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SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended
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Jul. 30, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
SIGNIFICANT ACCOUNTING POLICIES | SIGNIFICANT ACCOUNTING POLICIES
(a) | Nature of Business
United Natural Foods, Inc. and its subsidiaries (the "Company") is a leading distributor and retailer of natural, organic and specialty products. The Company sells its products primarily throughout the United States and Canada.
(b) | Basis of Presentation
The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. Certain prior year amounts have been reclassified to conform to the current year's presentation. The fiscal year of the Company ends on the Saturday closest to July 31. Fiscal 2016, 2015 and 2014 ended on July 30, 2016, August 1, 2015 and August 2, 2014, respectively. Fiscal 2016, 2015 and 2014 contained 52 weeks. Each of the Company's interim quarters consisted of 13 weeks. Net sales consist primarily of sales of natural, organic and specialty products to retailers, adjusted for customer volume discounts, returns and allowances. Net sales also include amounts charged by the Company to customers for shipping and handling, and fuel surcharges. The principal components of cost of sales include the amounts paid to manufacturers and growers for product sold, plus the cost of transportation necessary to bring the product to the Company's distribution centers, offset by consideration received from suppliers in connection with the purchase of the suppliers' products. Cost of sales also includes amounts incurred by the Company's manufacturing subsidiary, Woodstock Farms Manufacturing, for inbound transportation costs and depreciation for manufacturing equipment, offset by consideration received from suppliers in connection with the purchase or promotion of the suppliers' products. Operating expenses include salaries and wages, employee benefits, warehousing and delivery, selling, occupancy, insurance, administrative, share-based compensation and amortization expense. Operating expenses also include depreciation expense related to the wholesale and retail divisions. Other expense (income) includes interest on outstanding indebtedness, interest income and miscellaneous income and expenses. Certain items in the consolidated balance sheet as of August 1, 2015 have been reclassified as a result of an immaterial correction explained in Note 15, "I mmaterial Correction of Prior Period Financial Statements." These revisions were not material to the Company's consolidated financial statements as a whole.
(c) | Cash Equivalents
Cash equivalents consist of highly liquid investments with original maturities of three months or less.
(d) | Inventories and Cost of Sales
Inventories consist primarily of finished goods and are stated at the lower of cost or market, with cost being determined using the first-in, first-out (FIFO) method. Allowances received from suppliers are recorded as reductions in cost of sales upon the sale of the related products.
(e) | Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and amortization. Equipment under capital leases is stated at the lower of the present value of minimum lease payments at the inception of the lease or the fair value of the asset. Property and equipment includes the non-cash expenditures made by the landlord for the Aurora, Colorado distribution center in addition to office space utilized as the Company's Corporate headquarters in Providence, Rhode Island as the lease qualifies for capital lease treatment pursuant to Financial Accounting Standards Board Accounting Standards Codification 840, Leases. Property and equipment also includes accumulated depreciation with respect to these items. Refer to Note 8, Long-Term Debt, for additional information. Applicable interest charges incurred during the construction of new facilities may be capitalized as one of the elements of cost and are amortized over the assets' estimated useful lives. The Company capitalized $0.4 million of interest during the fiscal year ended July 30, 2016 related to the construction of a new distribution center in Gilroy, California which began operations in February 2016. The Company capitalized $0.5 million of interest during the fiscal year ended August 1, 2015 related to the construction of new distribution centers in Prescott, Wisconsin and Gilroy, California. The Company capitalized $0.9 million of interest during the fiscal year ended August 2, 2014 related to the construction of new distribution centers in Racine, Wisconsin and Hudson Valley, New York. Property and equipment consisted of the following at July 30, 2016 and August 1, 2015:
| Original Estimated Useful Lives (Years) |  | 2016 |  | 2015
| (In thousands, except years)
Land |  |  | $ | 52,641 |  |  | $ | 43,033 |
Buildings and improvements | 20-40 |  | 403,822 |  |  | 302,066 |
Leasehold improvements | 5-20 |  | 136,758 |  |  | 133,120 |
Warehouse equipment | 3-30 |  | 163,494 |  |  | 155,477 |
Office equipment | 3-10 |  | 55,915 |  |  | 57,519 |
Computer software | 3-7 |  | 146,766 |  |  | 130,652 |
Motor vehicles | 3-7 |  | 4,597 |  |  | 4,357 |
Construction in progress |  |  | 15,018 |  |  | 63,557 |
|  |  | 979,011 |  |  | 889,781 |
Less accumulated depreciation and amortization |  |  | 362,406 |  |  | 317,329 |
Net property and equipment |  |  | $ | 616,605 |  |  | $ | 572,452 |
Depreciation expense amounted to $61.1 million, $55.0 million and $42.9 million for the fiscal years ended July 30, 2016, August 1, 2015 and August 2, 2014, respectively.
(f) | Income Taxes
The Company accounts for income taxes under the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The calculation of the Company's tax liabilities includes addressing uncertainties in the application of complex tax regulations and is based on the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return,
(g) | Long-Lived Assets
Management reviews long-lived assets, including definite-lived intangible assets, for indicators of impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Cash flows expected to be generated by the related assets are estimated over the assets' useful lives based on updated projections. If the evaluation indicates that the carrying amount of an asset may not be recoverable, the potential impairment is measured based on a fair value discounted cash flow model.
(h) | Goodwill and Intangible Assets
Goodwill represents the excess of cost over the fair value of net assets acquired in a business combination. Goodwill and other intangible assets with indefinite lives are not amortized. Intangible assets with definite lives are amortized on a straight-line basis over the following lives:
Customer relationships |  | 7-20 years
Non-competition agreements |  | 1-10 years
Trademarks and tradenames |  | 4-10 years
Goodwill is assigned to the reporting units that are expected to benefit from the synergies of the business combination. The Company is required to test goodwill for impairment at least annually, and between annual tests if events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The Company has elected to perform its annual tests for indications of goodwill impairment as of the first day of the fourth quarter of each fiscal year. The Company's reporting units are at or one level below the operating segment level. Approximately 95.1% of the Company's goodwill is within its wholesale reporting unit as of July 30, 2016. In accordance with Accounting Standards Update ("ASU") No. 2011-08, Intangibles- Goodwill and Other (Topic 350): Testing Goodwill for Impairment ("ASU 2011-08"), the Company is allowed to perform a qualitative assessment for goodwill impairment unless it believes it is more likely than not that a reporting unit's fair value is less than the carrying value. The thresholds used by the Company for this determination in fiscal 2016 were for any reporting units that (1) have passed their previous two-step test with a margin of calculated fair value versus carrying value of at least 20%, (2) have had a two-step test within the past five years, (3) have had no significant changes to their working capital structure, (4) have current year income which is at least 85% of prior year amounts, and (5) present no other factors to be considered as outlined in ASU 2011-08. Based on the qualitative assessment performed for fiscal 2016, three of the Company's four reporting units met these thresholds. As these reporting units have passed their previous two-step tests within the past 5 years, the reporting units' net income has not decreased more than 15% and their working capital requirements have not increased significantly, no quantitative testing was performed on these reporting units as part of the annual test in fiscal 2016. For the reporting unit that did not meet the thresholds above for fiscal 2016, the Company performed a two-step goodwill impairment analysis. The first step to identify potential impairment involves comparing the reporting unit's estimated fair value to its carrying value, including goodwill. The reporting unit regularly prepares discrete operating forecasts and uses these forecasts as the basis for the assumptions used in the discounted cash flow analysis which is the basis for the fair value analysis. If the estimated fair value of the reporting unit exceeds its carrying value, goodwill is considered not to be impaired and no further testing is required. This was the case for the reporting unit that required a quantitative test for the annual assessment in fiscal 2016. Had the carrying value exceeded estimated fair value for this unit, there would have been an indication of potential impairment and the second step would have been performed to measure the amount of impairment. If required, the second step involves calculating an implied fair value of goodwill for each reporting unit for which the first step indicated potential impairment. The implied fair value of goodwill is determined in a manner similar to the amount of goodwill calculated in a business combination, by measuring the excess of the estimated fair value of the reporting unit, as determined in the first step, over the aggregate estimated fair values of the individual assets, liabilities and identifiable intangible assets. If the implied fair value of goodwill exceeds the carrying value of goodwill assigned to the reporting unit, there is no impairment. If the carrying value of goodwill assigned to a reporting unit exceeds the implied fair value of the goodwill, an impairment charge is recorded for the excess. Intangible assets with indefinite lives are tested for impairment at least annually as of the first day of the fourth fiscal quarter and if events occur or circumstances change that would indicate that the value of the asset may be impaired. Impairment is measured as the difference between the fair value of the asset and its carrying value. In accordance with ASU No. 2012-02, Intangibles- Goodwill and Other (Topic 350): Testing Indefinite Lived Intangible Assets for Impairment, the Company is allowed to perform a qualitative assessment for intangible asset impairment unless it believes it is more likely than not that an intangible asset's fair value is less than the carrying value. The thresholds used by the Company for this determination in the fourth quarter of fiscal 2016 were for any intangible assets (or groups of assets) that (1) have passed their previous two-step test with a margin of calculated fair value versus carrying value of at least 20%, (2) have had performed a two-step test within the past five years, and (3) have current year income which is at least 85% of prior year amounts. The Company's only indefinite lived intangible assets are the branded product line asset group. During fiscal 2016, the Company's annual qualitative assessment of its indefinite lived intangible assets indicated that no impairment existed. During fiscal 2015, the Company ceased operations at its Canadian facility located in Scotstown, Quebec which was acquired in 2010. In connection with this closure, the Company recognized an impairment of $0.6 million during the first quarter of fiscal 2015 representing the remaining unamortized value of an intangible asset. The changes in the carrying amount of goodwill and the amount allocated by reportable segment for the years presented are as follows (in thousands):
| Wholesale |  | Other |  | Total
Goodwill as of August 2, 2014 | $ | 256,817 |  |  | $ | 17,731 |  |  | $ | 274,548 |
Goodwill adjustment for prior year business combinations | (3,487 | ) |  | — |  |  | (3,487 | )
Change in foreign exchange rates | (4,421 | ) |  | — |  |  | (4,421 | )
Goodwill as of August 2, 2015 | $ | 248,909 |  |  | $ | 17,731 |  |  | $ | 266,640 |
Goodwill from current year business combinations | 99,142 |  |  | 294 |  |  | 99,436 |
Change in foreign exchange rates | 92 |  |  | — |  |  | 92 |
Goodwill as of July 30, 2016 | $ | 348,143 |  |  | $ | 18,025 |  |  | $ | 366,168 |
The following table presents the detail of the Company's other intangible assets (in thousands):
| July 30, 2016 |  | August 1, 2015
| Gross Carrying Amount |  | Accumulated Amortization |  | Net |  | Gross Carrying Amount |  | Accumulated Amortization |  | Net
Amortizing intangible assets: |  |  |  |  |  |  |  |  |  |  |
Customer relationships | $ | 196,313 |  |  | $ | 33,447 |  |  | $ | 162,866 |  |  | $ | 96,192 |  |  | $ | 25,364 |  |  | $ | 70,828 |
Non-compete agreements | 2,900 |  |  | 753 |  |  | 2,147 |  |  | 1,700 |  |  | 353 |  |  | 1,347 |
Trademarks and tradenames | 1,700 |  |  | 115 |  |  | 1,585 |  |  | — |  |  | — |  |  | — |
Total amortizing intangible assets | 200,913 |  |  | 34,315 |  |  | 166,598 |  |  | 97,892 |  |  | 25,717 |  |  | 72,175 |
Indefinite lived intangible assets: |  |  |  |  |  |  |  |  |  |  |
Trademarks and tradenames | 55,716 |  |  | — |  |  | 55,716 |  |  | 53,655 |  |  | — |  |  | 53,655 |
Total | $ | 256,629 |  |  | $ | 34,315 |  |  | $ | 222,314 |  |  | $ | 151,547 |  |  | $ | 25,717 |  |  | $ | 125,830 |
Amortization expense was $8.9 million, $7.8 million and $5.1 million for the fiscal years ended July 30, 2016, August 1, 2015 and August 2, 2014, respectively. The estimated future amortization expense for each of the next five fiscal years and thereafter on definite lived intangible assets existing as of July 30, 2016 is shown below:
Fiscal Year: | (In thousands)
2017 | $ | 15,099 |
2018 | 14,720 |
2019 | 14,704 |
2020 | 14,047 |
2021 | 13,130 |
2022 and thereafter | 94,898 |
| $ | 166,598 |
(i) | Revenue Recognition and Concentration of Credit Risk
The Company records revenue upon delivery of products. Revenues are recorded net of applicable sales discounts and estimated sales returns. Sales incentives provided to customers are accounted for as reductions in revenue as the related revenue is recorded. The Company's sales are primarily to customers located throughout the United States and Canada. Whole Foods Market, Inc. was the Company's largest customer in each fiscal year presented. Whole Foods Market, Inc. accounted for approximately 35% and 34% of the Company's net sales for the fiscal years ended July 30, 2016 and August 1, 2015, respectively, and 36% of the Company's net sales for the fiscal year ended August 2, 2014. There were no other customers that individually generated 10% or more of the Company's net sales during those periods. The Company analyzes customer creditworthiness, accounts receivable balances, payment history, payment terms and historical bad debt levels when evaluating the adequacy of its allowance for doubtful accounts. In instances where a reserve has been recorded for a particular customer, future sales to the customer are conducted using either cash-on-delivery terms, or the account is closely monitored so that as agreed upon payments are received, orders are released; a failure to pay results in held or canceled orders.
(j) | Fair Value of Financial Instruments
The carrying amounts of the Company's financial instruments including cash and cash equivalents, accounts receivable, accounts payable and certain accrued expenses approximate fair value due to the short-term nature of these instruments. The following estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. Refer to Note 9, Fair Value Measurements, for additional information regarding the fair value hierarchy. The fair value of notes payable and long-term debt are based on the instruments' interest rate, terms, maturity date and collateral, if any, in comparison to the Company's incremental borrowing rate for similar financial instruments. However, considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange.
| July 30, 2016 |  | August 1, 2015
| Carrying Value |  | Fair Value |  | Carrying Value |  | Fair Value
| (In thousands)
Assets: |  |  |  |  |  |  |
Cash and cash equivalents | $ | 18,593 |  |  | $ | 18,593 |  |  | $ | 17,380 |  |  | $ | 17,380 |
Accounts receivable | 489,708 |  |  | 489,708 |  |  | 474,494 |  |  | 474,494 |
Notes receivable | 3,709 |  |  | 3,709 |  |  | 7,361 |  |  | 7,361 |
Liabilities: |  |  |  |  |  |  |
Accounts payable | 445,430 |  |  | 445,430 |  |  | 390,134 |  |  | 390,134 |
Notes payable | 426,519 |  |  | 426,519 |  |  | 362,993 |  |  | 362,993 |
Long-term debt, including current portion | 173,593 |  |  | 182,790 |  |  | 184,562 |  |  | 192,679 |
(k) | Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect amounts reported therein. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be based on amounts that differ from those estimates.
(l) | Notes Receivable, Trade
The Company issues trade notes receivable to certain customers under two basic circumstances; inventory purchases for initial store openings and overdue accounts receivable. Notes issued in connection with store openings are generally receivable over a period not to exceed thirty-six months. Notes issued in connection with overdue accounts receivable may extend for periods greater than one year. All notes are issued at a market interest rate and contain certain guarantees and collateral assignments in favor of the Company.
(m) | Share-Based Compensation
The Company accounts for its share-based compensation in accordance with FASB ASC 718, Stock Compensation ("ASC 718"). ASC 718 requires the recognition of the fair value of share-based compensation in net income. The Company has four share-based employee compensation plans, which are described more fully in Note 3. Share-based compensation consists of stock options, restricted stock awards, restricted stock units, performance shares and performance units. Stock options are granted to employees and directors at exercise prices equal to the fair market value of the Company's stock at the dates of grant. Generally, stock options, restricted stock awards and restricted stock units granted to employees vest ratably over 4 years from the grant date and grants to members of the Company's Board of Directors vest ratably over 6 months with one half vesting immediately. The Company's President and Chief Executive Officer and its other executive officers or members of senior management have been granted performance units which have vested, when and if earned, in accordance with the terms of the related performance unit award agreements. During fiscal 2016, fiscal 2015 and fiscal 2014, the Company granted performance-based stock units to its executive officers that will vest if the Company achieves certain performance metrics as of and for the years ended July 29, 2017, July 30, 2016 and August 1, 2015, respectively. The Company recognizes share-based compensation expense on a straight-line basis over the requisite service period of the individual grants, which generally equals the vesting period. ASC 718 also requires that compensation expense be recognized for only the portion of share-based awards that are expected to vest. Therefore, we apply estimated forfeiture rates that are derived from historical employee and director termination activity to reduce the amount of compensation expense recognized. If the actual forfeitures differ from the estimate, additional adjustments to compensation expense may be required in future periods. The Company receives an income tax deduction for restricted stock awards and restricted stock units when they vest and for non-qualified stock options exercised by employees equal to the excess of the fair market value of its common stock on the vesting or exercise date over the exercised price. Excess tax benefits (tax benefits resulting from tax deductions in excess of compensation cost recognized) and tax deficit (tax deficit resulting from compensation cost recognized in excess of tax deductions) are presented as a cash inflow or outflow provided by financing activities in the accompanying consolidated statement of cash flows.
(n) | Earnings Per Share
Basic earnings per share is calculated by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated by adding the dilutive potential common shares to the weighted average number of common shares that were outstanding during the period. For purposes of the diluted earnings per share calculation, outstanding stock options, restricted stock awards, restricted stock units and performance-based awards, if applicable, are considered common stock equivalents, using the treasury stock method. A reconciliation of the weighted average number of shares outstanding used in the computation of the basic and diluted earnings per share for all periods presented follows:
| Fiscal year ended
| July 30, 2016 |  | August 1, 2015 |  | August 2, 2014
| (In thousands)
Basic weighted average shares outstanding | 50,313 |  |  | 50,021 |  |  | 49,602 |
Net effect of dilutive common stock equivalents based upon the treasury stock method | 86 |  |  | 246 |  |  | 286 |
Diluted weighted average shares outstanding | 50,399 |  |  | 50,267 |  |  | 49,888 |
Potential anti-dilutive share-based payment awards excluded from the computation above | 84 |  |  | 7 |  |  | 6 |
(o) | Comprehensive Income (Loss)
Comprehensive income (loss) is reported in accordance with ASU No. 2013-02, and includes net income and the change in other comprehensive income (loss). Other comprehensive income (loss) is comprised of the net change in fair value of derivative instruments designated as cash flow hedges, as well as foreign currency translation related to the translation of UNFI Canada, Inc. ("UNFI Canada") from the functional currency of Canadian dollars to U.S. dollar reporting currency. For all periods presented, the Company displays comprehensive income (loss) and its components in the consolidated statements of comprehensive income.
(p) | Derivative Financial Instruments
The Company is exposed to market risks arising from changes in interest rates, fuel costs, and with the operation of UNFI Canada, foreign currency exchange rates. The Company uses derivatives principally in the management of interest rate and fuel price exposure. From time to time the Company may use contracts to hedge transactions in foreign currency. The Company does not utilize derivatives that contain leverage features. For derivative transactions accounted for as hedges, on the date the Company enters into the derivative transaction, the exposure is identified. The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking the hedge transaction. In this documentation, the Company specifically identifies the asset, liability, firm commitment, forecasted transaction, or net investment that has been designated as the hedged item and states how the hedging instrument is expected to reduce the risks related to the hedged item. The Company measures effectiveness of its hedging relationships both at hedge inception and on an ongoing basis as needed.
(q) | Shipping and Handling Fees and Costs
The Company includes shipping and handling fees billed to customers in net sales. Shipping and handling costs associated with inbound freight are generally recorded in cost of sales, whereas shipping and handling costs for selecting, quality assurance, and outbound transportation are recorded in operating expenses. Outbound shipping and handling costs totaled $467.5 million, $452.9 million and $397.7 million for the fiscal years ended July 30, 2016, August 1, 2015 and August 2, 2014, respectively.
(r) | Reserves for Self-Insurance
The Company is primarily self-insured for workers' compensation and general and automobile liability insurance. It is the Company's policy to record the self-insured portion of workers' compensation and automobile liabilities based upon actuarial methods to estimate the future cost of claims and related expenses that have been reported but not settled, and that have been incurred but not yet reported. Any projection of losses concerning workers' compensation and automobile liability is subject to a considerable degree of variability. Among the causes of this variability are unpredictable external factors affecting litigation trends, benefit level changes and claim settlement patterns.
(s) | Operating Lease Expenses
The Company records lease expense via the straight-line method. For leases with step rent provisions whereby the rental payments increase over the life of the lease, and for leases where the Company receives rent-free periods, the Company recognizes expense based on a straight-line basis based on the total minimum lease payments to be made over the expected lease term.
(t) | Recently Issued Accounting Pronouncements
In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which is intended to improve the accounting for share-based payment transactions as part of the FASB's simplification initiative. This ASU will change aspects of accounting for share-based payment award transactions including accounting for income taxes, the classification of excess tax benefits and the classification of employee taxes paid when shares are withheld for tax-withholding purposes on the statement of cash flows, forfeitures, and minimum statutory tax withholding requirements. The ASU is effective for public companies with interim and fiscal years beginning after December 15, 2017, which for the Company will be the first quarter of the fiscal year ending August 3, 2019. Early adoption is permitted provided that the entire ASU is adopted. The Company has not yet adopted this standard, but if the Company had adopted this standard in fiscal 2016, the result would have been a reclassification from additional paid-in capital to income tax expense. For fiscal 2016, the result would have increased current year income tax expense by $0.1 million and for fiscal 2015, the result would have decreased current year income tax expense by $2.7 million. In February 2016, the FASB issued ASU No. 2016-2, Leases (Topic 842), which will require companies as the lessee to recognize lease assets and liabilities for leases formerly classified as operating leases. The ASU is effective for public companies with interim and annual periods in fiscal years beginning after December 15, 2018, which for the Company will be the first quarter of the fiscal year ending August 1, 2020. We are in the process of evaluating the impact that this new guidance will have on the Company's consolidated financial statements. In January 2016, the FASB issued ASU No. 2016-1, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Liabilities, which will change the income statement impact of equity investments, and the recognition of changes in fair value of financial liabilities when the fair value option is elected. The ASU is effective for public companies with interim and annual periods in fiscal years beginning after December 15, 2017, which for the Company will be the first quarter of the fiscal year ending August 3, 2019. We do not expect the adoption of this guidance to have a significant impact on the Company’s consolidated financial statements. In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes, which requires entities with a classified balance sheet to present all deferred tax assets and liabilities as noncurrent. The new pronouncement is effective for public companies with annual periods, and interim periods within those periods, beginning after December 15, 2016, which for the Company will be the first quarter of the fiscal year ending July 28, 2018. Early adoption at the beginning of an interim or annual period is permitted. The Company has not yet adopted this standard, but if the Company had adopted this standard in fiscal 2016, the result would have been a reclassification from current deferred income tax assets to noncurrent deferred income tax liabilities of $35.2 million and $32.3 million as of July 30, 2016 and August 1, 2015, respectively. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers, (Topic 606): Deferral of the Effective Date deferring the adoption of previously issued guidance published in May 2014, ASU No. 2014-09, Revenue from Contracts with Customers, (Topic 606). The core principle of the new guidance is that an entity will recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new pronouncement is effective for public companies with annual periods, and interim periods within those periods, beginning after December 15, 2017, which for the Company will be the first quarter of the fiscal year ending August 3, 2019. We are in the process of evaluating the impact that this new guidance will have on the Company's consolidated financial statements. In April 2015, the FASB issued ASU No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30) ("ASU 2015-03"), which simplifies the presentation of debt issuance costs. ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with the presentation of debt discounts. ASU 2015-03 is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The Company early adopted this standard in the fourth quarter of fiscal 2016, which resulted in the reclassification of $1.6 million and $1.8 million as of July 30, 2016 and August 1, 2015, respectively, from other long-term assets to long-term debt on the Company's Consolidated Balance Sheets.
(u) | Correction of Prior Period Errors
During the three months ended January 31, 2015, the Company recorded a cumulative adjustment to net sales for $7.7 million related to amounts owed to a customer resulting from an incorrect calculation of contractual obligations to that customer from fiscal year 2009 through fiscal year 2014. The aggregate amount of the reduction in net sales related to this incorrect calculation in fiscal 2015 was $9.3 million, including a $1.6 million reduction in the first quarter of fiscal 2015. The Company reviewed the impact of these corrections in accordance with Securities and Exchange Commission ("SEC") Staff Accounting Bulletin No. 99 "Materiality," and determined that these corrections were not material to prior periods or the periods in which the amounts were recorded. During the fourth quarter of fiscal 2016, the Company revised previously reported amounts for identified errors in accounting for early payment discounts on inventory purchases. Management considered both the quantitative and qualitative factors within the provisions of SEC Staff Accounting Bulletin No. 99, "Materiality", and Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements. Based on evaluation of the errors, management has concluded that the prior period errors were immaterial to the previously issued consolidated financial statements. Refer to Note 15, "Immaterial Correction of Prior Period Financial Statements" for further detail.

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- Definition The entire disclosure for the organization, consolidation and basis of presentation of financial statements disclosure, and significant accounting policies of the reporting entity. May be provided in more than one note to the financial statements, as long as users are provided with an understanding of (1) the significant judgments and assumptions made by an enterprise in determining whether it must consolidate a VIE and/or disclose information about its involvement with a VIE, (2) the nature of restrictions on a consolidated VIE's assets reported by an enterprise in its statement of financial position, including the carrying amounts of such assets, (3) the nature of, and changes in, the risks associated with an enterprise's involvement with the VIE, and (4) how an enterprise's involvement with the VIE affects the enterprise's financial position, financial performance, and cash flows. Describes procedure if disclosures are provided in more than one note to the financial statements. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 275 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=51801978&loc=d3e6003-108592 + Details
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