “Accrued liabilities” in the accompanying Consolidated Balance Sheets. As of December 31, 2016 and 2015, the long-term portion of the liability was $0 and $789,000, respectively, and is included in “Other liabilities, net of current portion” in the accompanying Consolidated Balance Sheets.

In addition, management of the Company approved and implemented a restructuring plan during the fourth quarter of 2014 designed to improve operating efficiencies, which reduced the Company’s overall headcount at its corporate headquarters (the “Restructuring Plan”). In connection with the Restructuring Plan, the Company incurred a total of $1,303,000 in expenses related to severance and outplacement services provided to certain former employees of the Company, all of which was recorded during the year ended December 31, 2014. These expenses are included in “Selling, general and administrative expenses” in the accompanying Consolidated Statements of Income.

The Company’s severance and other related expenses incurred for the aforementioned leadership changes and restructuring activities were $1,055,000, $1,091,000 and $4,848,000 for the years ended December 31, 2016, 2015 and 2014, respectively, which is included in “Selling, operating and administrative expenses” in the accompanying Consolidated Statements of Income.

The following table presents a rollforward of the estimated fair value liability established for the aforementioned leadership changes and restructuring activities during the years ended December 31, 2016 and 2015 (in thousands):


	2016		2015
Balance, January 1	$	1,973	$	2,408
Severance and other related expenses		1,055		1,091
Accretion		59		82
Cash payments		(1,792)		(1,392)
Non-cash adjustment (a)		(331)		(216)
Balance, December 31	$	964	$	1,973

(a)

For the year ended December 31, 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. For the year ended December 31, 2015, 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 Retirement Agreement.