Restructuring and Exit Costs

12 Months Ended

Dec. 31, 2015

Restructuring and Related Activities [Abstract]

During the year ended December 31, 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 includes the potential divestiture of a product line. In connection with the restructuring plan, the Company expects to incur total restructuring charges between $2.6 million and $3.3 million. The anticipated charges include approximately $1.2 million to $1.9 million in facilities costs related to the consolidation of manufacturing operations, $1.3 million in employee severance costs and $125,000 in relocation costs. The Company also expects to incur $560,000 in accelerated equipment depreciation expense and $1.6 million in capital expenditures related to the restructuring. Upon completion of the plan, which is anticipated to be substantially completed by the end of the first quarter of 2016, total cash expenditures related to restructuring activities are expected to be approximately $1.4 million. During the year ended December 31, 2015, the Company paid $1.0 million in restructuring expenses.

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. 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.

Restructuring charges for the year ended December 31, 2015 include $1.3 million in employee severance costs for work force reductions. This amount includes planned severance payments to be paid in consideration of past employee services under the Company’s ongoing employee termination benefit arrangement, which were probable of incurrence and estimable as of December 31, 2015.

For the year ended December 31, 2015, the Company recorded total charges related to its restructuring plan of $2.5 million within "restructuring and exit costs" and recorded $434,000 of accelerated depreciation expense within “cost of revenue” in the consolidated statements of operations. As of December 31, 2015, the Company had a $294,000 liability associated with employee severance recorded in “accrued employee compensation”, $231,000 of lease obligation costs recorded within “other current liabilities” and $812,000 of lease obligation costs recorded within "other long term liabilities” in the consolidated balance sheet.

The following table summarizes the restructuring and exit costs for the year ended December 31, 2015 (in thousands):



Year ended December 31, 2015	Employee Severance Costs			Lease Obligation Costs			Total
Costs incurred	$	1,439		$	1,208		$	2,647
Amounts paid	(1,010		)	—			(1,010		)
Accruals released	(135		)	—			(135		)
Other non-cash adjustments	—			(165		)	(165		)
Restructuring liability as of December 31, 2015	$	294		$	1,043		$	1,337