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Operational Efficiency Initiatives
6 Months Ended
Jul. 02, 2016
Restructuring and Related Activities [Abstract]  
Operational Efficiency Initiatives
Operational Efficiency Initiatives
During the second quarter of fiscal 2016, we announced operational efficiency initiatives which will result in the closure of four owned distribution centers by the end of the third quarter of 2016, and a corresponding reduction in force of approximately 60 full-time employees. A $1.2 million severance and employee benefits charge was recorded in the second quarter of fiscal 2016 in “Selling, general, and administrative expenses” in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss), with a corresponding liability recorded in the Condensed Consolidated Balance Sheet in “Other current liabilities” due to the initiative. The payments for the severance and employee benefits charges are expected to occur throughout the remainder of fiscal 2016.
Additionally, for the first six months of fiscal 2016, we announced the closure of our Canadian sales center and administrative office, in the first quarter of fiscal 2016, which resulted in a reduction in force of approximately 11 full-time employees. Severance charges recorded in the first quarter of fiscal 2016 were immaterial.
Furthermore, as part of the operational efficiency initiative process, we also began a stock keeping unit (“SKU”) rationalization initiative in local markets during the second quarter of fiscal 2016, resulting in the identification of certain less productive SKUs which we decided to discontinue offering. The SKU rationalization initiative was substantially completed by the end of the second quarter of fiscal 2016.
We recognized total inventory adjustments in “Inventories” on the Condensed Consolidated Balance Sheet related to the operational efficiency initiatives of approximately $4.3 million, recorded as a reduction of gross margin. We also recognized an additional $2.2 million of “selling, general, and administrative” expense in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) primarily for cost to serve, which included material handling and delivery cash payments.