RESTRUCTURING

2016 Restructuring

On January 4, 2016, the Company’s board of directors approved the 2016 Restructuring to reduce its exposure to the upstream oil markets and to reduce consolidated costs. The Company made significant progress in executing its 2016 Restructuring objectives in the first quarter of 2016, and the Company expects to substantially complete by the end of the second quarter of 2016 all of the objectives set forth in the 2016 Restructuring, including repositioning Energy Services’ upstream operations in California, reducing Corrosion Protection’s upstream exposure by divesting its interest in a Canadian pipe coating joint venture, right-sizing Corrosion Protection to compete more effectively and reducing corporate and other operating costs. The 2016 Restructuring is expected to reduce consolidated annual costs between $15.0 million to $16.0 million, most of which is expected to be realized in 2016, primarily through headcount reductions and office closures. The Company’s initial savings estimate was approximately $15.0 million.

As part of the 2016 Restructuring, the Company expects to reduce headcount by approximately 900 employees, or 14.5% of the Company’s total workforce. Headcount reductions associated with the 2016 Restructuring totaled 705 as of March 31, 2016. In connection with the 2016 Restructuring, the Company expects to record estimated pre-tax charges, most of which are cash charges, between $11.0 million to $13.0 million, which is an increase from the original estimate of between $7.0 million to $9.0 million. The increased cost estimate is the result of longer wind-down efforts associated with downsizing our upstream operations in Energy Services and Corrosion Protection. These charges are expected to consist primarily of employee severance, extension of benefits, employment assistance programs, early lease termination and other restructuring costs.

Total pre-tax restructuring charges during the first quarter of 2016 were $9.7 million ($6.6 million after tax), all of which were cash charges. These charges included employee severance, retention, extension of benefits, employment assistance programs and other restructuring costs associated with the restructuring efforts described above.

During the quarter ended March 31, 2016, the Company recorded pre-tax expense related to the 2016 Restructuring as follows (in thousands):



	Quarter Ended March 31, 2016
	Infrastructure Solutions		Corrosion Protection		Energy Services		Total
Severance and benefit related costs	$	1,912	$	2,420	$	1,309	$	5,641
Lease termination costs	—		—		969		969
Relocation and other moving costs	—		—		120		120
Other restructuring costs ⁽¹⁾	241		317		2,454		3,012
Total pre-tax restructuring charges ⁽²⁾	$	2,153	$	2,737	$	4,852	$	9,742

__________________________


⁽¹⁾	Primarily includes charges related to the downsizing of the Company's upstream operations in California.


⁽²⁾	Includes $1.0 million of corporate-related restructuring charges that have been allocated to the reportable segments.

2016 Restructuring costs related to severance, other termination benefit costs and early lease termination costs for the quarter ended March 31, 2016 were $6.7 million and are reported, along with similar charges for the 2014 Restructuring, 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 charges related to the 2016 Restructuring recognized in the quarter ended March 31, 2016 as presented in their affected line in the Consolidated Statements of Operations (in thousands):



	Quarter Ended March 31, 2016
Cost of revenues	$	49
Operating expenses	2,963
Restructuring charges	6,730
Total pre-tax restructuring charges ⁽¹⁾	$	9,742

__________________________


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

The following tables summarize the 2016 Restructuring activity during the first quarter of 2016 (in thousands):



	2016 Charge to Income		Utilized in 2016				Reserves at March 31, 2016
	2016 Charge to Income		Cash⁽¹⁾		Non-Cash		Reserves at March 31, 2016
Severance and benefit related costs	$	5,641	$	3,062	$	—	$	2,579
Lease termination costs	969		583		—		386
Relocation and other moving costs	120		120		—		—
Other restructuring costs	3,012		2,906		—		106
Total pre-tax restructuring charges	$	9,742	$	6,671	$	—	$	3,071

__________________________


⁽¹⁾	Refers to cash utilized to settle charges during the first quarter of 2016.

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 March 31, 2016. Remaining headcount reductions and cash costs related to the 2014 Restructuring are not expected to be material.

Total pre-tax 2014 Restructuring charges since inception were $60.3 million ($44.8 million after tax) and consisted of non-cash charges totaling $48.3 million and cash charges totaling $12.0 million. The non-cash charges of $48.3 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) $26.1 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 $12.0 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.

During the quarters ended March 31, 2016 and 2015, the Company recorded pre-tax (income) expense related to the 2014 Restructuring as follows (in thousands):



	Quarters Ended March 31,
	2016			2015
Severance and benefit related costs	$	67		$	516
Lease termination costs	—			141
Allowances for doubtful accounts	(341		)	(999		)
Other restructuring costs ⁽¹⁾	94			3,880
Total pre-tax restructuring charges (reversals) ⁽²⁾	$	(180	)	$	3,538

__________________________


⁽¹⁾	For the quarter ended March 31, 2015, includes charges related to the write-off of certain other assets, including the loss on the sale of the CIPP contracting operation in France in February 2015, including the release of cumulative currency translation adjustments, professional fees and certain other restructuring charges.


⁽²⁾	All charges for the quarters ended March 31, 2016 and 2015 relate to Infrastructure Solutions.

2014 Restructuring costs related to severance, other termination benefit costs and early lease termination costs for the quarters ended March 31, 2016 and 2015 were $0.1 million and $0.7 million, respectively, and are reported, along with similar charges for the 2016 Restructuring, 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 charges related to the 2014 Restructuring recognized in the quarters ended March 31, 2016 and 2015 as presented in their affected line in the Consolidated Statements of Operations (in thousands):



	Quarters Ended March 31,
	2016									2015
	Other Non-Cash Restructuring Charges (Reversals)			Cash Restructuring Charges (Reversals) ⁽¹⁾			Total			Other Non-Cash Restructuring Charges (Reversals)			Cash Restructuring Charges ⁽¹⁾		Total
Cost of revenues	$	—		$	(14	)	$	(14	)	$	(166	)	$	180	$	14
Operating expenses	(341		)	(21		)	(362		)	(1,021		)	1,153		132
Restructuring charges	—			67			67			—			658		658
Other expense ⁽²⁾	129			—			129			2,692			42		2,734
Total pre-tax restructuring charges (reversals) ⁽³⁾	$	(212	)	$	32		$	(180	)	$	1,505		$	2,033	$	3,538

__________________________


⁽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⁾	Charges in the quarter ended March 31, 2015 primarily include the loss on sale of the CIPP contracting operation in France in February 2015, including the release of cumulative currency translation adjustments.


⁽³⁾	All charges relate to Infrastructure Solutions.

The following tables summarize the 2014 Restructuring activity during the first quarters of 2016 and 2015 (in thousands):



								Utilized
	Reserves at December 31, 2015		Charge (Credit) to Income			Foreign Currency Translation		Cash⁽¹⁾		Non-Cash		Reserves at March 31, 2016
Severance and benefit related costs	$	—	$	67		$	—	$	—	$	—	$	67
Lease termination expenses	—		—			—		—		—		—
Allowances for doubtful accounts	6,605		(341		)	49		—		235		6,078
Other restructuring costs	968		94			33		45		129		921
Total pre-tax restructuring charges (reversals)	$	7,573	$	(180	)	$	82	$	45	$	364	$	7,066

__________________________


⁽¹⁾	Refers to cash utilized to settle charges, either those reserved at December 31, 2015 or charged to income during the first quarter of 2016.



									Utilized
	Reserves at December 31, 2014		Charge (Credit) to Income			Foreign Currency Translation			Cash⁽¹⁾		Non-Cash			Reserves at March 31, 2015
Severance and benefit related costs	$	466	$	516		$	(2	)	$	82	$	—		$	898
Lease termination expenses	—		141			—			141		—			—
Allowances for doubtful accounts	11,464		(999		)	(1		)	—		(124		)	10,588
Other restructuring costs	2,496		3,880			(102		)	1,297		2,572			2,405
Total pre-tax restructuring charges	$	14,426	$	3,538		$	(105	)	$	1,520	$	2,448		$	13,891

__________________________


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