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Note 4 - Restructuring

9 Months Ended

Sep. 30, 2019

Restructuring, Impairment, and Other Activities Disclosure [Text Block]

4.	RESTRUCTURING

On July 28, 2017, the Company’s board of directors approved the 2017 Restructuring. As part of the 2017 Restructuring, the Company announced plans to: (i) divest Bayou; (ii) exit all non-pipe related contract applications for the Tyfo^® system in North America; (iii) right-size the cathodic protection services operation in Canada and the CIPP businesses in Australia and Denmark; and (iv) reduce corporate and other operating costs.

During 2018 and the first quarter of 2019, the Company’s board of directors approved additional actions with respect to the 2017 Restructuring, which included the decisions to: (i) divest the Australia and Denmark CIPP businesses; (ii) take actions to further optimize operations within North America, including measures to reduce consolidated operating costs; and (iii) divest or otherwise exit multiple additional international businesses, including: (a) the Company’s cathodic protection installation activities in the Middle East, including Corrpower; (b) United Pipeline de Mexico S.A. de C.V., the Company’s Tite Liner^® joint venture in Mexico; (c) the Company’s Tite Liner^® businesses in Brazil and Argentina; (d) Aegion South Africa; and (e) the Company’s CIPP contract installation operations in England. During the second quarter of 2019, as part of the 2017 Restructuring, the Company initiated plans to exit additional international businesses, including Insituform Netherlands, Insituform Spain and Environmental Techniques.

Total pre-tax 2017 Restructuring and related impairment charges since inception were $157.6 million ($140.9 million post-tax) and consisted of cash charges totaling $37.3 million and non-cash charges totaling $120.3 million. Cash charges included employee severance, retention, extension of benefits, employment assistance programs and other restructuring costs associated with the restructuring efforts described above. Non-cash charges included (i) $86.4 million related to goodwill and long-lived asset impairment charges recorded in 2017 as part of exiting the non-pipe FRP contracting market in North America, and (ii) $33.9 million related to allowances for accounts receivable, write-offs of inventory and long-lived assets, impairment of definite-lived intangible assets, release of cumulative currency translation adjustments as well as net losses on the disposal of both domestic and international entities. The Company reduced headcount by approximately 500 employees as a result of these actions.

The Company expects to incur additional cash charges of less than $5 million related to the 2017 Restructuring. Also, the Company could incur additional non-cash charges primarily associated with the release of cumulative currency translation adjustments and losses on the closure or liquidation of international entities. The identified charges are primarily focused in the international operations of both Infrastructure Solutions and Corrosion Protection, but will also include certain charges in Energy Services and Corporate to a lesser extent. The Company expects to reduce headcount by an additional 30 employees as a result of these further actions.

During the quarters and nine months ended September 30, 2019 and 2018, the Company recorded pre-tax expenses related to the 2017 Restructuring as follows (in thousands):

	*Quarter Ended September 30, 2019*										*Quarter Ended September 30, 2018*
	*Infrastructure Solutions*		*Corrosion Protection*		*Energy Services*		*Corporate*		*Total*		*Infrastructure Solutions*		*Corrosion Protection*		*Corporate*		*Total*
Severance and benefit related costs	$	210	$	447	$	74	$	416	$	1,147	$	914	$	35	$	—	$	949
Contract termination costs		201		8		—		—		209		215		—		—		215
Relocation and other moving costs		79		—		—		—		79		55		—		—		55
Other restructuring costs ⁽¹⁾		5,414		463		65		1,230		7,172		4,952		988		264		6,204
Total pre-tax restructuring charges	$	5,904	$	918	$	139	$	1,646	$	8,607	$	6,136	$	1,023	$	264	$	7,423

⁽¹⁾

For the quarter ended September 30, 2019, charges primarily related to certain wind-down costs, allowances for accounts receivable, fixed asset disposals, release of cumulative currency translation adjustments and other restructuring-related costs in connection with exiting the CIPP operations in Europe, exiting the cathodic protection operations in the Middle East, disposing of certain international businesses and other cost savings initiatives. For the quarter ended September 30, 2018, charges primarily related to certain wind-down costs, allowances for accounts receivable, fixed asset disposals, and other restructuring-related costs in connection with exiting non-pipe-related applications for the Tyfo^® systems in North America and right-sizing the CIPP operations in Australia and Denmark.

	*Nine Months Ended September 30, 2019*										*Nine Months Ended September 30, 2018*
	*Infrastructure Solutions*		*Corrosion Protection*		*Energy Services*		*Corporate*		*Total*		*Infrastructure Solutions*		*Corrosion Protection*		*Corporate*		*Total*
Severance and benefit related costs	$	1,043	$	2,192	$	114	$	425	$	3,774	$	2,695	$	352	$	170	$	3,217
Contract termination costs		534		815		—		98		1,447		1,052		—		150		1,202
Relocation and other moving costs		130		144		—		—		274		129		—		—		129
Other restructuring costs ⁽¹⁾		8,854		1,192		65		2,383		12,494		8,006		2,471		555		11,032
Total pre-tax restructuring charges	$	10,561	$	4,343	$	179	$	2,906	$	17,989	$	11,882	$	2,823	$	875	$	15,580

⁽¹⁾

For the nine months ended September 30, 2019, charges primarily related to certain wind-down costs, allowances for accounts receivable, fixed asset disposals, release of cumulative currency translation adjustments and other restructuring-related costs in connection with exiting the CIPP operations in Europe, exiting the cathodic protection operations in the Middle East, disposing of certain international businesses and other cost savings initiatives. For the nine months ended September 30, 2018, charges primarily related to certain wind-down costs, allowances for accounts receivable, fixed asset disposals, and other restructuring-related costs in connection with exiting non-pipe-related applications for the Tyfo^® systems in North America and right-sizing the CIPP operations in Australia and Denmark.

2017 Restructuring costs related to severance, other termination benefit costs and early contract termination costs were $1.4 million and $1.2 million for the quarters ended September 30, 2019 and 2018, respectively, and $5.5 and $4.5 million for the nine months ended September 30, 2019 and 2018, respectively, are reported on a separate line in the Consolidated Statements of Operations.

The following tables summarize all charges related to the 2017 Restructuring recognized in the quarters and nine months ended September 30, 2019 and 2018 as presented in their affected line in the Consolidated Statements of Operations (in thousands):

	*Quarter Ended September 30, 2019*													*Quarter Ended September 30, 2018*
	*Infrastructure Solutions*			*Corrosion Protection*			*Energy Services*		*Corporate*		*Total (1)*			*Infrastructure Solutions*		*Corrosion Protection*		*Corporate*		Total ⁽²⁾
Cost of revenues	$	(30	)	$	(3	)	$	-	$	-	$	(33	)	$	138	$	567	$	—	$	705
Operating expenses		748			315			65		732		1,860			2,333		421		264		3,018
Goodwill impairment		—			—			—		—		—			1,389		—		—		1,389
Definite-lived intangible asset impairment		—			—			—		—		—			870		—		—		870
Restructuring and related charges		490			455			74		416		1,435			1,184		35		—		1,219
Other expense		4,696			151			—		498		5,345			222		—		—		222
Total pre-tax restructuring charges	$	5,904		$	918		$	139	$	1,646	$	8,607		$	6,136	$	1,023	$	264	$	7,423

⁽¹⁾

Total pre-tax restructuring charges for the quarter ended September 30, 2019, include cash charges of $3.1 million and non-cash charges of $5.5 million. Cash charges consist of charges incurred during the quarter that will be settled in cash, either during the current period or future periods.

⁽²⁾

Total pre-tax restructuring charges for the quarter ended September 30, 2018, include cash charges of $2.3 million and non-cash charges of $5.1 million. Cash charges consist of charges incurred during the quarter that will be settled in cash, either during the current period or future periods.

	*Nine Months Ended September 30, 2019*											*Nine Months Ended September 30, 2018*
	*Infrastructure Solutions*			*Corrosion Protection*		*Energy Services*		*Corporate*		*Total (1)*		*Infrastructure Solutions*		*Corrosion Protection*		*Corporate*		Total ⁽²⁾
Cost of revenues	$	(122	)	$	559	$	—	$	—	$	437	$	138	$	567	$	—	$	705
Operating expenses		3,070			583		65		1,877		5,595		5,387		1,904		555		7,846
Goodwill impairment		—			—		—		—		—		1,389		—		—		1,389
Definite-lived intangible asset impairment		—			—		—		—		—		870		—		—		870
Restructuring and related charges		1,707			3,151		114		523		5,495		3,876		352		320		4,548
Other expense		5,906			50		—		506		6,462		222		—		—		222
Total pre-tax restructuring charges	$	10,561		$	4,343	$	179	$	2,906	$	17,989	$	11,882	$	2,823	$	875	$	15,580

⁽¹⁾

Total pre-tax restructuring charges include cash charges of $11.6 million and non-cash charges of $6.4 million. Cash charges consist of charges incurred during the period that will be settled in cash, either during the current period or future periods.

⁽²⁾

Total pre-tax restructuring charges include cash charges of $7.4 million and non-cash charges of $8.2 million. 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 2017 Restructuring activity during the first nine months of 2019 and 2018 (in thousands):

								*Utilized in 2019*
	*Reserves at December 31, 2018*		*2019 Charge to Income*		*Foreign Currency Translation*			Cash⁽¹⁾		*Non-Cash*		*Reserves at September 30, 2019*
Severance and benefit related costs	$	1,742	$	3,774	$	(26	)	$	2,434	$	—	$	3,056
Contract termination costs		359		1,447		(30	)		1,153		—		623
Relocation and other moving costs		—		274		(4	)		198		—		72
Other restructuring costs		311		12,494		(9	)		5,954		6,419		423
Total pre-tax restructuring charges	$	2,412	$	17,989	$	(69	)	$	9,739	$	6,419	$	4,174

⁽¹⁾

Refers to cash utilized to settle charges during the first nine months of 2019.

								*Utilized in 2018*
	*Reserves at December 31, 2017*		*2018 Charge to Income*		*Foreign Currency Translation*			Cash⁽¹⁾		*Non-Cash*		*Reserves at September 30, 2018*
Severance and benefit related costs	$	3,864	$	3,217	$	(30	)	$	4,754	$	—	$	2,297
Contract termination costs		650		1,202		(4	)		1,337		—		511
Relocation and other moving costs		—		129		—			129		—		—
Other restructuring costs		675		11,032		—			3,204		8,150		353
Total pre-tax restructuring charges	$	5,189	$	15,580	$	(34	)	$	9,424	$	8,150	$	3,161

⁽¹⁾

Refers to cash utilized to settle charges during the first nine months of 2018.