Income (Loss) from Operations
For the thirteen weeks ended February 27, 2016 and February 28, 2015, changes in our revenues and costs as mentioned above resulted in the following changes in our income (loss) from operations:
(In thousands, except percentages)
|
|
February 27,
2016
|
|
|
February 28,
2015
|
|
|
Dollar
Change
|
|
|
Percent
Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core Laundry Operations
|
|
$
|
36,129
|
|
|
$
|
40,924
|
|
|
$
|
(4,795
|
)
|
|
|
(11.7
|
)%
|
Specialty Garments
|
|
|
1,146
|
|
|
|
(435
|
)
|
|
|
1,581
|
|
|
|
364.1
|
|
First Aid
|
|
|
918
|
|
|
|
1,062
|
|
|
|
(144
|
)
|
|
|
(13.6
|
)
|
Consolidated total
|
|
$
|
38,193
|
|
|
$
|
41,551
|
|
|
$
|
(3,358
|
)
|
|
|
(8.1
|
)%
|
Other (Income) Expense
Other (income) expense, which includes interest expense, interest income and exchange rate loss, was $0.8 million of income in the thirteen weeks ended February 27, 2016 compared to $0.2 million of expense during the thirteen weeks ended February 28, 2015. This change was primarily due to foreign currency gains of $0.1 million during the thirteen weeks ended February 27, 2016 compared to foreign currency losses of $0.9 million during the thirteen weeks ended February 28, 2015.
Provision for Income Taxes
Our effective income tax rate was 39.7% for the thirteen
weeks ended February 27, 2016 compared to 38.5% for the thirteen
weeks ended February 28, 2015. The increase in our effective tax rate was due to a change in the mix of our jurisdictional earnings.
Twenty-six weeks ended February 27, 2016 compared with twenty-six weeks ended February 28, 2015
Revenues
(In thousands, except percentages)
|
|
February 27,
2016
|
|
|
February 28,
2015
|
|
|
Dollar
Change
|
|
|
Percent
Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core Laundry Operations
|
|
$
|
666,402
|
|
|
$
|
667,915
|
|
|
$
|
(1,513
|
)
|
|
|
(0.2
|
)%
|
Specialty Garments
|
|
|
47,221
|
|
|
|
41,137
|
|
|
|
6,084
|
|
|
|
14.8
|
|
First Aid
|
|
|
22,858
|
|
|
|
22,771
|
|
|
|
87
|
|
|
|
0.4
|
|
Consolidated total
|
|
$
|
736,481
|
|
|
$
|
731,823
|
|
|
$
|
4,658
|
|
|
|
0.6
|
%
|
For the twenty-six weeks ended February 27, 2016, our consolidated revenues increased by $
4.7 million from the comparable period in fiscal 2015, or
0.6%.
Core Laundry Operations’ revenues decreased to $666.4 million for the twenty-six weeks ended February 27, 2016 from $667.9 million for the comparable period of fiscal 2015, a decrease of 0.2%. Excluding the effect of acquisitions and a weaker Canadian dollar, Core Laundry Operations’ revenues grew 0.4% organically. Organic growth consists primarily of new sales, price increases, and net changes in the wearer levels at our existing customers, offset by lost accounts. Organic growth in the first half of fiscal 2016 was negatively impacted by reductions in wearer levels at our customers that directly or indirectly support oil or other energy production in the United States and Canada during the previous year.
Specialty Garments’ revenues increased to $47.2 million in the twenty-six weeks ended February 27, 2016 from $41.1 million in the comparable period of 2015, an increase of 14.8%. This increase was primarily the result of increased power reactor business in North America compared to a year ago. This segment’s results are affected by the timing and length of its customers’ power reactor outages as well as its project-based activities.
First Aid’s revenues increased to $22.9 million for the twenty-six weeks ended February 27, 2016 from $22.8 million for the comparable period of fiscal 2015, an increase of 0.4%.
Cost of Revenues
For the twenty-six weeks ended February 27, 2016, cost of revenues increased to
61.4% of revenues, or $
452.3 million, from 60.6% of revenues, or $443.2 million, for the twenty-six weeks ended February 28, 2015. This increase was primarily due to higher merchandise amortization and healthcare claims incurred during the first half of the fiscal year compared to the comparable period in the prior year. In addition, payroll and other production costs increased as a percent of revenues compared to the twenty-six weeks ended February 28, 2015 primarily due to the lack of revenue growth. These higher costs were partially offset by lower fuel costs associated with our fleet of delivery vehicles and lower natural gas costs used to operate our plants compared to the prior year period.
Selling and Administrative Expense
Our selling and administrative expenses decreased to 20.1% of revenues, or $148.2 million, for the twenty-six weeks ended February 27, 2016
from 20.4% of revenues, or $149.6 million, for the twenty-six weeks ended February 28, 2015
.
This decrease was primarily due to additional reserves of $3.6 million we recorded related to our environmental contingencies during the thirteen weeks ended February 28, 2015.
The effect of this item was partially offset by higher healthcare claims and payroll costs during the first half of 2016 compared to the comparable period in the prior year.
Depreciation and Amortization
Our depreciation and amortization expense was $
39.5 million, or
5.4% of revenues, for the twenty-six weeks ended February 27, 2016 compared to
$36.8 million, or 5.0% of revenues, for the twenty-six weeks ended February 28, 2015. Depreciation
and amortization expense increased due to capital expenditure and acquisition activity in earlier periods.
Income from Operations
For the twenty-six weeks ended February 27, 2016 and February 28, 2015, the revenue growth in our operations, as well as the change in our costs as mentioned above, resulted in the following changes in our income from operations:
(In thousands, except percentages)
|
|
February 27,
2016
|
|
|
February 28,
2015
|
|
|
Dollar
Change
|
|
|
Percent
Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core Laundry Operations
|
|
$
|
89,101
|
|
|
$
|
97,797
|
|
|
$
|
(8,696
|
)
|
|
|
(8.9
|
)%
|
Specialty Garments
|
|
|
5,432
|
|
|
|
1,833
|
|
|
|
3,599
|
|
|
|
196.3
|
|
First Aid
|
|
|
1,954
|
|
|
|
2,510
|
|
|
|
(556
|
)
|
|
|
(22.1
|
)
|
Consolidated total
|
|
$
|
96,487
|
|
|
$
|
102,140
|
|
|
$
|
(5,653
|
)
|
|
|
(5.5
|
)%
|
Other (Income) Expense
Other (income) expense, which includes interest expense, interest income and foreign currency exchange loss, was
$0.9 million of income for the twenty-six weeks ended February 27, 2016 as compared to
$0.1 million of income for the twenty-six weeks ended February 28, 2015. This change was primarily due to foreign currency losses of $0.3 million during the twenty-six weeks ended February 27, 2016 compared to foreign currency losses of $1.3 million during the twenty-six weeks ended February 28, 2015.
Provision for Income Taxes
Our effective income tax rate was 39.0% for the twenty-six weeks ended February 27, 2016 compared to 38.5% for the twenty-six weeks ended February 28, 2015. The increase in our effective tax rate was due to a change in the mix of our jurisdictional earnings.
Liquidity and Capital Resources
General
Cash and cash equivalents totaled $335.0 million as of February 27, 2016, an increase of $58.4 million from August 29, 2015 when the amount totaled $276.6 million. Our working capital was $557.4 million as of February 27, 2016 compared to $477.7 million as of August 29, 2015. In addition, we generated $105.5 million and $226.9 million in cash from operating activities in the twenty-six weeks ended February 27, 2016 and the full fiscal year ended August 29, 2015, respectively. We
believe that our current cash and cash equivalent balances, our cash generated from future operations and amounts available under our Credit Agreement (defined below) will be sufficient to meet our current anticipated working capital and capital expenditure requirements for at least the next 12 months.
We have accumulated $56.2 million in cash outside the United States that is expected to be invested indefinitely in our foreign subsidiaries. If these funds were distributed to the U.S. in the form of dividends, we would likely be subject to additional U.S. income taxes. However, we do not believe that any resulting taxes payable would have a material impact on our liquidity.
Cash flows provided by operating activities have historically been the primary source of our liquidity. We generally use these cash flows to fund most, if not all, of our operations, capital expenditure and acquisition activities as well as dividends on our common stock. We may also use cash flows provided by operating activities, as well as proceeds from loans payable and long-term debt, to fund growth and acquisition opportunities, as well as other cash requirements.
Cash Provided by Operating Activities
Cash provided
by operating activities for the twenty-six weeks ended February 27, 2016 was $105.5 million, a decrease of $1.6 million from the comparable period in the prior year when cash provided by operating activities was $107.0 million. This net decrease was primarily driven by decreases in net income, adjusted for non-cash items.
Cash Used in Investing Activities
Cash used in investing activities for the twenty-six weeks ended February 27, 2016 was
$44.0 million, a decrease of $16.8 million from the twenty-six weeks ended February 28, 2015 when cash used in investing activities was $60.8 million. The net decrease in cash used in investing activities was primarily driven by a decrease in cash outflows of $15.0 million for the acquisition of businesses.
Cash (Used in) Provided by Financing Activities
Cash used in financing activities for the twenty-six weeks ended February 27, 2016 was $1.5 million compared to cash provided by financing activities of $1.6 million from the twenty-six weeks ended February 28, 2015. This change was primarily due to a decrease in proceeds received from the exercise of share based awards.
Long-Term Debt and Borrowing Capacity
On May 5, 2011, we entered into a $250.0 million unsecured revolving credit agreement (the “Credit Agreement”) with a syndicate of banks, which matures on May 4, 2016. Under the Credit Agreement, we are able to borrow funds at variable interest rates based on, at our election, the Eurodollar rate or a base rate, plus in each case a spread based on our consolidated funded debt ratio. Availability of credit requires compliance with certain financial and other covenants, including a maximum consolidated funded debt ratio and minimum consolidated interest coverage ratio as defined in the Credit Agreement. We test our compliance with these financial covenants on a fiscal quarterly basis. At February 27, 2016, the interest rates applicable to our borrowings under the Credit Agreement would be calculated as LIBOR plus 75 basis points at the time of the respective borrowing. As of February 27, 2016, we had no outstanding borrowings, letters of credit amounting to $53.0 million and $197.0 million available for borrowing under the Credit Agreement. We are currently in the process of finalizing an amendment and extension to this Credit Agreement which we expect to execute in our third fiscal quarter of 2016.
As of February 27, 2016, we were in compliance with all covenants under the Credit Agreement.
Derivative Instruments and Hedging Activities
In January 2015, we entered into sixteen forward contracts to exchange Canadian dollars (“CAD”) for U.S. dollars at fixed exchange rates in order to manage our exposure related to certain forecasted CAD denominated sales of one of our subsidiaries. The hedged transactions are specified as the first amount of CAD denominated revenues invoiced by one of our domestic subsidiaries each fiscal quarter, beginning in the third fiscal quarter of 2015 and continuing through the second fiscal quarter of 2019. In total, we will sell approximately 31.0 million CAD at an average Canadian-dollar exchange rate of 0.7825 over these quarterly periods. We concluded that the forward contracts met the criteria to qualify as a cash flow hedge under US GAAP. Accordingly, we have reflected all changes in the fair value of the forward contracts in accumulated other comprehensive (loss) income, a component of shareholders’ equity. Upon the maturity of each foreign exchange forward contract, the gain or loss on the contract will be recorded as an adjustment to revenues.
As of February 27, 2016, we had forward contracts with a notional value of approximately 21.2 million CAD outstanding and recorded the fair value of the contracts of $0.5 million in other long-term assets and $0.3 million in prepaid expenses and other current assets with a corresponding gain in accumulated other comprehensive (loss) income of $0.5 million, which was recorded net of tax. During the twenty-six weeks ended February 27, 2016, we reclassified $0.2 million from accumulated other comprehensive (loss) income to revenue, related to the derivative financial instruments. The gain in accumulated other comprehensive (loss) income as of February 27, 2016 is expected to be reclassified to revenues prior to its maturity on February 22, 2019.
Commitments and Contingencies
We are subject to various federal, state and local laws and regulations governing, among other things, air emissions, wastewater discharges, and the generation, handling, storage, transportation, treatment and disposal of hazardous wastes and other substances. In particular, industrial laundries currently use and must dispose of detergent waste water and other residues, and, in the past, used perchloroethylene and other dry cleaning solvents. We are attentive to the environmental concerns surrounding the disposal of these materials and have, through the years, taken measures to avoid their improper disposal. Over the years, we have settled, or contributed to the settlement of, actions or claims brought against us relating to the disposal of hazardous materials and there can be no assurance that we will not have to expend material amounts to remediate the consequences of any such disposal in the future.
US GAAP requires that a liability for contingencies be recorded when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated. Significant judgment is required to determine the existence of a liability, as well as the amount to be recorded. We regularly consult with attorneys and outside consultants in our consideration of the relevant facts and circumstances before recording a contingent liability. Changes in enacted laws, regulatory orders or decrees, our estimates of costs, risk-free interest rates, insurance proceeds, participation by other parties, the timing of payments, the input of our attorneys and outside consultants or other factual circumstances could have a material impact on the amounts recorded for our environmental and other contingent liabilities.
Under environmental laws, an owner or lessee of real estate may be liable for the costs of removal or remediation of certain hazardous or toxic substances located on, or in, or emanating from such property, as well as related costs of investigation and property damage. Such laws often impose liability without regard to whether the owner or lessee knew of, or was responsible for, the presence of such hazardous or toxic substances. There can be no assurances that acquired or leased locations have been operated in compliance with environmental laws and regulations or that future uses or conditions will not result in the imposition of liability upon our Company under such laws or expose our Company to third party actions such as tort suits. We continue to address environmental conditions under terms of consent orders or otherwise negotiated with the applicable environmental authorities with respect to sites located in or related to Woburn, Massachusetts, Somerville, Massachusetts, Springfield, Massachusetts, Uvalde, Texas, Stockton, California, three sites related to former operations in Williamstown, Vermont, as well as sites located in Goldsboro, North Carolina, Wilmington, North Carolina and Landover, Maryland.
We have accrued certain costs related to the sites described above as it has been determined that the costs are probable and can be reasonably estimated. We have potential exposure related to a parcel of land (the “Central Area”) related to the Woburn, Massachusetts site mentioned above. Currently, the consent decree for the Woburn site does not define or require any remediation work in the Central Area. The United States Environmental Protection Agency (the “EPA”) has provided us and other signatories to the consent decree with comments on the design and implementation of groundwater and soil remedies at the Woburn site and investigation of environmental conditions in the Central Area. We, and other signatories, have implemented and proposed to do additional work at the Woburn site but many of the EPA’s comments remain to be resolved. We have accrued costs to perform certain work responsive to EPA’s comments. We are also in discussions with EPA concerning its invoices for oversight costs with respect to the Woburn site and the Central Area. We have implemented mitigation measures and continue to monitor environmental conditions at the Somerville, Massachusetts site.
In addition, we have reserved for costs we expect to incur associated with the construction of a planned municipal transit station in the area of our Somerville site.
We routinely review and evaluate sites that may require remediation and monitoring and determine our estimated costs based on various estimates and assumptions. These estimates are developed using our internal sources or by third-party environmental engineers or other service providers. Internally developed estimates are based on:
|
•
|
Management’s judgment and experience in remediating and monitoring our sites;
|
|
•
|
Information available from regulatory agencies as to costs of remediation and monitoring;
|
|
•
|
The number, financial resources and relative degree of responsibility of other potentially responsible parties (PRPs) who may be liable for remediation and monitoring of a specific site; and
|
|
•
|
The typical allocation of costs among PRPs.
|
There is usually a range of reasonable estimates of the costs associated with each site. In accordance with US GAAP, our accruals represent the amount within the range that we believe is the best estimate or the low end of a range of estimates if no point within the range is a better estimate. When we believe that both the amount of a particular liability and the timing of the payments are reliably determinable, we adjust the cost in current dollars using a rate of 3% for inflation until the time of expected payment and discount the cost to present value using current risk-free interest rates. As of February 27, 2016, the risk-free interest rates we utilized ranged from 1.8% to 2.6%.
For environmental liabilities that have been discounted, we include interest accretion, based on the effective interest method, in selling and administrative expenses on the Consolidated Statements of Income. The changes to the amounts of our environmental liabilities for the twenty-six weeks ended
February 27, 2016 were as follows (in thousands):
|
|
February 27,
2016
|
|
Beginning balance as of August 29, 2015
|
|
$
|
23,307
|
|
Costs incurred for which reserves have been provided
|
|
|
(505
|
)
|
Insurance proceeds
|
|
|
31
|
|
Interest accretion
|
|
|
334
|
|
Change in discount rates
|
|
|
630
|
|
|
|
|
|
|
Balance as of February 27, 2016
|
|
$
|
23,797
|
|
Anticipated payments and insurance proceeds relating to currently identified environmental remediation liabilities as of February 27, 2016, for the next five fiscal years and thereafter, as measured in current dollars, are reflected below.
(In thousands)
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
|
2019
|
|
|
2020
|
|
|
Thereafter
|
|
|
Total
|
|
Estimated costs – current dollars
|
|
$
|
6,908
|
|
|
$
|
1,829
|
|
|
$
|
1,476
|
|
|
$
|
1,309
|
|
|
$
|
1,361
|
|
|
$
|
12,494
|
|
|
$
|
25,377
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated insurance proceeds
|
|
|
(128
|
)
|
|
|
(173
|
)
|
|
|
(159
|
)
|
|
|
(173
|
)
|
|
|
(159
|
)
|
|
|
(1,293
|
)
|
|
|
(2,085
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net anticipated costs
|
|
$
|
6,780
|
|
|
$
|
1,656
|
|
|
$
|
1,317
|
|
|
$
|
1,136
|
|
|
$
|
1,202
|
|
|
$
|
11,201
|
|
|
$
|
23,292
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of inflation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,589
|
|
Effect of discounting
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,084
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of February 27, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
23,797
|
|
Estimated insurance proceeds are primarily received from an annuity received as part of our legal settlement with an insurance company. Annual proceeds of approximately $
0.3 million are deposited into an escrow account which funds remediation and monitoring costs for three sites related to our former operations in Williamstown, Vermont. Annual proceeds received but not expended in the current year accumulate in this account and may be used in future years for costs related to this site through the year 2027. As of February 27, 2016, the balance in this escrow account, which is held in a trust and is not recorded in our Consolidated Balance Sheet, was approximately $
3.2 million. Also included in estimated insurance proceeds are amounts we are entitled to receive pursuant to legal settlements as reimbursements from three insurance companies for estimated costs at the site in Uvalde, Texas.
Our nuclear garment decontamination facilities are licensed by the Nuclear Regulatory Commission (“NRC”), or, in certain cases, by the applicable state agency, and are subject to regulation by federal, state and local authorities. We also have nuclear garment decontamination facilities in the United Kingdom and the Netherlands. These facilities are licensed and regulated by the respective country’s applicable federal agency. There can be no assurance that such regulation will not lead to material disruptions in our garment decontamination business.
From time to time, we are also subject to legal proceedings and claims arising from the conduct of our business operations, including personal injury claims, customer contract matters, employment claims and environmental matters as described above.
While it is impossible for us to ascertain the ultimate legal and financial liability with respect to contingent liabilities, including lawsuits and environmental contingencies, we believe that the aggregate amount of such liabilities, if any, in excess of amounts covered by insurance have been properly accrued in accordance with accounting principles generally accepted in the United States. It is possible, however, that the future financial position and/or results of operations for any particular future period could be materially affected by changes in our assumptions or strategies related to these contingencies or changes out of our control.
Off-Balance Sheet Arrangements
As of February 27, 2016, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Securities and Exchange Commission Regulation S-K.
Seasonality
Historically, our revenues and operating results have varied from quarter to quarter and are expected to continue to fluctuate in the future. These fluctuations have been due to a number of factors, including: general economic conditions in our markets; the timing of acquisitions and of commencing start-up operations and related costs; our effectiveness in integrating acquired businesses and start-up operations; the timing of nuclear plant outages; capital expenditures; seasonal rental and purchasing patterns of our customers; and price changes in response to competitive factors. In addition, our operating results historically have been lower during the second and fourth fiscal quarters than during the other quarters of the fiscal year. The operating results for any historical quarter are not necessarily indicative of the results to be expected for an entire fiscal year or any other interim periods.
Effects of Inflation
In general, we believe that our results of operations are not dependent on moderate changes in the inflation rate. Historically, we have been able to manage the impacts of more significant changes in inflation rates through our customer relationships, customer agreements that generally provide for price increases consistent with the rate of inflation, and continued focus on improvements of operational productivity.
Contractual Obligations and Other Commercial Commitments
As of February 27, 2016, there were no material changes in our contractual obligations that were disclosed in our Annual Report on Form 10-K for the year ended August 29, 2015.
Recent Accounting Pronouncements
In May 2014, the FASB issued updated accounting guidance for revenue recognition, which they have subsequently modified. This modified update provides a comprehensive new revenue recognition model that requires revenue to be recognized in a manner to depict the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. This guidance will be effective for annual reporting periods, and any interim periods within those annual periods, that begin after December 15, 2017 and will be required to be applied retrospectively (full or modified), with early adoption permitted. Accordingly, the standard will be effective for us on August 26, 2018. We are currently evaluating the adoption method we will apply and the impact that this guidance will have on our financial statements and related disclosures.
In February 2015, the FASB issued updated accounting guidance on consolidation requirements. This update changes the guidance with respect to the analysis that a reporting entity must perform to determine whether it should consolidate certain types of legal entities. This guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2015, with early adoption permitted. Accordingly, the standard will be effective for us on August 28, 2016. We expect that adoption of this guidance will not have a material impact on our financial statements.
In April 2015, the FASB issued updated guidance on the presentation of debt issuance costs. This update changes the guidance with respect to presenting such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs is reported as interest expense. This guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2015, with early adoption permitted. Accordingly, the standard will be effective for us on August 28, 2016. We expect that adoption of this guidance will not have a material impact on our financial statements.
In May 2015, the FASB issued updated guidance to remove the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. This guidance also removes the requirement to make certain disclosures for all investments that are eligible to be measured at fair value using the net asset value per share practical expedient. This guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2015, and is to be applied retrospectively to all periods presented, with early adoption permitted. Accordingly, the standard will be effective for us on August 28, 2016. We expect that adoption of this guidance will not have a material impact on our financial statements.
In July 2015, the FASB issued updated guidance which changes the measurement principle for inventory from the lower of cost or market to the lower of cost or net realizable value. Subsequent measurement is unchanged for inventory measured using last-in, first-out or the retail inventory method.
This guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2016, and is to be applied prospectively, with early adoption permitted. Accordingly, the standard will be effective for us on August 27, 2017. We expect that adoption of this guidance will not have a material impact on our financial statements.
In September 2015, the FASB issued updated guidance that requires an entity to recognize adjustments made to provisional amounts that are identified in a business combination in the period such adjustments are determined, rather than retrospectively adjusting previously reported amounts. This guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2015, and is to be applied prospectively, with early adoption permitted. Accordingly, the standard will be effective for us on August 28, 2016. We expect that adoption of this guidance will not have a material impact on our financial statements.
In November 2015, the FASB issued updated guidance on the presentation of deferred income taxes. This update requires that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. This guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2016 and is to be applied prospectively, and may also be applied retrospectively to all periods presented, with early adoption permitted. We adopted this standard prospectively on February 27, 2016 and prior periods were not retroactively adjusted.
In January 2016, the FASB issued updated guidance for the recognition, measurement, presentation, and disclosure of certain financial assets and liabilities. This guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017, with early adoption permitted. Accordingly, the standard will be effective for us on August 26, 2018. We expect that adoption of this guidance will not have a material impact on our financial statements.
In February 2016, the FASB issued updated guidance that improves transparency and comparability among companies by recognizing lease assets and lease liabilities on the balance sheet and by disclosing key information about leasing arrangements. This guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2018, with early adoption permitted. Accordingly, the standard will be effective for us on September 1, 2019. We are currently evaluating the impact that this guidance will have on our financial statements and related disclosures.
In March 2016, the FASB issued updated guidance that simplifies several aspects of accounting for share-based payment transactions. This guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2016 and, depending on the amendment, must be applied using a prospective transition method, retrospective transition method, modified retrospective transition method, prospectively and/or retroactively, with early adoption permitted. Accordingly, the standard will be effective for us on August 27, 2017. We are currently evaluating the impact that this guidance will have on our financial statements and related disclosures.