Annual report pursuant to Section 13 and 15(d)

Note 5 - Restructuring

v3.6.0.2
Note 5 - Restructuring
12 Months Ended
Dec. 31, 2016
Restructuring and Related Activities [Abstract]  
Restructuring

Note 5. Restructuring

 

As part of an effort to better focus and align the Company’s resources toward profitable growth, on August 24, 2015, the Board authorized the Company to undertake steps to commence a restructuring of the business and operations, which concluded during the third quarter of 2016. The Company closed certain facilities, reduced headcount, discontinued products and renegotiated certain contracts resulting in restructuring and other charges of $18.3 million for the year ended December 31, 2015 and recoveries of such charges of $3.5 million for the year ended December 31, 2016.

 

Included in these charges, for the years ended December 31, 2016 and 2015, the Company recorded restructuring charges in “Cost of revenue” of $2.3 million and $2.9 million, respectively, related to the write-down of inventory identified to be discontinued in the restructuring plan.

 

 

For the year ended December 31, 2016, the Company recorded a credit in “Restructuring and other charges” of $3.5 million which primarily included: (i) an expense credit of $4.8 million related to the release of the restructuring accrual of $7.0 million which was expensed during the year ended December 31, 2015, offset by the cash payment of $2.2 million related to the settlement agreement which terminated all future commitments between ETW Corporation (“ETW”) and the Company (see Note 15); (ii) $1.4 million related to write-off of long-lived assets related to the abandonment of certain lease facilities; and (iii) $0.9 million related to severance and other employee compensation costs. The restructuring plan was substantially complete as of December 31, 2016.

 

For the year ended December 31, 2015, the Company recorded expenses of $18.3 million in “Restructuring and other charges” primarily comprised of: (i) $7.7 million related to cancellation of certain contracts and sponsorship agreements, primarily related to the ETW commitment; (ii) write-down of prepaid stock compensation related to terminated endorsement agreements of $5.4 million; (iii) $2.7 million related to the accelerated vesting of 657,310 shares of restricted stock for severed employees; (iv) $1.4 million related to severance and benefit costs related to terminated employees; and (v) $0.9 million for costs associated with permanently vacating certain leased facilities, including $0.4 million write-off of long-lived assets.

 

The following table illustrates the provision of the restructuring charges and the accrued restructuring charges balance as of December 31, 2016 and 2015 (in thousands):

   

 

Employee Severance Costs

 

 

 

Contract Termination Costs

 

  Purchase Commitment of Discontinued Inventories Not Yet Received  

 

Abandoned Lease Facilities

 

 

 

Total

 

Balance as of December 31, 2014   $ —       $ —       $ —       $ —       $ —    
Expensed     1,353       6,979       350       467       9,149  
Cash payments     (845 )     (949 )     —         (56 )     (1,850 )
Reclassification from accounts payable to restructuring charges     —         2,120       —         —         2,120  
Balance as of December 31, 2015     508       8,150       350       411       9,419  
Expensed     601       (288 )     —         1,399       1,712  
Benefit from settlement of Endorsement Agreement with ETW     —         (4,750 )     —         —         (4,750 )
Cash payments     (1,109 )     (2,804 )     (175 )     (1,506 )     (5,594 )
Reclassification from capital lease liabilities to restructuring charges     —         —         —         35       35  
Balance as of December 31, 2016   $ —       $ 308     $ 175     $ 339     $ 822  

 

The total future payments under the restructuring plan as of December 31, 2016 are as follows (in thousands):

 

    For the Year Ending December 31,    
Outstanding Payments   2017   2018   2019   2020   2021   2022   Total
Contract termination costs   $ 308     $ —       $ —       $ —       $ —       $ —       $ 308  
Purchase commitment of discontinued inventories not yet received     175       —         —         —         —         —         175  
Abandoned leased facilities     131       92       91       25       —         —         339  
Total future payments   $ 614     $ 92     $ 91     $ 25     $ —       $ —       $ 822