RESTRUCTURING

On October 6, 2014, the Company’s board of directors approved the 2014 Restructuring to improve gross margins and profitability over the long term by exiting low-return businesses and reducing the size and cost of the Company’s overhead structure.

The 2014 Restructuring included exiting certain unprofitable international locations for the Company’s Insituform business, consolidating the Company’s worldwide Fyfe/Fibrwrap business with the Company’s global Insituform business into the Infrastructure Solutions platform and shutting down certain idle facilities in the Company’s Bayou Louisiana coatings operation.

As of June 30, 2015, significant progress had been made against all of the aforementioned objectives. Headcount reductions to date total 85, of which 54 occurred in the first six months of 2015. The Company expects minimal additional headcount reductions to occur throughout the remainder of 2015 as the Company substantially completes its 2014 Restructuring.

In December 2014, and in connection with the 2014 Restructuring, the Company sold its wholly-owned subsidiary, Ka-te, the Company’s Swiss contracting operation, to Marco Daetwyler Gruppe AG, a Swiss company. In connection with the sale, the Company entered into a five-year tube supply agreement whereby Ka-te will source liners from Insituform Lining. Ka-te will also be entitled to continue to use its trade name based on a trade mark license granted for the same five-year time period.

In February 2015, and in connection with the 2014 Restructuring, the Company sold its wholly-owned subsidiary, VII, the Company’s French CIPP contracting operation, to certain employees of VII. In connection with the sale, the Company entered into a five-year exclusive tube supply agreement whereby VII will source liners from Insituform Lining. VII will also be entitled to continue to use its trade name based on a trade mark license granted for the same five-year time period.

During the quarter and six-month period ended June 30, 2015, the Company recorded pre-tax expense related to the 2014 Restructuring as follows (in thousands):



	Quarter Ended June 30, 2015		Six Months Ended June 30, 2015
Severance and benefit related costs	$	178	$	694
Lease termination costs	26		168
Allowances for doubtful accounts	2,290		1,291
Currency translation	411		820
Other restructuring costs ⁽¹⁾	2,789		6,259
Total pre-tax restructuring charges ⁽²⁾	$	5,694	$	9,232

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⁽¹⁾	Includes charges related to the write-off of certain other assets, including the loss on the CIPP contracting operation in France, professional fees and certain other restructuring charges.


⁽²⁾	All charges for the quarter and six-month period ended June 30, 2015 relate to the Infrastructure Solutions reportable segment.

Restructuring costs related to severance, other termination benefit costs and early lease termination costs for the quarter and six-month period ended June 30, 2015 were $0.2 million and $0.9 million, respectively, and are reported on a separate line in the Consolidated Statements of Operations in accordance with FASB ASC 420, Exit or Disposal Cost Obligations.

The following tables summarize all restructuring charges recognized in the quarter and six-month period ended June 30, 2015 as presented in their affected line in the Consolidated Statements of Operations (in thousands):



	Quarter Ended June 30, 2015							Six Months Ended June 30, 2015
	Other Non-Cash Restructuring Charges		Cash Restructuring Charges (Reversals)⁽¹⁾			Total		Other Non-Cash Restructuring Charges (Reversals)			Cash Restructuring Charges (Reversals)⁽¹⁾			Total
Cost of revenues	$	35	$	933		$	968	$	(132	)	$	1,114		$	982
Operating expenses	2,290		2,210			4,500		1,270			3,362			4,632
Restructuring charges	—		204			204		—			862			862
Other expense	246		(224		)	22		2,938			(182		)	2,756
Total pre-tax restructuring charges ⁽²⁾	$	2,571	$	3,123		$	5,694	$	4,076		$	5,156		$	9,232

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⁽¹⁾	Cash charges consist of charges incurred during the period that will be settled in cash, either during the current period or future periods.


⁽²⁾	All charges for the quarter and six-month period ended June 30, 2015 relate to the Infrastructure Solutions reportable segment.

Total pre-tax restructuring charges to date were $58.7 million ($43.8 million post-tax) and consisted of non-cash charges totaling $47.9 million and cash charges totaling $10.8 million. The non-cash charges of $47.9 million included $22.2 million related to the impairment of certain long-lived assets and definite-lived intangible assets for Bayou’s coatings operation in Louisiana, which is reported in the Corrosion Protection reportable segment, and $25.7 million related to inventory obsolescence, impairment of definite-lived intangible assets, allowances for doubtful accounts receivable, currency translation adjustments, write-off of certain other current assets and long-lived assets as well as a legal accrual related to disputed work performed by our European and Asia-Pacific operations, which are reported in the Infrastructure Solutions reportable segment. The cash charges of $10.8 million included employee severance, retention, extension of benefits, employment assistance programs, early lease termination costs and other costs associated with the restructuring of Insituform’s European and Asia-Pacific operations and Fyfe’s worldwide business.

Estimated remaining cash costs to be incurred in 2015 for the 2014 Restructuring are approximately $2.0 million related to severance and benefits costs and other restructuring costs.

The following table summarizes the 2014 Restructuring activity during the first six months of 2015 (in thousands):



								Utilized
	Reserves at December 31, 2014		Charge to Income		Foreign Currency Translation			Cash⁽¹⁾		Non-Cash		Reserves at June 30, 2015
Severance and benefit related costs	$	466	$	694	$	(3	)	$	975	$	—	$	182
Lease termination expenses	—		168		(2		)	166		—		—
Allowances for doubtful accounts	11,464		1,291		(72		)	—		2,785		9,898
Currency translation	—		820		—			—		820		—
Other restructuring costs	2,496		6,259		(70		)	3,541		2,032		3,112
Total pre-tax restructuring charges	$	14,426	$	9,232	$	(147	)	$	4,682	$	5,637	$	13,192

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⁽¹⁾	Refers to cash utilized to settle charges, either those reserved at December 31, 2014 or charged to income during the current period.