Special & Restructuring (Recoveries) Charges, net

Special and Restructuring (Recoveries) Charges, net

Special and restructuring charges, net consist of restructuring costs (including costs to exit a product line or program) as well as certain special charges such as significant litigation settlements and other transactions (charges or recoveries) that are described below. All items described below are recorded in Special and restructuring (recoveries) charges, net in our condensed consolidated statements of income. Certain other special and restructuring charges such as inventory related items may be recorded in cost of revenues given the nature of the item.

The table below (in thousands) summarizes the amounts recorded within the special and restructuring (recoveries) charges, net line item on the condensed consolidated statements of income for the three and six months ended July 2, 2017 and July 3, 2016:



	Special & Restructuring (Recoveries) Charges, net
	For the three months ended					For the six months ended
	July 2, 2017			July 3, 2016		July 2, 2017			July 3, 2016
Special (recoveries) charges, net	$	(5,520	)	$	1,335	(7,788		)	2,111
Restructuring charges, net	3,566			3,259		5,025			4,422
Total special and restructuring (recoveries) charges, net	$	(1,954	)	$	4,594	$	(2,763	)	$	6,533

Special (Recoveries) Charges, net

The table below (in thousands) outlines the special (recoveries) charges, net recorded for the three and six months ended July 2, 2017:



	Special (Recoveries) Charges, net
	For the three months ended July 2, 2017
	Energy			Advanced Flow Solutions		Corporate		Total
Divestiture	$	—		$	3,748	$	101	$	3,849
Contingent consideration revaluation	(9,700		)	—		—		(9,700		)
Acquisition related charges	—			—		136		136
Brazil closure	195			—		—		195
Total special recoveries, net	$	(9,505	)	$	3,748	$	237	$	(5,520	)



	Special (Recoveries) Charges, net
	For the six months ended July 2, 2017
	Energy			Advanced Flow Solutions		Corporate		Total
Divestiture	$	—		$	3,748	$	101	$	3,849
Contingent consideration revaluation	(12,200		)	—		—		(12,200		)
Acquisition related charges	—			—		136		136
Brazil closure	427			—		—		427
Total special recoveries, net	$	(11,773	)	$	3,748	$	237	$	(7,788	)

Divestiture: On July 7, 2017, we divested a non-core business as part of our simplification strategy. In connection with the sale, we recorded $5.3 million of special and restructuring charges. As of July 2, 2017, the business was held-for-sale and reported within the other current assets and liabilities captions on our condensed consolidated balance sheet. We measured the held-for-sale disposal group at its fair value less cost to sell, which was lower than its carrying value, and recorded a $3.8 million adjustment.

Contingent Consideration Revaluation: The fair value of the CFS earn-out decreased $9.7 million and $12.2 million during the three and six months ended July 2, 2017, respectively. The change in fair value was recorded as a special gain during the three and six months ended July 2, 2017. Accordingly, the revised fair value assessment indicates an earn-out of zero as of July 2, 2017.

Acquisition related charges: On October 12, 2016, we acquired CFS. In connection with our acquisition, we recorded $0.1 million of acquisition related professional fees during the three and six months ended July 2, 2017.

Brazil Closure: On November 3, 2015, the Board of Directors approved the closure and exit of our Brazil manufacturing operations due to the economic realities in Brazil and the ongoing challenges with our only significant end customer, Petrobras.

CIRCOR Brazil reported substantial operating losses every year since it was acquired in 2011 while the underlying market

conditions and outlook deteriorated. In connection with the closure, we recorded $0.2 million and $0.4 million of charges within the Energy segment during the three and six months ended July 2, 2017, respectively, which relates to losses incurred subsequent to our Q1 2016 closure of manufacturing operations. As of July 2, 2017, our remaining Brazil assets were $1.6 million, of which $0.9 million relates to assets held-for-sale, $0.5 million relates to cash, and $0.2 million relates to net third party accounts receivables. The Brazil assets held-for-sale as of July 2, 2017 are reported within the other current assets caption on our condensed consolidated balance sheet.

The table below (in thousands) outlines the special charges (recoveries), net recorded for the three and six months ended July 3, 2016:



	Special Charges (Recoveries), net
	For the three months ended July 3, 2016
	Energy		Advanced Flow Solutions			Corporate		Total
Brazil Closure	$	1,383	$	—		$	—	$	1,383
Acquisition related recoveries	—		(48		)	—		(48		)
Total special charges (recoveries), net	$	1,383	$	(48	)	$	—	$	1,335



	Special Charges (Recoveries), net
	For the six months ended July 3, 2016
	Energy		Advanced Flow Solutions			Corporate		Total
Brazil Closure	$	2,270	$	—		$	2	$	2,272
Acquisition related recoveries	—		(161		)	—		(161		)
Total special charges (recoveries), net	$	2,270	$	(161	)	$	2	$	2,111

Brazil Closure: In connection with the closure, we recorded $1.4 million and $2.3 million of charges within the Energy segment during the three and six months ended July 3, 2016, respectively, which primarily related to employee termination costs and losses incurred subsequent to our Q1 2016 closure of manufacturing operations.

Acquisition related charges: On April 15, 2015, we acquired Germany-based Schroedahl. In connection with our acquisition of Schroedahl, we recorded $0.1 million and $0.2 million of recoveries of acquisition related professional fees during the three months and six months ended July 3, 2016, respectively.

Restructuring Charges, net

The tables below (in thousands) outline the charges (or any recoveries) associated with restructuring actions recorded for the three and six months ended July 2, 2017 and July 3, 2016, respectively. A description of the restructuring actions is provided in the section titled "Restructuring Programs Summary" below.



	Restructuring Charges / (Recoveries)
	As of and for the three months ended July 2, 2017
	Energy		Advanced Flow Solutions		Corporate		Total
Facility related expenses	$	1,144	$	225	$	—	$	1,369
Employee related expenses	803		1,394		—		2,197
Total restructuring charges, net	$	1,947	$	1,619	$	—	$	3,566

Accrued restructuring charges as of April 3, 2017							$	1,418
Total year to date charges, net (shown above)							3,566
Charges paid / settled, net							(2,866		)
Accrued restructuring charges as of July 2, 2017							$	2,118



	Restructuring Charges / (Recoveries)
	As of and for the six months ended July 2, 2017
	Energy		Advanced Flow Solutions		Corporate		Total
Facility related expenses	$	1,994	$	332	$	—	$	2,326
Employee related expenses	975		1,724		—		2,699
Total restructuring charges, net	$	2,969	$	2,056	$	—	$	5,025

Accrued restructuring charges as of December 31, 2016							$	1,618
Total year to date charges, net (shown above)							5,025
Charges paid / settled, net							(4,525		)
Accrued restructuring charges as of July 2, 2017							$	2,118

We expect to make payment or settle half of the restructuring charges accrued as of July 2, 2017 during the second half of 2017, with the remaining settled in 2018.



	Restructuring Charges / (Recoveries)
	As of and for the three months ended July 3, 2016
	Energy			Advanced Flow Solutions		Corporate		Total
Facility related expenses (recoveries)	$	(113	)	$	2,068	$	—	$	1,955
Employee related expenses	638			666		—		1,304
Total restructuring charges, net	$	525		$	2,734	$	—	$	3,259

Accrued restructuring charges as of April 3, 2016								$	652
Total year to date charges, net (shown above)								3,259
Charges paid / settled, net								(3,220		)
Accrued restructuring charges as of July 3, 2016								$	691



	Restructuring Charges / (Recoveries)
	As of and for the six months ended July 3, 2016
	Energy			Advanced Flow Solutions		Corporate		Total
Facility related expenses (recoveries)	$	(489	)	$	3,468	$	—	$	2,979
Employee related expenses	736			707		—		1,443
Total restructuring charges, net	$	247		$	4,175	$	—	$	4,422

Accrued restructuring charges as of December 31, 2015								$	663
Total year to date charges, net (shown above)								4,422
Charges paid / settled, net								(4,394		)
Accrued restructuring charges as of July 3, 2016								$	691

Restructuring Programs Summary

As specific restructuring programs are announced, the amounts associated with that particular action may be recorded in periods other than when announced to comply with the applicable accounting rules. For example, 2016 Action’s total cost may be recorded in 2016 and 2017. The amounts shown below reflect the total cost for that restructuring program.

During 2017, we initiated certain restructuring activities, under which we continued to simplify our business ("2017 Actions"). Under these restructurings, we reduced expenses, primarily through reductions in force and closing a number of smaller facilities.



	2017 Actions Restructuring Charges / (Recoveries), net as of July 2, 2017
	Energy		Advanced Flow Solutions		Total
Facility related expenses - incurred to date	$	—	$	210	$	210
Employee related expenses - incurred to date	463		1,554		2,017
Total restructuring related special charges - incurred to date	$	463	$	1,764	$	2,227

During 2016, we initiated certain restructuring activities, under which we continued to simplify our business ("2016 Actions"). Under these restructurings, we reduced expenses, primarily through reductions in force and closing a number of smaller facilities.



	2016 Actions Restructuring Charges / (Recoveries), net as of July 2, 2017
	Energy		Advanced Flow Solutions		Total
Facility related expenses - incurred to date	$	2,701	$	256	$	2,957
Employee related expenses - incurred to date	2,970		1,347		4,317
Total restructuring related special charges - incurred to date	$	5,671	$	1,603	$	7,274

In July 2015, we announced the closure of one of the two Corona, California manufacturing facilities ("California Restructuring"). Under this restructuring, we are reducing certain general, manufacturing and facility related expenses. Charges with this action were finalized in the fourth quarter of 2016.



	California Restructuring Charges, net as of July 2, 2017
	Advanced Flow Solutions
Facility related expenses - incurred to date	$	3,700
Employee related expenses - incurred to date	800
Total restructuring related special charges - incurred to date	$	4,500

Additional Restructuring Charges

During the first and second quarters of 2016, we recorded restructuring related inventory charges of $1.9 million and $0.1 million, respectively, associated with the closure of manufacturing operations and the exit of the gate, globe and check valves product line in Brazil. As of July 2, 2017, no inventory amounts remain on our balance sheet for the gate, globe and check valves product line.

During the first quarter of 2016, in connection with the restructuring of certain structural landing gear product lines, we recorded inventory related charges of less than $0.1 million within the Advanced Flow Solutions segment. As of July 2, 2017, our remaining structural landing gear product line inventory balance is $0.4 million, which we believe is recoverable based upon our net realizable value analysis.

The inventory restructuring charges described above are recorded in the cost of revenues caption on our condensed consolidated statement of income.