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 expenses. The Company substantially completed its 2016 Restructuring objectives in the first nine months of 2016, 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 expenses by approximately $17.0 million, most of which is expected to be realized in 2016, primarily through headcount reductions and office closures.

As part of the 2016 Restructuring, the Company reduced headcount by approximately 960 employees, or 15.5% of the Company’s total workforce as of December 31, 2015. Headcount reductions associated with the 2016 Restructuring were substantially completed as of September 30, 2016, with minimal headcount reductions expected in the remainder of the year. The Company expects to record total estimated pre-tax charges, most of which are cash charges, of approximately $15.5 million in connection with the 2016 Restructuring.

Estimated remaining costs to be incurred for the 2016 Restructuring are approximately $0.7 million (pre-tax) and are expected to be incurred in the fourth quarter of 2016, primarily in Corrosion Protection. The estimated remaining costs consist primarily of cash charges related to office closures, employee severance, extension of benefits, employment assistance programs and other restructuring costs.

Total pre-tax 2016 Restructuring charges during the first nine months of 2016 were $14.8 million ($9.7 million after tax) and consisted primarily of 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 and nine months ended September 30, 2016, the Company recorded pre-tax expense related to the 2016 Restructuring as follows (in thousands):



	Quarter Ended September 30, 2016
	Infrastructure Solutions			Corrosion Protection		Energy Services		Total
Severance and benefit related costs	$	—		$	48	$	98	$	146
Relocation and other moving costs	—			—		66		66
Other restructuring costs ⁽¹⁾	(31		)	130		976		1,075
Total pre-tax restructuring charges (reversals) ⁽²⁾	$	(31	)	$	178	$	1,140	$	1,287

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⁽¹⁾	Includes charges primarily related to downsizing the Company’s upstream operations in California, inclusive of wind-down costs, professional fees, fixed asset disposals and certain other restructuring charges.


⁽²⁾	Includes less than $0.1 million of corporate-related restructuring charges that have been allocated to the reportable segments.



	Nine Months Ended September 30, 2016
	Infrastructure Solutions		Corrosion Protection		Energy Services		Total
Severance and benefit related costs	$	2,256	$	3,182	$	1,501	$	6,939
Lease termination costs	—		—		969		969
Relocation and other moving costs	307		62		200		569
Other restructuring costs ⁽¹⁾	777		628		4,909		6,314
Total pre-tax restructuring charges ⁽²⁾	$	3,340	$	3,872	$	7,579	$	14,791

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⁽¹⁾	Includes charges primarily related to downsizing the Company’s upstream operations in California, inclusive of wind-down costs, professional fees, fixed asset disposals and certain other restructuring charges.


⁽²⁾	Includes $1.2 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 and nine months ended September 30, 2016 were $0.2 million and $8.5 million, respectively, 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 and nine months ended September 30, 2016 as presented in their affected line in the Consolidated Statements of Operations (in thousands):



	Quarter Ended September 30, 2016						Nine Months Ended September 30, 2016
	Non-Cash Restructuring Charges		Cash Restructuring Charges ⁽¹⁾		Total		Non-Cash Restructuring Charges		Cash Restructuring Charges ⁽¹⁾		Total
	Non-Cash Restructuring Charges		Cash Restructuring Charges ⁽¹⁾		Total		Non-Cash Restructuring Charges		Cash Restructuring Charges ⁽¹⁾		Total
Cost of revenues ⁽²⁾	$	—	$	130	$	130	$	—	$	189	$	189
Operating expenses ⁽³⁾	257		688		945		516		5,360		5,876
Restructuring charges ⁽⁴⁾	—		212		212		—		8,477		8,477
Other expense ⁽⁵⁾	—		—		—		249		—		249
Total pre-tax restructuring charges	$	257	$	1,030	$	1,287	$	765	$	14,026	$	14,791

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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 nine-month period ended September 30, 2016 relate to Corrosion Protection.

⁽³⁾

Includes charges of less than $0.1 million and $0.5 million for the quarter and nine-month period ended September 30, 2016, respectively, related to Infrastructure Solutions. Includes charges of zero and $0.4 million for the quarter and nine-month period ended September 30, 2016, respectively, related to Corrosion Protection. Includes charges of $1.0 million and $4.9 million for the quarter and nine-month period ended September 30, 2016, respectively, related to Energy Services.

⁽⁴⁾

Includes charges of zero and $2.6 million for the quarter and nine-month period ended September 30, 2016, respectively, related to Infrastructure Solutions. Includes charges of less than $0.1 million and $3.2 million for the quarter and nine-month period ended September 30, 2016, respectively, related to Corrosion Protection. Includes charges of $0.2 million and $2.7 million for the quarter and nine-month period ended September 30, 2016, respectively, related to Energy Services.


⁽⁵⁾	All charges relate to the release of cumulative currency translation adjustments in Infrastructure Solutions.

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



	2016 Charge to Income		Utilized in 2016				Reserves at September 30, 2016
	2016 Charge to Income		Cash⁽¹⁾		Non-Cash		Reserves at September 30, 2016
Severance and benefit related costs	$	6,939	$	5,835	$	—	$	1,104
Lease termination costs	969		969		—		—
Relocation and other moving costs	569		569		—		—
Other restructuring costs	6,314		5,549		765		—
Total pre-tax restructuring charges	$	14,791	$	12,922	$	765	$	1,104

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⁽¹⁾	Refers to cash utilized to settle charges during the first nine months 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 September 30, 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 $60.0 million ($44.6 million after tax) and consisted of non-cash charges totaling $48.3 million and cash charges totaling $11.7 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; 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 $11.7 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. All such charges will be recognized in Infrastructure Solutions.

During the quarters and nine months ended September 30, 2016 and 2015, the Company recorded pre-tax (income) expense related to the 2014 Restructuring as follows (in thousands):



	Quarters Ended September 30,					Nine Months Ended September 30,
	2016			2015		2016			2015
Severance and benefit related costs	$	—		$	172	$	67		$	866
Lease termination costs	—			—		—			168
Allowances for doubtful accounts	(232		)	339		(585		)	1,630
Other restructuring costs ⁽¹⁾	(131		)	987		35			8,066
Total pre-tax restructuring charges (reversals) ⁽²⁾	$	(363	)	$	1,498	$	(483	)	$	10,730

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⁽¹⁾	The quarter and nine months ended September 30, 2015 include 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 and nine months ended September 30, 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 September 30, 2016 and 2015 were zero and $0.2 million, respectively, and for the nine months ended September 30, 2016 and 2015 were $0.1 million and $1.0 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 and nine months ended September 30, 2016 and 2015 as presented in their affected line in the Consolidated Statements of Operations (in thousands):



	Quarters Ended September 30,
	2016									2015
	Non-Cash Restructuring Charges (Reversals)			Cash Restructuring Charges (Reversals) ⁽¹⁾			Total			Non-Cash Restructuring Charges (Reversals)			Cash Restructuring Charges (Reversals)⁽¹⁾			Total
Cost of revenues	$	—		$	—		$	—		$	1,678		$	(17	)	$	1,661
Operating expenses	(232		)	(130		)	(362		)	(829		)	386			(443		)
Restructuring charges	—			—			—			—			172			172
Other expense	(1		)	—			(1		)	66			42			108
Total pre-tax restructuring charges (reversals) ⁽²⁾	$	(233	)	$	(130	)	$	(363	)	$	915		$	583		$	1,498

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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 relate to Infrastructure Solutions.



	Nine Months Ended September 30,
	2016									2015
	Non-Cash Restructuring Charges (Reversals)			Cash Restructuring Charges (Reversals) ⁽¹⁾			Total			Non-Cash Restructuring Charges (Reversals)		Cash Restructuring Charges (Reversals) ⁽¹⁾			Total
Cost of revenues	$	—		$	(14	)	$	(14	)	$	1,546	$	1,097		$	2,643
Operating expenses	(593		)	(71		)	(664		)	441		3,748			4,189
Restructuring charges	—			67			67			—		1,034			1,034
Other expense ⁽²⁾	128			—			128			3,004		(140		)	2,864
Total pre-tax restructuring charges (reversals) ⁽³⁾	$	(465	)	$	(18	)	$	(483	)	$	4,991	$	5,739		$	10,730

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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⁾	Charges in the nine months ended September 30, 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 nine months 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 September 30, 2016
Severance and benefit related costs	$	—	$	67		$	—	$	—	$	—	$	67
Reserves for customer receivables ⁽²⁾	6,605		(585		)	45		—		3,739		2,326
Other restructuring costs	968		35			24		214		307		506
Total pre-tax restructuring charges (reversals)	$	7,573	$	(483	)	$	69	$	214	$	4,046	$	2,899

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


⁽²⁾	During the third quarter of 2016, the Company received payment on certain accounts receivable that were previously reserved. Additionally, the Company wrote off certain balances in costs and estimated earnings in excess of billings, along with the corresponding reserves, that were deemed fully uncollectible.



								Utilized
	Reserves at December 31, 2014		Charge (Credit) to Income		Foreign Currency Translation			Cash⁽¹⁾		Non-Cash		Reserves at September 30, 2015
Severance and benefit related costs	$	466	$	866	$	(7	)	$	1,205	$	—	$	120
Lease termination expenses	—		168		(2		)	166		—		—
Reserves for customer receivables	11,464		1,630		(321		)	—		3,863		8,910
Other restructuring costs	2,496		8,066		(67		)	4,045		4,832		1,618
Total pre-tax restructuring charges	$	14,426	$	10,730	$	(397	)	$	5,416	$	8,695	$	10,648

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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 first nine months of 2015.