Special & Restructuring Charges (Recoveries), net

Special and Restructuring Charges (Recoveries), 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 charges (recoveries), 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 charges (recoveries), net line item on the condensed consolidated statements of income for the three and nine months ended October 1, 2017 and October 2, 2016:



	Special & Restructuring Charges (Recoveries), net
	Three Months Ended				Nine Months Ended
	October 1, 2017		October 2, 2016		October 1, 2017			October 2, 2016
Special charges (recoveries), net	$	1,978	$	379	$	(5,809	)	$	2,491
Restructuring charges, net	341		2,252		5,366			6,674
Total special and restructuring charges (recoveries), net	$	2,319	$	2,631	$	(443	)	$	9,165

Special Charges (Recoveries), net

The table below (in thousands) outlines the special charges (recoveries), net recorded for the three and nine months ended October 1, 2017:



	Special Charges, net
	For the three months ended October 1, 2017
	Energy		Advanced Flow Solutions		Corporate		Total
Acquisition related charges	$	—	$	—	$	1,786	$	1,786
Brazil closure	192		—		—		192
Total special charges, net	$	192	$	—	$	1,786	$	1,978



	Special (Recoveries) Charges, net
	For the nine months ended October 1, 2017
	Energy			Advanced Flow Solutions		Corporate		Total
Acquisition related charges	$	—		$	—	$	1,923	$	1,923
Brazil closure	619			—		—		619
Divestiture	—			3,748		101		3,849
Contingent consideration revaluation	(12,200		)	—		—		(12,200		)
Total special (recoveries) charges, net	$	(11,581	)	$	3,748	$	2,024	$	(5,809	)

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 nine months ended October 1, 2017. No CFS professional fees were recorded during the three months ended October 1, 2017.


•	On September 24, 2017, we entered into the Purchase Agreement to purchase FH. In connection with the Purchase Agreement, we recorded $1.8 million of acquisition related professional fees, primarily for legal services, during the three and nine months ended October 1, 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 $0.6 million of charges within the Energy segment during the three and nine months ended October 1, 2017, respectively, which relates to losses incurred subsequent to our Q1 2016 closure of manufacturing operations.

Divestiture: On July 7, 2017, we divested our French non-core aerospace build-to-print business within our Advanced Flow Solutions segment as part of our simplification strategy. We considered this business as non-core because the products or services did not fit our strategy and the long-term profitable growth prospects were below our expectations. Divestiture of this non-core business enables us to focus resources on businesses where there is greater opportunity to achieve sales growth, higher margins, and market leadership. 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 during the second quarter of 2017.

Contingent Consideration Revaluation: The fair value of the CFS-related earn-out had no change during the three months ended October 1, 2017, as it had been reduced to zero prior to the beginning of the period. The fair value of the earn-out decreased $12.2 million during the nine months ended October 1, 2017. The change in fair value during the nine months ended October 1, 2017 was recorded as a recovery within the special and restructuring charges (recoveries) line on our condensed consolidated statement of income. The actual achievement of the earn-out was zero as of October 1, 2017, as the earn-out period expired on September 30, 2017.

The table below (in thousands) outlines the special charges (recoveries), net recorded for the three and nine months ended October 2, 2016:



	Special Charges, net
	For the three months ended October 2, 2016
	Energy		Advanced Flow Solutions		Corporate		Total
Brazil Closure	$	379	$	—	$	—	$	379
Total special charges, net	$	379	$	—	$	—	$	379



	Special Charges (Recoveries), net
	For the nine months ended October 2, 2016
	Energy			Advanced Flow Solutions		Corporate		Total
Acquisition related recoveries	$	(161	)	$	—	$	—	$	(161	)
Brazil Closure	2,650			—		2		2,652
Total special charges (recoveries), net	$	2,489		$	—	$	2	$	2,491

Brazil Closure: In connection with the closure, we recorded $0.4 million and $2.7 million of charges within the Energy segment during the three and nine months ended October 2, 2016, respectively, which primarily related to employee termination costs and losses incurred subsequent to our Q1 2016 closure of manufacturing operations.

Acquisition related recoveries: On April 15, 2015, we acquired Germany-based Schroedahl. In connection with our acquisition of Schroedahl, we recorded $0.2 million of recoveries of acquisition related professional fees during the nine months ended October 2, 2016.

Restructuring Charges (Recoveries), net

The tables below (in thousands) outline the charges (or any recoveries) associated with restructuring actions recorded for the three and nine months ended October 1, 2017 and October 2, 2016, respectively. A description of the restructuring actions is provided in the section titled "Restructuring Programs Summary" below.



	Restructuring Charges (Recoveries), net
	As of and for the three months ended October 1, 2017
	Energy			Advanced Flow Solutions		Corporate		Total
Facility related expenses	$	227		$	165	$	—	$	392
Employee related (recoveries) expenses, net	(89		)	38		—		(51		)
Total restructuring charges, net	$	138		$	203	$	—	$	341

Accrued restructuring charges as of July 2, 2017								$	2,118
Total year to date charges, net (shown above)								341
Charges paid / settled, net								(592		)
Accrued restructuring charges as of October 1, 2017								$	1,867



	Restructuring Charges (Recoveries), net
	As of and for the nine months ended October 1, 2017
	Energy		Advanced Flow Solutions		Corporate		Total
Facility related expenses	$	2,221	$	497	$	—	$	2,718
Employee related expenses	886		1,762		—		2,648
Total restructuring charges, net	$	3,107	$	2,259	$	—	$	5,366

Accrued restructuring charges as of December 31, 2016							$	1,618
Total year to date charges, net (shown above)							5,366
Charges paid / settled, net							(5,117		)
Accrued restructuring charges as of October 1, 2017							$	1,867

We expect to make payment or settle approximately half of the restructuring charges accrued as of October 1, 2017 during the fourth quarter of 2017, with the remaining settled in 2018.



	Restructuring Charges (Recoveries), net
	As of and for the three months ended October 2, 2016
	Energy		Advanced Flow Solutions		Corporate		Total
Facility related expenses	$	336	$	454	$	—	$	790
Employee related expenses	757		705		—		1,462
Total restructuring charges, net	$	1,093	$	1,159	$	—	$	2,252

Accrued restructuring charges as of July 3, 2016							$	691
Total year to date charges, net (shown above)							2,252
Charges paid / settled, net							(1,473		)
Accrued restructuring charges as of October 2, 2016							$	1,470



	Restructuring Charges (Recoveries), net
	As of and for the nine months ended October 2, 2016
	Energy			Advanced Flow Solutions		Corporate		Total
Facility related (recoveries) expenses	$	(153	)	$	3,922	$	—	$	3,769
Employee related expenses	1,493			1,412		—		2,905
Total restructuring charges, net	$	1,340		$	5,334	$	—	$	6,674

Accrued restructuring charges as of December 31, 2015								$	663
Total year to date charges, net (shown above)								6,674
Charges paid / settled, net								(5,867		)
Accrued restructuring charges as of October 2, 2016								$	1,470

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, 2017 Action’s total cost associated with 2017 Actions (as discussed below) may be recorded in 2017 and 2018. 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 October 1, 2017
	Energy		Advanced Flow Solutions		Total
Facility related expenses - incurred to date	$	—	$	366	$	366
Employee related expenses - incurred to date	463		1,592		2,055
Total restructuring related special charges - incurred to date	$	463	$	1,958	$	2,421

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 October 1, 2017
	Energy		Advanced Flow Solutions		Total
Facility related expenses - incurred to date	$	2,928	$	256	$	3,184
Employee related expenses - incurred to date	2,882		1,347		4,229
Total restructuring related special charges - incurred to date	$	5,810	$	1,603	$	7,413

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 October 1, 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 October 1, 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 October 1, 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.

Intangible Impairment Charges

During the three months ended October 2, 2016, we recorded a $0.2 million impairment charge for a China patent deemed to no longer have economic value. The impairment charge is included in the impairment charge line on our condensed consolidated statement of income.