RESTRUCTURING

2016 Restructuring

On January 4, 2016, the Company’s board of directors approved the 2016 Restructuring to reposition Energy Services’ upstream operations in California, right-size Corrosion Protection to compete more effectively and reduce corporate and other operating costs. See further discussion in Note 16.

2014 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 generated annual operating cost savings of approximately $10.8 million, which was in-line with the Company’s initial estimate, and consisted of approximately $8.4 million and $2.4 million of recognized savings within Infrastructure Solutions and Corrosion Protection, respectively. The Company achieved these cost savings by (i) exiting certain unprofitable international locations for the Company’s Insituform business and consolidating the Company’s worldwide Fyfe business with the Company’s global Insituform business, all of which is in Infrastructure Solutions; and (ii) eliminating certain idle facilities in the Company’s Bayou pipe coating operation in Louisiana, which is in Corrosion Protection.

The Company has substantially completed all of the aforementioned objectives related to the 2014 Restructuring. Headcount reductions associated with the 2014 Restructuring totaled 86 as of December 31, 2015. Remaining headcount reductions and cash costs related to the 2014 Restructuring are not expected to be material.

Total pre-tax restructuring charges since inception were $60.5 million ($44.9 million after tax) and consisted of non-cash charges totaling $48.6 million and cash charges totaling $11.9 million. The non-cash charges of $48.6 million included (i) $22.2 million related to the impairment of certain long-lived assets and definite-lived intangible assets for Bayou’s pipe coating operation in Louisiana, which is reported in Corrosion Protection, and (ii) $26.4 million related to impairment of definite-lived intangible assets, allowances for accounts receivable, write-off of certain other current assets and long-lived assets, inventory obsolescence, as well as losses related to the sales of the Company’s CIPP contracting operations in France and Switzerland, which are reported in Infrastructure Solutions. Cash charges totaling $11.9 million included employee severance, retention, extension of benefits, employment assistance programs and other costs associated with the restructuring of Insituform’s European and Asia-Pacific operations and Fyfe’s worldwide business.

While estimated remaining cash costs to be incurred in 2016 for the 2014 Restructuring are not expected to be material, the Company expects to incur additional non-cash charges in 2016, primarily related to the potential release of cumulative currency translation adjustments resulting from the disposal of certain entities as well as the foreign currency impact from settlement of inter-company loans.

The Company recorded pre-tax expenses of $11.0 million and $49.5 million in 2015 and 2014, respectively, related to the 2014 Restructuring as follows (in thousands):



	Years Ended December 31,
	2015						2014
	Infrastructure Solutions		Corrosion Protection		Total		Infrastructure Solutions		Corrosion Protection		Total
Severance and benefit related costs	$	801	$	—	$	801	$	687	$	—	$	687
Lease termination costs	167		—		167		—		—		—
Allowances for doubtful accounts	1,186		—		1,186		11,947		—		11,947
Inventory obsolescence	—		—		—		2,746		—		2,746
Fixed asset impairment	—		—		—		533		11,338		11,871
Definite-lived intangible asset impairment	—		—		—		—		10,896		10,896
Other asset write-offs	1,880		—		1,880		5,013		—		5,013
Other restructuring costs ⁽¹⁾	6,946		—		6,946		6,358		—		6,358
Total pre-tax restructuring charges	$	10,980	$	—	$	10,980	$	27,284	$	22,234	$	49,518

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⁽¹⁾	Includes charges related to the losses on the sales of the CIPP contracting operations in France in February 2015 and Switzerland in December 2014, including the release of cumulative currency translation adjustments resulting from those sales. Also includes the write-off of certain other current assets and long-lived assets, professional fees and certain other restructuring charges.

Restructuring costs of $1.0 million and $0.7 million in 2015 and 2014, respectively, are reported on a separate line in the Consolidated Statements of Operations in accordance with FASB ASC 420, Exit or Disposal Cost Obligations, and relate to severance, related termination benefit costs and lease termination costs.

The following table summarizes all restructuring charges recognized in 2015 and 2014, as presented in their affected line in the Consolidated Statements of Operations:



	Years Ended December 31,
	2015							2014
	Other Non-Cash Restructuring Charges ⁽¹⁾		Cash Restructuring Charges (Reversals)⁽³⁾			Total		Other Non-Cash Restructuring Charges ⁽²⁾		Cash Restructuring Charges⁽³⁾		Total
Cost of revenues	$	1,620	$	1,097		$	2,717	$	14,610	$	1,076	$	15,686
Operating expenses	25		4,362			4,387		17,579		2,976		20,555
Definite-lived intangible asset impairment	—		—			—		10,896		—		10,896
Restructuring charges	—		968			968		—		687		687
Other expense	3,035		(127		)	2,908		790		904		1,694
Total pre-tax restructuring charges	$	4,680	$	6,300		$	10,980	$	43,875	$	5,643	$	49,518

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⁽¹⁾	The non-cash charges for the year ended December 31, 2015 are comprised solely of Infrastructure Solutions charges related to the loss on sale of the CIPP contracting operation in France, including the release of cumulative currency translation adjustments, write-off of certain other current assets and long-lived assets as well as the reversal of a legal accrual.

⁽²⁾

The non-cash charges for the year ended December 31, 2014 are comprised of Corrosion Protection charges of $10.9 million related to definite lived intangible asset impairment and $11.3 million related to fixed asset impairment, and Infrastructure Solutions charges of $21.7 million related to inventory obsolescence, impairment definite-lived intangible assets, allowances for accounts receivable, write-off of certain other current assets and long-lived assets, loss on the sale of the CIPP contracting operation in Switzerland, including the release of cumulative currency translation adjustments, as well as a legal accrual related to disputed work performed by our European and Asia-Pacific operations.


⁽³⁾	Cash charges consist of charges incurred during the period that will be settled in cash, either during the current period or future periods.

The following tables summarize the 2014 Restructuring activity during 2015 and 2014 (in thousands):



	Reserves at December 31, 2014		2015 Charge to Income		Foreign Currency Translation			Utilized in 2015				Reserves at December 31, 2015
	Reserves at December 31, 2014		2015 Charge to Income		Foreign Currency Translation			Cash⁽¹⁾		Non-Cash		Reserves at December 31, 2015
Severance and benefit related costs	$	466	$	801	$	(7	)	$	1,260	$	—	$	—
Lease termination expenses	—		167		(2		)	165		—		—
Allowances for doubtful accounts	11,464		1,186		(401		)	—		5,644		6,605
Other asset write-offs	—		1,880		—			—		1,880		—
Other restructuring costs	2,496		6,946		(87		)	4,828		3,559		968
Total pre-tax restructuring charges	$	14,426	$	10,980	$	(497	)	$	6,253	$	11,083	$	7,573

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⁽¹⁾	Refers to cash utilized to settle charges, either those reserved at December 31, 2014 or charged to income during 2015.



	2014 Charge to Income		Utilized in 2014				Reserves at December 31, 2014
	2014 Charge to Income		Cash⁽¹⁾		Non-Cash		Reserves at December 31, 2014
Severance and benefit related costs	$	687	$	221	$	—	$	466
Allowances for doubtful accounts	11,947		—		483		11,464
Inventory obsolescence	2,746		—		2,746		—
Fixed asset impairment	11,871		—		11,871		—
Definite-lived intangible asset impairment	10,896		—		10,896		—
Other asset write-offs	5,013		—		5,013		—
Other restructuring costs	6,358		3,862		—		2,496
Total pre-tax restructuring charges	$	49,518	$	4,083	$	31,009	$	14,426

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⁽¹⁾	Refers to cash utilized to settle charges that were charged to income during 2014.